Last Thursday, July 26, in a PanAm Post article entitled “The Removal of Zeros by Maduro, a Well-known scam in Argentina“, we have already warned our readers that if there are no fundamental changes in the economic structure of Venezuela, the new currency that will be launched in August would be doomed to failure. What we never imagined is that it would fail even before its launch, at the time of the official announcement. But Nicolás Maduro has done so, and appears headed straight into the Guinness Book of World Records for the most laughably incompetent launch of a “new” currency.
In a public announcement to the eager public, Maduro announced his exciting plans to finish “nationalizing” the economy and again pledged to intimidate anyone seeking to stand in the way of his grand schemes. But besides the usual bravado, Maduro was dedicated to presenting the spectacle of Venezuela’s new currency: a brilliant plan to remove five zeros from Venezuelan bank notes.
Trying to show power and capability, the Chavista disciple proclaimed that Venezuela already “has ten times more bills than the country needs.” His eager horde of paid supporters applauded, as if it were good news.
“We already have them printed, in your hand. Here compadre,” gestured Maduro, showing off his new monetary arsenal.
The speech was part an attempt at serious political discourse, and part comedy routine. What is readily apparent to all, is that Maduro does not have the faintest idea about the nature or root causes of hyperinflation. Maduro is now nearly completed isolated, even within the realm of the Latin American left. He has replaced public policy experts with loyalists, and has no one in his administration who has the slightest understanding of basic macroeconomic issues. Venezuela is totally adrift with a dictatorship as intolerant as it is ignorant.
Although Maduro suggested that having a robust and abundant supply of bank notes is a sign of strength, what he actually did when he said that they have printed “ten times more than they need”, is to seriously attack the credibility of the new bolivar. Although he said that the new currency would have an “anchor” to the laughable state-sponsored cryptocurrency the “petro”, by publicly recognizing that there is ridiculous surplus of Venezuelan bank notes, Maduro acknowledged that this convertibility is worth nothing at all.
In the moment where he most needed to show credibility, Maduro made a laughingstock of a currency that has not even been issued yet. Even Hugo Chávez and Fidel Castro had some basic monetary conceptions, something they demonstrated on more than one occasion by criticizing the US dollar for a supposed lack of government backing. Maduro does not even have that. He does not understand what money is, what is for, what gives it value, and what takes that value away.
Having “ten times more bills than you need” in a country, ready to flood the streets, is a terrible news, since the monetary issue, not demanded by the market, merely devalues the circulating currency units. It is curious that in the middle of a monetary disaster like that of Venezuela, Maduro has not yet noticed this fundamental principle.
He wanted to give a show of strength, but to have “ten times more bills” than necessary, ready to use, is not to have an army ten times bigger, or an arsenal ten times bigger. It is the equivalent of having a gun with which to shoot oneself in the foot. And Maduro has done that again.
Maduro and his incompetent Chavista cronies can manipulate the money supply as much as they want, and remove as many zeroes as they want. As long as there is utterly no faith in the government backing the “bolivar fuerte”, the money will be as worthless as the paper it is printed on.