4 hours agoInflation paralyses Venezuela, 14 million to buy a chicken
Periskopi(8 years ago)
(8 years ago)Venezuela is introducing economic reforms, including new bills that put an end to five zeroes from its enlarged currency, while the country has entered the harshest battle with hyperinflation. Banks will be closed Monday as they prepare for the release of “sovereignbolvar”, amid warnings from International Monetary Fund economists [...]
Venezuela is introducing economic reforms, including new bills that put an end to five zeroes from its enlarged currency, while the country has entered the harshest battle with hyperinflation.
Banks will be shut down Monday after preparing for the release of “sovereign hilvar”, amid warnings from economists of the International Monetary Fund that Venezuela's inflation rate could exceed 1m per cent tomorrow this year.
The new sovereign bolivar, is called such by the official Caracas to distinguish it from the current bolivar (who has failed) and will be anchored in Venezuela's widely discredited krytomonde, petro. Each petro will be worth about $60, given the price of a domestic oil barrel.
This will be worth 3,600 sovereign bolivars in the new currency, which signals a massive devaluation. In addition, the minimum wage will be fixed at half a petro (1800 sovereign bolivard) from Monday.
This is around 28, more than $34 times lower than a dollar in the dominant black market rate.
What is hyperinflation?
Hyperinflation is the term used to describe prices that come out of control, coupled with high currency value, and causing consumers to fill out cash carts to enable them to purchase the most essential items in everyday life.
In theory, prices should always be fluctuated depending on bidding and demand. Inflation is the term for price hikes, while deflation describes price reduction. Hyperinflation occurs when prices rise wildly to give the concept of absurd inflation.
The problem comes when the supply of money in an economy exceeds demand for goods and services, causing the value of the currency to decline. This happens when governments create new money to finance their tax spending.
Hyperinflation has so far destroyed purchasing power in Venezuela, and businesses have increased prices by more than 50% per month recently. The Times reports that restaurant owners in Venezuela no longer have printed menus, while supermarkets have also removed prices from shelves. Many people use cards to buy goods instead of money.
Most Venezuelan people have been forced to leave the country with over 1 million crossing the border with neighboring Colombia in recent months, while others are forced to collect their wages with suitcases to pay a bread or a chicken, whose price, according to the “The Guardian” has reached up to 14 million bolivara, while a kilogram of tomatoes costs 5 million bolivara.
Aware of the problem that has paralysed the country and increased extreme poverty, some Venezuelan companies have begun offering unusual compensation packages, such as bonuses paid in eggs in exchange for workers' salaries.
