Venezuelan Currency Collapse

For the record, Venezuela produces oil at $27.50 a barrel, and sells it for over $50 a barrel. The drop in oil prices is not the reason for their governmental collapse.

Over the weekend, Venezuela held an "election" to establish an special assembly whose purpose will be to change the country's constitution. The ballots only had a provision to vote "yes" - there wasn't any "no" box to check. This is widely seen as a ploy by President Nicolas Maduro to provide a "democratic" basis for assuming more or less dictatorial powers. According to some news reports, he'll now attempt to appoint his wife as the head of this assembly.

It's hard to see how such antics might in any way alleviate the present wretched conditions with which the Venezuelan people must daily contend, and in fact the chances of a popular uprising or military coup would seem to have been enhanced.

The currency, of course, continues to lose value.

See: https://www.theguardian.com/world/2...colas-maduro

A couple more relatively recent articles on this topic. Both do cite the decline in the price of oil from its unsustainable peak as a contributing factor in Venezuela's present dire circumstances.

See:

http://www.businessinsider.com/stat...lapse-2017-8

And:

https://www.aier.org/research/venez...mic-collapse

On a less technical level, another article, albeit written almost two years ago, shows clearly the other side of the situation, which is the Venezuelan government's utterly repressive response to its new found inability to any longer finance its socialist agenda.

See:

https://www.activistpost.com/2016/0...ks-like.html

(Please note that I'm not necessarily endorsing the above website on the whole, just identifying this article as particularly interesting)

Translation : Despite being unable to maintain a viable national currency given our large pools of natural resources such as oil, gas, gold, and diamonds, due to ideological stupidity, I'm going to sell futures derivatives for our public resources to non-national banks and pocket the money.

I have a Venezuela silver dime size coin that I could get a lot of bolivars bills for that one

On top of everything else, this appeared in the newsfeed today, that Venezuela will in fact press ahead with the "Petro", a digital currency tied to crude oil.

See: http://www.caribbean360.com/busines...tal-currency

It seems as if the government would very much like to abandon the now nearly worthless Bolivar. To be fair, this really isn't a bad tactic under the circumstances. In 1923, the German government stabilized its hyperinflation crisis by ditching the mark for what was known as the rentenmark, a substitute backed by the tangible wealth the country had left, which was agricultural and commercial land holdings, which had to be mortgaged under the plan. That last detail may be the sticking point for Venezuela, as it doesn't sound as if the government intends to allow any sort of lien to be placed against its oil reserves, but simply to sell the new currency to investors who are bullish on the future price of a barrel of oil. The difference would seem to be what would be an oil based currency as opposed to an oil backed one. I'm also wondering how such an oil based currency dovetails with the reality of shrinking production and revenue - but perhaps that's irrelevant if it's merely pegged to a specific oil price index, and maybe that's intentional. Finally, I have doubts about the utility and accessibility of a digital currency for a great many ordinary (as in impoverished) Venezuelans.

Wow! and I thought the issue was the government's "investment" just wasn't working the way they thought it was supposed to work. Hmmmmmmmmmmm.

Not meaning to go off on a tangent, but I'm not sure about Panama (albeit for many years their coinage was struck by the U.S. Mint). Another Latin American country for which the U.S. Dollar is the official currency is El Salvador. In the Caribbean, the U.S. Dollar is used by both the British Virgin Islands and the British Turks and Caicos, which frankly astonishes me, although I guess it makes perfect sense from a tourism standpoint.