Postcards from the socialist edge: Venezuela to cancel 48% of its currency

What does a socialist Christmas look like? Venezuela gives us a fascinating — and horrifying — peek into the answer to that question in two bizarre, and yet unsurprising, moves. The government of Nicolas Maduro wants to introduce new currency with higher denominations in order to keep up with the raging inflation that their economic and monetary policy has created. First, though, Maduro has ordered Venezuelans to turn in the most popular denomination in use at the moment, Fortune reports this morning:


Venezuela, mired in an economic crisis and facing the world’s highest inflation, will pull its largest bill, worth two U.S. cents on the black market, from circulation this week ahead of introducing new higher-value notes, President Nicolas Maduro said on Sunday.

The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank.

Less than two weeks to exchange the 100-bolivar bill? Should be no problem. After all, how many of them could there be? Er

Central bank data showed that in November, there were more than six billion 100-bolivar bills in circulation, 48% of all bills and coins.

Six billion? Hope banks have tellers working overtime to keep up with the demand. Then again, how would they pay them? With 100-bolivar bills?

That highlights a huge problem for Venezuelans — how exactly will they conduct business over the next few weeks? Maduro just canceled half of the currency, which will make cash business extremely difficult to conduct; after all, no one will want to take any more 100-bolivar bills from this point forward, and many people won’t have enough of anything else to use. Business in the country will likely grind to a halt in a nation where inflation is estimated to be around 500% this year alone.


That could put a damper on Maduro’s foray into toy sales. Rather than channeling Marx or Engels in this business venture, Maduro seems to be channeling Tony Soprano. The government seized 4 million toys from a distributor it accused of price-gouging, and will sell them at a “steep discount.”

Why not? After inventory “falls off the truck,” all income is profit:

Dolls, bicycles and playsets are among the nearly 4 million toys that have been seized by Venezuela’s government. The toys will now be sold at sharp discounts, after a regulator said a large toy distributor had hoarded the toys to push prices higher.

“Boys and girls of the country will have a happy Christmas,” said William Contreras, Venezuela’s national superintendent for the defense of socioeconomic rights. He added, “We will guarantee a child” gets a present.

The toys were found in several Caracas-area warehouses owned by the Kreisel toy company. In addition to accusing the company of creating scarcity to boost prices, the government says Kreisel used dollars that it acquired at a special government exchange rage to buy the products between 2008 and 2014 — and that stores have recently complained that the distributor won’t fill their orders.

It’s odd that these issues never occurred in Venezuela until Hugo Chavez decided he wanted to recreate Cuba in Venezuela. Businesses didn’t have to rely on “special government exchange rates” to invest in their operations and to produce goods and services. Now, businesses are lucky to avoid special government theft. This seizure is just the latest in a long series of expropriations that have investors and businesses avoiding Venezuela like the plague, and Venezuelans mired in poverty.


Maduro clearly wants to use this as a way to paint himself as a Santa or Robin Hood. Maduro and Chavez have been Grinches from the get-go, however, and this latest stunt with the currency will drive that point home even further. It doesn’t do any good to have cheap toys for sale when no one has the cash to buy them.

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