The black market exchange rate for Venezuela’s currency—the bolivar—has been sliding downward for the past year but Reuters reports the currency’s value took an especially severe nosedive over the past month:
Venezuela’s bolivar currency tumbled past the psychological barrier of 4,000 per dollar on the black market on Wednesday, racking up a 10 percent depreciation since Monday and fueling concerns about the crisis-stricken OPEC nation’s economy.
The black market rate has weakened 62 percent this month amid Soviet-style product shortages and a crippling recession that have become the norm in Venezuela’s steadily unraveling socialist economy.
What that means on the street is carrying around big stacks of paper money to buy something as simple as a bag of groceries:
Basic purchases such as a few days worth of groceries often require stacks of 100-bolivar notes, the largest denomination.
A brick-sized package of 1,000 of the smallest bill, a two-bolivar note, buys a loaf of sandwich bread. Fifteen years ago, one individual note of equivalent value would have bought a modest lunch.
Why the sudden loss of value? According to a story published by El National, the supply of circulating money has increased by more than 1.6 trillion bolivars since the end of September [via Google Translate]:
The official information of the Central Bank of Venezuela shows that between 30 September and 18 November 2016 monetary liquidity, which is the circulante- money grew 201%, equivalent to 1.61 trillion bolivars who entered the economy in 50 days. This decision by the government of Nicolas Maduro fired the price of the parallel dollar and is producing greater inflationary spike in all assets already expected for the end of the year, say the experts.
With that amount of circulating resources, monetary liquidity increased from 3.60 trillion bolivars in November 2015 to 8.29 billion bolivars for the same month in 2016, equivalent to an increase of 130.2%.
The black market exchange rate highlighted by Reuters is published by a website called DolarToday. DolarToday is published by a Venezuelan named Gustavo Díaz who is living in Alabama and who has become enemy number one of the socialist government:
Public Enemy No. 1 of Venezuela’s revolutionary government is Gustavo Díaz, a Home Depot Inc. employee in central Alabama…
Socialist President Nicolás Maduro has accused DolarToday of leading an “economic war” against his embattled government and vowed to jail Mr. Díaz and his two partners, also Venezuelan expatriates in the U.S. The Venezuelan central bank unsuccessfully filed suit against the website twice in U.S. courts. The government has also turned to hackers to launch constant attacks, Mr. Díaz said, forcing the site to use sophisticated defenses…
He sneaks to the bathroom during shifts at Home Depot to check his BlackBerry for gossip about the Venezuelan government sent to him by old friends in the military and the expat media, which always promises an imminent downfall for Mr. Maduro.
“To me, it’s still a passionate daily fight against totalitarianism,” said Mr. Díaz.
The government’s current plan to deal with inflation? Release a 500-bolivar note so people won’t be forced to carry such large bricks of cash when they go shopping.