During the great recession some people in the US were stockpiling gold, silver, bitcoins because they felt if the US economy collapsed they could use them as currency.
But Venezuela is collapsing. Does silver or gold work as currency there? You’d assume food or medicine would be far more valuable on the market.
I’m thinking rice, beans, and some bottled water would actually be pretty good to own right now. Private property would be good but I’m not sure how it works down there, being socialist and all.
Right now, cash. Well, US cash or Euro anyway. Gold is good for smuggling, or selling to get cash. If you can find someone who is willing to buy or trade, no problem. Silver is too bulky and heavy.
A big problem in Venezuela right now is that the store shelves are empty. All the gold in the world won’t do you any good if there’s nothing to buy.
Buy all the land for a song, the entire country, then begin your own dictatorship?
Usually when that happens there’s a thriving black market system going on.
The reason the stores are empty though, is because their currency is no good or at least getting steadily worse. Civilized countries run on credit, or derivations of it. Like 90 days net, stuff like that. In extremis that won’t do. Vendors demand cash on the barrelhead as is their right. So US dollars are what’s in demand, at least for imported goods. That’s a lot of stuff. They might find someone to take gold or silver coinage but it might be discounted quite a bit. Also in those situations anyone flashing cash or anything like that is inviting extra (unwanted) attention.
Apparently due to subsidized electricity (where available), bitcoin mining is big in Venezuela.
The problem in Venezuela is not that all the money suddenly disappeared one day and they have to find some other method of exchanging goods and services.
So think about your question. People who anticipate an economic downturn might stockpile gold. That is, they use their dollars to buy gold, and then hold the gold, because they believe that soon the dollar will be worth much less, while the gold will remain valuable.
But people in Venezuela didn’t have the expectation that the dollar would crater, they might have been worried that the bolivar would crater, and they would have been right. So it would make a lot more sense to buy US dollars, or Euros, or some other foreign currency, even Colombian pesos, in the expectation that the bolivar would soon be worthless. The only trouble with this is that Chavez wouldn’t let you do that. And where are you going to find someone willing to trade foreign currency for your soon to be worthless bolivars?
And in any case, buying gold or silver doesn’t work AFTER the economic collapse. If you can buy an ounce of gold with your wheelbarrow full of bolivars, you could buy food instead. This is what happens in a situation with hyperinflation, people will buy any tangible good they can find for sale because their paper money is going to buy less tomorrow.
And the reason the store shelves are empty is not so much that there’s no money to buy stuff, although that’s also true. The problem is that Chavez implemented draconian price controls that basically made it impossible to legally sell goods at above cost. If every loaf of bread you sell costs you money, what happens? The store shelves become empty.
“In socialism, the people line up for bread. In a free market, the bread lines up for the people.”
There’s some good bloggers who’ve weathered the various economic and political collapses around the world in recent years. Gold or “hard” stable currencies are always better than the soon-to-be-worthless confetti the crooked governments issue, but there are some interesting perspectives. Luxury goods are currency, of a sorts. Fucking socks are a luxury, or can be. Small soaps, deodorant, cigarette lighters, booze, all kinds of mundane things can be extremely hard to acquire after some time in a failing regime. “The last official act is to loot the Treasury.” Cooking oil, diapers, toilet paper, the list is practically endless. Of course, a warehouse would be ideal…
Maybe some sturdy rope, for the bastards that caused all this shit. What a bunch of wankers.
I heard a talk by one of our geologists who went to the former USSR just as the economy was collapsing. He mentioned that in Moscow, people got paid every day at noon since the money would be worth a lot less by Friday. They’d run out a lunch and buy anything they could get their hands on. Then in the evening, at the suburban Metro stations, there’s be people holding up miscellaneous goods like T-Shirts or bottles of vodka, hoping to trade with someone else for something else they needed.
Argentinian joke during hyperinflation -
Q: what’s cheaper, the bus or the taxi?
A: The taxi, since you don’t pay until the end of the ride.
Anything is money if it is something someone else will take in exchange for giving you what you want. Gold, silver and bitcoin are useful because people outside of Venezuela will accept them so eventually someone can use them to buy goods from a stable outside source; ditto for dollars and euros, and obviously NOT for bolivars. Money is just a more compact (and usually, divisible) form of storing value.
Speaking of buses, I’ve heard that in some countries during hyperinflation, bus tokens became a de facto currency. A bus token was always worth one ride, and so it couldn’t easily inflate, and enough people rode the bus that even those who didn’t could still trade tokens to those who did for various other goods.
Cigarettes too : common, portable, with a stable value and coming in several denominations (cigarette, pack, carton).
There’s actually two parallel economies operating at once in Venezuela right now. If you have some kind of work that’s denominated in US dollars, you can go to grocery stores in rich neighbourhoods overflowing with food and pay a little bit over Western prices in official stores.
If you have some kind of stash of savings or relatives outside of the country who can send you remittances in hard currency, you can go on the black market and buy food that’s been misdirected from government subsidized sources for a few multiples of of the official price.
It’s the people who’s only source of income is denominated in bolivars that are really suffering as they have no other option except to depend on official government subsidized sources of food.
This is why it’s crucial to have decent, moral, ethical, sane and honorable people at every level in positions of power in government, the press, academia et al.
Yeah, I know, we’re fucked.
Holding a little gold has always been prudent, it doesn’t follow one has to build a bunker and start wearing tin foil hats. It’s simply part of a diversified portfolio. Just pray to God you never need it. Real estate is good but sadly is not very portable. Some years ago I made an effort to purchase bitcoin, but I couldn’t figure out how to do it from a smartphone, eventually I gave up. At the time I thought it might invite attention from folks who nobody wants. Strictly as a speculative venture. I figured $2k or 3k would be a safe bet. It was something like .03c or 3 cents per.
Argentinian anecdote: you got paid and ran out shopping ASAP. Of course you sprang for the taxi, because you had no time to piss away waiting for the bus, especially since you had to stop by the bank first. Once at the store you bought anything you could get your hands on, and it would all be traded later, as in your story.
Inefficient, but people did it. Nevertheless, as per Shalmanese, this does not translate to Venezuela if you are not paid in dollars/gold/EUR/whatever the stocked shops accept.
Yes, there’s a big difference between a system where the currency is undergoing hyperinflation but you still have a semblance of a market system where people are still working to get paid in the currency and stores will accept the currency at some valuation. And the system in Venezuela where even if you have a wheelbarrow of bolivars you can’t buy anything because merchants aren’t allowed to charge you anything but the official price. And that means no merchants except the black market, and those black market people won’t accept bolivars because there’s nothing they can buy with them either. They want foreign currency or barter or nothing.
There are some things you can buy with bolivars, but they’re all state rationed items, so you can’t just roll up with a wheelbarrow and buy the entire stock and then resell them for hard currency. Unless you’re one of the insiders.
So under law the bolivar is money, but it doesn’t act very much like money anymore because it doesn’t act as a medium of exchange or a store of value.
Black markets in Venezuela are happy to accept Bolivar. The Bolivar is in severe inflation but it hasn’t reached hyper inflation levels yet. Estimates are that the Bolivar will inflate 1600% in 2017 but that’s still only 6% a week. People in Venezuela just check the website of this one dude in Miami and just adjust the day’s prices so it’s roughly pegged to the US dollar.
You don’t need a wheelbarrow to buy goods in Venezuela. The Government introduced new banknotes in January with the highest denomination being 20,000 Bolivars which is worth about $2. Previously, the 100 Bolivar note was worth about 3 US cents but you could still transact with notes that fit into a large purse or duffel bag, not a wheelbarrow.
Look, what’s happening in Venezuela right now is undeniably shitty and a human tragedy but there’s a lot of lurid made up stories about the country floating around that are more to do with satisfying Western morbid sensibilities than any real concern for the country.
How does online stuff like Amazon.com work in Venezuela anyway? Was there a point they took bolivars but then now they don’t?
Well, shoot, since you put it like that! What the hell.
You don’t need a wheelbarrow to buy goods in Venezuela. The Government introduced new banknotes in January with the highest denomination being 20,000 Bolivars which is worth about $2. Previously, the 100 Bolivar note was worth about 3 US cents but you could still transact with notes that fit into a large purse or duffel bag, not a wheelbarrow.
I still can’t tell, are you being sarcastic? “Only 6% a week inflation, only need a dufflebag to haul around cash, not a wheelbarrow, everything’s fine you guys!!”
Look, what’s happening in Venezuela right now is undeniably shitty and a human tragedy but there’s a lot of lurid made up stories about the country floating around that are more to do with satisfying Western morbid sensibilities than any real concern for the country.
I haven’t heard any of the made up ones. Can you provide a link or some examples? The factual examples we know about are apalling, though the press in this country is reluctant to cover stories like this, except maybe with a pillow. Now to be clear, I don’t think it’s fair to brand people as motivated by morbid curiosity, thinking people are concerned because they’d like first and foremost to prevent these kinds of things from happening in their own countries. It is a “we’ve seen this movie before” kind of thing, there is a certain tragic inevitableness about it, these things usually have to play out, we’d like to think that humans learn from their mistakes. Argentina was once the third wealthiest nation on the planet, with a huge “middle class” high standard of living, etc and then the crooks showed up, and ran it into the ground. That was maybe 100 years ago or so. They still haven’t recovered. And at one level, people are cognizent of the fact that at least some of the Venezuelans *voted for this shit.*Very sad, but there’s nothing anyone can do, really. Not a hemisphere away.