Venezuela is a nation spinning out of control. With the oil-dependent economy down as much as the price of oil in 2014, the nation’s economic central planners, ignoring core free market supply and demand principles, took center stage.

Price controls that attempted to force businesses to sell products at a loss didn’t work. The communist nation then went on a mad hunt for paper to print as much currency as possible while citizens were reported raiding the local zoo to kill animals for food and dogs walking in the street were on the dinner menu. The crime-ridden nation is now experiencing inflation so out of control that a standard wallet no longer is big enough to hold enough bolivars to transact business on the streets or in stores. And who is to blame for all this? The scapegoat is Gustavo Diaz, 60, a Home Depot store clerk from Hoover, Alabama.

Venezuela Runs Out Of Money To Print Money

 

Venezuela

Carry a backpack full of cash to buy groceries in Venezuela

Inflation in Venezuela is nearing 720% per year as the currency has sunk to new lows along with the civil society in the nation. Its largest currency denomination – the 100 bolivar bill – is now just worth five US cents on the black market, the prices of which are communicated on a website controlled by Diaz.

To walk the street and buy common items in a store requires a backpack full of cash and an attitude of adventure as having cash in public in Venezuela, sporting one of highest crime rates in the world, is a consistent risk.

ATM machines are in need of being refilled with new currency supply every three hours, according to reports, because so much currency is being dispensed. Taking out the equivalent of $5 US requires a fistful of large denomination bills and many are abandoning cash and only using digital forms of payment.

The enemy of the people is a 60-year-old Home Depot clerk

Three years ago, when the price of oil was consistently trading above $100 per barrel, life was good. The streets were safe, the stores were filled with groceries and the public zoo was used for viewing animals not eating them.

Unable to cope with the reality of dramatically lower oil prices, Venezuela, rather than bolstering its economic engine, has instead turned to scapegoats and conspiracy theories.

Diaz, a former colonel in the Venezuelan army, and his business partners in the small website that is used to determine the black market value for Venezuela’s national currency, DolarToday.com, which started off a Twitter feed, are at the top of the list of scoundrels.

“DolarToday is the Empire’s strategy to push down the currency and overthrow Maduro,” Vice President Aristóbulo Istúriz was quoted as saying, pointing to a larger plot. “DolarToday is the enemy of the people.”

But behind it all is a massive US government plot, says the Venezuelan government. When Venezuelan government officials make such charges they don’t mention the fact that the drop in oil significantly damaged the nascent US shale oil production industry – a key component of US independence and national security.

Since trade was cut off from Columbia in 2013, calculating currency fair market value is more difficult

Facts don’t matter to an authoritarian government that has closed trade with neighbor Columbia, making it more difficult for Diaz to calculate the black market value of the currency. The website is now reported to be using a scanning program to calculate bolivar / US dollar buying and selling requests.

The program culls Venezuelan activity on social media sites to determine fair value, much like a rudimentary exchange market making system using buying and selling pressure to determine prices. The currency price communicated to average Venezuelans is manually checked against large underground exchange houses in the troubled region that offer currency services to multinational corporations.

In the face of a depilating economy, Venezuelan economic officials have taken decisive action to print larger denomination bills. President Nicolás Maduro, who came to power in 2013 following the reign of Hugo Chavez, is determined to fight the threat by printing 500 and 20,000 bills. Perhaps he should look at the nation of Zimbabwe as their future path rather than hope a new currency solves the problems. Either that or they could accept the fact that free market supply and demand is a force of nature that should be worked with rather than being manipulated.