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Paper Money Eventually Returns To Its Intrinsic Value – Zero

Date: Tuesday, September 4, 2018 8:03 PM EDT

In socialist Venezuela, the price of a cup of coffee has doubled every few weeks. The annual inflation rate could hit 1,000,000 percent by years end. People can no longer afford food, but that’s okay because there isn’t any food to be found. South America’s once wealthy nation has spiraled from secure and stable into an unimaginable state of hyperinflation. Venezuela is experiencing the results of government mismanagement, corruption, and socialist ideology. President Maduro’s solution to the problem is to proudly lob three zeros off the hyperinflated Bolivar and call it a “miracle solution.”

At one time, Venezuela had the largest oil reserves in the world, which provided steady revenues for the country and a good living for its citizens. Oil accounted for most of Venezuela’s exports. Life in Venezuela was excellent. Then, in 1998, came President Hugo Chavez. Chavez used the abundant income stream to go on a spending spree as he instituted a large number of entitlement programs using the oil revenues. A strike in 2003 interrupted Chavez’s plans and caused the GDP to crash by 27 percent in just four months. Chavez began nationalizing industries and instituting price controls, which was the beginning on Venezuela’s inflationary spiral as Venezuelans developed a reliance on their government for products and services.

The price of crude oil plummeted in 2014, and the economy shrank by 30 percent. Oil revenues, in the form of U.S. dollars, were dwindling, and Venezuela was unable to continue importing necessary goods. These days, in 2018, stores are empty as people attempt to survive on dealing through the black market.

Venezuela is printing currency at the speed of a copy machine. The more money that is injected into circulation, the more it becomes devalued. The cup of coffee that could be bought for 140,000 bolivars rose to over 1,000,000 within weeks. Today, that cup costs 2,000,000 bolivars. Hyperinflation has placed the purchase of everyday items out of the reach of the average Venezuelan, although President Maduro has granted four wage hikes this year alone.

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