Previous post showed the obverse of the bills issued in June 2019. That post also discussed the hyperinflation that made it necessary to add a couple of zeros to the bills. Unfortunately by the time the largest bill was issued it was only worth less than one US dollar.
Here are the reverses (back) of the bills issued in June 2019:
10,000 Bs. S, equal to 1,000,000,000 Bs. F., yes one billion
Mausoleo del Libertador Simon Bolivar – Mausoleum of liberator Simon Bolivar
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.
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.
The headline unemployment rate declined to 13.3% from 14.7% in April. Rates for both months are a dramatic increase from the 3.5% rate in February.
The only way I can square this data with the massive volume of new unemployment claims is that a lot of people are getting new jobs after being furloughed. That is the only way the U3 is not above 20%.
So, my tentative guess is the economy is actually starting to recover, in spite of efforts of multiple governors to keep the economy in their states shut down.
Misclassification error in data understates unemployment
A new phenomenon in the age of shutdown is arising from the way the data is accumulated. The unemployment rate is determined by a large survey.
Turns out people are answering the question of their unemployment status as “employed but absent from work.” In normal times, that means a person is on vacation, thus actually employed.
In this shattered economy that means you got laid off or furloughed but are still getting paid by your employer or perhaps highly enhanced unemployment. People in that category are actually unemployed but are counted in the statistical data as employed.