– Deepening Crisis In Hyper-inflationary Venezuela and Zimbabwe
– Real inflation in Zimbabwe is 313 percent annually and 112 percent on a monthly basis
– Venezuela’s new 100,000-bolivar note is worth less than USD 2.50
– Maduro announces plans to eliminate all physical cash
– Gold rises in response to ongoing crises
A military coup-de-grace in Zimbabwe and a bankrupt Venezuela. Both countries have extreme hyperinflation, citizens are starving and basic medical treatment is near impossible to find. These are the real world problems 47.5 million people are currently facing.
Presidents Robert Mugabe and Nicolas Maduro both deny the crises in their respective countries. For Maduro it is the media propagating false truths. In Zimbabwe the response to hyperinflation has been to declare it illegal.
Both countries are in the media spotlight after a significant week that has left one man powerless and another scrambling to restore faith in his bankrupt country.
Each country’s mess is thanks to mismanagement of resources and the central banking system. Citizens have had their rights almost decimated as the cash in the bank is worth increasingly less and fewer people are receiving income. Basic goods and services are near impossible to come by, with little sign of let-up.
The hyperinflation and economic situations in both the Latin American and south African country are a reminder of the damage caused by governments. Both Maduro and Mugabe have acted under the premise of serving the electorate. Citizens as a result have only suffered and seen their wealth diminish on a daily basis.
Both countries may seem a million miles away from the West in terms of political situation and cultures. However there is a strong lesson to be learnt. Savers should learn the need to protect their earnings and wealth from the manipulative decisions of governments and destructive monetary policies.
Zimbabwe: The tyranny of a despot and his central bank
“Zimbabwe, welcome back to the record books! You have once again entered the inglorious world of hyperinflation. It is a world of economic chaos, wrenching poverty and death,”
Venezuela reminds me of a quote that is often misattributed to Milton Friedman:
“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.”
Today you could say the same about oil and the Venezuelan government. The country was once the richest in Latin America but can no longer cover its own debts.
On Monday it missed interest payments on two government bonds. Even after a 30-day grace period it is unable to muster up $280 million owed in payments.
Meanwhile the value of the bolivar continues to plunge, causing major financial problems for Venezuelans. As explained by Business Insider:
After the country’s economic collapse in 2016, high inflation caused the bolivar’s value to plummet. By December, the then-largest note of 100 bolivares, which was worth about $US0.02, was pulled from circulation. To counter this, new denominations of 500, 1,000, 2,000, 5,000, 10,000, and 20,000 bolivares were introduced.
Maduro’s unveiling of the 100,000 bolivar note means it’s possible that some of these sm