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Why did it happen with Venezuela?
The Inflation rate in Venezuela is predicted to be 10,000,000% in 2019, with the biggest Bolivar banknote of 50,000 now to be valued at just USD 0.03 cents in the black market.
- A 2.4kg chicken costs 14,600,000 bolivars
- Venezuela’s money is worth less than toilet paper as a toilet paper roll costs 2.6 million bolivar
In 2014, the dropping international oil prices destroyed the economy of Venezuela. To fix the issue, President Nicolás Maduro reacted by altering the currency exchange rate and ordered banks to print more currency notes, which eventually undervalued the cash, while goods prices rose.
Shop Cashiers weigh the notes instead of counting them
Few shop cashiers reported that they have started weighing rather than counting the pack of cash which consumers offer to them, and normal size purse has become useless in the South American regions. Many citizens now carry a large amount of cash in handbags, money belts, or backpacks instead of wallets. The scene shows hyperinflation and its effects.
Jesus Casique, a consulting company executive, told the news site that even this method of weighing cash was not very common everywhere, it was an indication of a monetary disaster.
He said that when we start weighing cash instead of counting it shows the rise in inflation. It is worst that Venezuelans don’t realize how terrible it is because the authorities do not announce the facts and figures.
The over-reliance on Oil
Oil accounts for an amazing 95% of Venezuela’s exports, and one-fourth of the country’s economy, with the generated revenues fulfilling approximately half the government’s budget. This kind of dependency on only a single export discourages all the other businesses in the country and this is known by economists as Dutch Disease.
When the price of oil in the universal market distorted in 2014 by two-thirds, Venezuela had nothing much for its backup. So, an ordinary response would have been for the Bolivar to fall.
The Crime Rate in Venezuela
Venezuela has one of the highest crime rates and he is afraid to lose his money while carrying to another place.
ATM machines need to be refilled every 4 hours. The value of money dropped to the ground. Bremmer Rodrigues, the owner of a bakery, said that it is difficult to manage his daily hundreds of bills. He hides the cash in his office, stacks of cartons to carry it to the bank. He said if anyone sees him like this, he might be misguided for a drug trader.
Source: Independent UK