Op-Ed: Venezuelans Look to Bitcoin for Economic Asylum

Executive Brief

Hyperinflation has destroyed the economic prosperity of Venezuelans. The oil-rich nation is now home to some of the highest crime rates in the world, and the banknotes required to conduct everyday life there are reminiscent of Germany’s Weimar Republic. Venezuela’s government has proven itself inept by printing money and spending themselves to oblivion, and by making everyday trade more difficult in their attempts to curtail the resulting hyperinflation. We heard from Leon about the challenges his family are facing in Venezuela, and how his discovery of Bitcoin has given him new hope for his family’s future. 

Read the full story below. 

Venezuela’s hyperinflation is a story of a man-made crimes against humanity — one to the detriment of its thirty million inhabitants. Every passing day sees their local currency nosedive further, along with the purchasing power of Venezuelans. This a symptom of the Venezuelan government’s relentless drive to print money so worthless that it needs to be counted by weight. The International Monetary Fund forecast last year that 2016 would see inflation in Venezuela top 720%. Luckily, Venezuela’s President Maduro pulled out the tried and tested (to failure) socialist go-to solutions straight from their handbook: imposing price freezes and capital controls on local firms and citizens. But they failed. Abysmally. In the middle of 2016 Venezuela ran out of money to pay for the new banknotes it needed, which had to be paid in US dollars. The government liquidated its gold reserves to facilitate this payment — their only asset that was still valuable — just to buy these banknotes (liabilities) that would further wreak havoc on their people’s well-being.

Unbridled inflation has left the people of Venezuela — home to a year-round growing season, top tourist destinations, and the world’s largest oil reserves — to deal with shortages of essential-foods, clean water, electricity and medical supplies. Unemployment and crime are now at a record levels, which Bernie Sanders will be pleased gives Venezuelans more time to wait their current average of 35 hours monthly waiting in lines for necessities — lines that he once called “a good thing” among his many other praises of the regime. I’m glad at least he will be happy. In early December when it already cost a month's wages for a basket of groceries, the Venezuelan government figured a novel way to combat the hyperinflation they had caused — to ban their own money. The largest banknote — the 100 bolivar they had been printing en-masse — was banned from circulation under the guise of combating “hoarding” of their worthless currency, and daily banknote withdrawal limits of it up to $5 USD value were enforced. The government did everything possible to make money exchange as difficult as possible for Venezuelans — which ironically is money’s central purpose.

Leon is one such affected Venezuelan. His story is that of a man whose aspirations were to provide for his family the best lives possible. He went to university, became a journalist, and works among his various projects and jobs more than 12 hours per day to bring his family an income. Leon watched his family’s entire savings evaporate thanks to hyperinflation, and rues the barren shelves in supermarkets, empty ATM’s machines, no longer being able to afford housing for his family, and that 1kg of meat cost what took him the previous six months to earn. According to Leon, most people don’t accept the local bolivar anymore — nobody wants to count (or weigh) 100 paper notes for a hamburger, or dedicate entire rooms just to store cash. In Venezuela, money is a burden.

Digital currency is the escape for Venezuelans:

Leon explains at his blog that Bitcoin is his family’s best opportunity to escape hyperinflation. Bitcoin’s value is set at a world market price where his the government is unable to destroy its value. Bitcoin has allowed Leon to keep his money safe from thieves while accessing money when it’s needed, and Bitcoin does not require bags-full of it to pay for essential goods. Bitcoin means Leon’s family can once again contemplate saving to purchase life’s essentials like a home to rent or escape to another country. Bitcoin has already become the preferred payment method to many local retailers and its users have risen rapidly in Venezuela from 450 to more than 85,000 in just the last two years. While Bitcoin may be seen as the catalyst for many in the west as a hedge against economic and currency collapse caused by modern central banker policies, Leon is already enduring a glimpse of our potential future. Today, Bitcoin is Leon’s family’s means to survive.


if you want to read the crowd funding effort for Leon, the oirignal post can be found here: 

https:[email protected][email protected]inflation

The views expressed by the authors on this site do not necessarily represent the views of DCEBrief or the management team.

Author: Timothy Goggin

Timothy Goggin is an economic analyst with an interest in the application of moral philosophy and decentralized systems. He studied economics at the Business School at Victoria University of Wellington, New Zealand. His area of research is the consequential and moral dimensions of implementing digital currencies and the resulting synergies for consumers in the trading environment.

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