I guess maybe the question is whether one wants to “ride it out” in a collapsing economy. I was thinking along the lines of how someone would manage getting the hell out of there, if possible. Maybe savvier or wealthier people opened dollar denominated accounts overseas prior to the unpleasantness. Bitcoin is definitely not “stable” but it has possibilities as a way to (maybe) protect wealth without risk of confiscation by the locals. It also (I guess) is used to conduct transactions. It may be illegal there though, along with using dollars or alternate currencies.
Someone who was a local who managed to get a hefty fraction of their hefty wealth out early would be well positioned to “ride it out”.
Then, as the inevitable bottom happens, they’d also be well positioned to buy up lots of real assets, e.g. real estate and factories and such, at giveaway prices in the replacement currency issued by the replacement government. Using the stable money they’d stashed earlier.
Being on the ground there as things reach the inevitable dénouement would probably be necessary; otherwise they’d be too far from the market, and the dealmakers, to play successfully.
But why would you want to invest with hard currency with a government that has a history of seizing assets?
Exactly. Would you invest anything in Venezuela today? Even if you’re Venezuelan, if you have hard currency accounts somewhere outside the country the last thing you want to do is spend it in Venezuela. Economic uncertainty is one thing, but the much bigger risk is the political risk.
There’s actually two risks. One is that the current regime will continue, in which case they can take whatever they like from you. Even if you’re a political insider that could change. The other risk is that the regime collapses, and then the next government tries to clean up the mess. Are they going to let all the corrupt deals stand? Are they going to try to claw back property for people who lost it? People who profited from the previous situation just might find themselves with nothing, or in prison, even if all they did was act as a vulture picking the bones left by the real predators.
Or maybe you can make a lot of money. History is full of examples of people who used political chaos to enrich themselves. But there are also plenty of people who thought they could enrich themselves from political chaos who ended up penniless or worse.
There’s a third risk: the country is on the verge of civil war, which would destroy assets. One could invest in a business only to have it reduced to rubble, both literally and figuratively.
Well there won’t be any “giveaway prices” in a replacement or revalued currency. That’s the point of a new currenc, after all. Political risk goes hand in hand with a currency collapse, kind of a chicken and egg thing. The Bolivar lost 16% against the dollar today and about the same earlier this week. Anything imported will just become unobtainable. The government declared that eggs had a price limit, 30 cents a dozen. Sounds great, right? Well, eggs disappeared from the shelves within a week and haven’t been back since.
Price controls are one of the more evil aspects of "expert " economists.
In day to day transactions, gold coins have too much value. A tiny dime size one tenth ounce of gold coin is worth around $150 US (in the USA). One would have to go on a major shopping spree at a supermarket to spend your single gold coin. And there is no way to make change from your gold coin if you didn’t spend it all unless you were willing to accept silver. However, a pre 1965 US silver Quarter is worth about $3.00. This is much more useful in a supermarket or department store situation.
Look how tiny a 1/10 oz of gold coin is. Its worth $150 US. You couldn’t make a smaller coin.
Hm, it doesn’t sound like you’ve been shopping for a long while. A few groceries will nuke a $100 bill right quick. Those tiny gold coins would be trouble. It’s one thing to misplace a dime, the equivalent of $150 is something else.
Anyway it’s irrelevant. Nobody is using gold or silver coins in Venezuela. If they can’t buy stuff using bolivars, they use dollars. And the problem in Venezuela isn’t that there’s not enough government money so they have to use something else as money. The problem is that there’s nothing to buy with the money. Money is just a way to facilitate the exchange of goods and services. It doesn’t do any good that you could buy a dozen eggs for a dollar if nobody has the eggs to sell in the first place.
And here’s a story from Politico about this: