Ongoing hyperinflation in Venezuela was so severe after the conversion to Bolivar soberano (Bs.S) in August 2018 that far higher denomination currency had to be introduced in June 2019.
To illustrate the concept, the exchange rate at the end of July 2018 was 3,600,000 Bs. F. to $1. That would be equivalent to 36 Bs. S. to $1 using the new currency.
At the end of August 2018 the exchange rate was 90 Bs.S to $1. From 36 to 90 in a month.
At the end of December 2018, the exchange rate was 730 Bs. S to $1.00. That meant that the highest denomination note in circulation, the 500 Bs.S. was worth less than one US dollar. By the way it had been worth it $8.47 at the end of August 2018, just four months earlier.
By the time the new denominations were in circulation at the end of June 2019 the exchange rate was 7,880 Bs. S to $1.
Oh, that 500 Bs. S. issued back in August 2018? It was worth $0.06 at the end of June 2019.
That one bill dropped from being worth US$8.47 in August 2018 all the way down to US$0.06 in June 2019.
The obverse (front) of the bills issued in June 2019:
10,000 Bs. S, equal to 1,000,000,000 Bs. F., yes one billion
Inflation was so severe in Venezuela during the 2017 and 2018 timeframe that currency in circulation was worthless. In 2018 the government replaced the previous currency, called the Bolivar fuerte (Bs.F) with a new currency, called the Bolivar soberano (Bs. S).
The exchange rate was 100,000 of the old Bs. F. for 1 of the new Bs. S. . Essentially that lopped five digits off currency and prices.
To illustrate the concept, the highest denominated old currency was 100,000 Bs. F. The lowest denominated new currency was 2 Bs. S., which is the equivalent to 200,000 Bs. F.
In 2019 the government issued three extremely high denomination notes. More on that in future posts.
This post and the next will illustrate the 2018 currency. As you would expect it is beautiful. Full-color, with nice portrait on the obverse, fun illustration of animals on the reverse, a metal security band, and a large watermark.
The currency is a delight to view. Each obverse and reverse is a lovely work of art. I’m being serious. The generous doses of sarcasm heaped on socialism will follow later. For the moment let’s enjoy the visually pleasing currency.
Launch by SpaceX put another 60 satellites into orbit, bringing the constellation of Starlink communication satellites to over 1,300. Launch by OneWeb put another 36 of their satellites in orbit for total of 146.
SpaceX and OneWeb are both making progress on developing a constellation of satellites which will provide Internet connectivity across the planet. Discussion of OneWeb’s progress follows description of SpaceX’s launch.
Oh, by the way, after reading this post I am confident you will agree that the future is so bright we ought to wear sunglasses all the time.
In a significant policy shift, England is planning to expand its nuclear weapon stockpile. The current guess from outsiders is they have 190 nuclear weapons. The previously announced goal was to draw down the inventory to 180 or less by the mid-2020s.
Instead they will build up to a stockpile of not more than 260.
To illustrate the devastation from hyperinflation, we will now use Venezuelan Bolivares currency to see what that destruction looks like in terms of paper money.
To start, we will look at the currency itself.
As usual for currency outside the U.S., the paper money of Venezuela are esthetically beautiful. All the bills are colorful with lovely illustrations. All the ones we will now see have a nice sized watermark at the otherwise empty space. The watermarks are same face at the bottom of the obverse (front).
Portraits on the obverse of the currency are patriotic reminders of the struggle for Venezuelan independence.
To start our pictorial excursion, here are the obverses of the 2 Bolivar through 100,000 Bolivar currency:
2 – dated 12/27/12, featuring Francisco de Miranda, his efforts for independence in South America failed; he served as forerunner of Simon Bolivar.
Final graph in this series of posts showing the devastating hyperinflation currently running loose in Venezuela will combine two sets of data.
Purpose of doing so is to see if the two sets of data overlap so that there is some good longer-term information that can be used into the future. The source for current data only goes back to late 2020.
Graph at the top of this post shows exchange rate of Venezuelan Bolivars into US dollars between June 2019 and March 2021. This graph is expressed in Bolivar soberanos (Bv.s).
Let’s look at the exchange rate in Venezuela in more detail, breaking out the exchange rate before and after 2018. On the previous graphs it looked like the exchange rate deterioration wasn’t that bad in the lead up to 2018 and it looks like things turned real bad starting in 2019.
That’s the weird thing about hyperinflation. If you remove the recent severe acceleration you still see the rapid increase earlier.
Graph at the top of this post shows exchange rate through 2018. It looks like hyperinflation kicked off in early 2018. Actually, it was going crazy before that. Inflation so severe as to destroy the economy has been running since 2012. Let’s change that graph above to a logarithmic scale to show the percentage changes better.
Socialism in Venezuela has produced the expected results – poverty, a collapsing economy, and people fleeing for their lives. Twenty some odd years of socialism has also produced another foreseeable consequence – hyperinflation.
Let’s track the exchange rate of Venezuelan Bolivars to US dollar as an indicator.