Wrecking economies the easiest, fastest way possible
The history of the last 100 years has repeatedly shown that the final sign that an economy is being run according to a political theory rather than by the dictates of common sense, is when its paper currency costs more to print than its face value.
It takes time for the value of a pound, a dollar, a mark, a bolivar, a kwacha, or a franc to drop horrendously, but when it does even a million will not buy a loaf of bread. Alas, as obvious as this is, the politicians who dig the hole into which their currency is falling often continue to dig.
Last week a South American country became the poster child for such economic lunacy when it had to knock off a few noughts off its paper currency because it was physically difficult to pay cash for anything.
It was not the first time this once-rich country’s citizens found their savings wiped out overnight – it was the third time in the last 13 years. This time it was necessary to remove not two zeroes but six. That is an in-your-face obvious, stand-out verdict that political meddling with an economy is Not a Good Idea.
This week, the Venezuelan million-Bolivar note of last week became a one-Bolivar note. But it is still worth only 25 US cents.
The politicians will keep on digging. It’s a neat way to impoverish everyone, especially those in the pesky middle classes. Even street vendors selling their goods in the street were fed up at carrying huge bundles of notes.