Gold as money in Venezuela during hyperinflation
davidk
Posts: 275 ✭✭✭
https://www.caracaschronicles.com/2019/04/21/inside-ciudad-guayanas-illegal-gold-retail/
I think the article misses some very important points, e.g. bad money drives out good...but still interesting.
“In Guayana, it’s common for people to purchase real estate or expensive assets, such as vehicles or high volumes of merchandise, with dollars or gold.”
“The business is also prosperous for 27-year old Enrique Bello, who just got Bs. 91,000 in cash for 0.91 gold grams. He had a career in Administration which he abandoned due to economic hardship, and now he retails gold to bring food to six relatives.”
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Comments
Gold is money... always will be... Cheers, RickO
I agree. What is happening on the ground in Venezuela flies directly in the face of paper currency bugs who often declare “you can’t eat gold during a financial crisis”.
Perhaps they plan on eating paper and digital bits...
Dollars and gold. Did a quick lookup of the exchange rates between dollars and Bolivares since 1 Jan of this year.
Conclusion: I am glad I am not there; and would stick with gold. Seeing one’s own country’s currency valuation drop so precipitously would be unnerving.
——-
“...the hyperinflation that makes any amount of banknotes useless to buy basic goods, have led the market to using other exchange values, such as the dollar, Brazil’s real (highly prized at the border) and gold, the latter due to the gold mining rush.”
Current exchange rate: 1 USD to VEF = 9.98750 Venezuelan Bolívares
Historical
4/19/2019 Friday 4,105.52500 VES
4/18/2019 Thursday 4,105.52500 VES
4/17/2019 Wednesday 4,105.50000 VES
4/16/2019 Tuesday 4,091.50000 VES
4/15/2019 Monday 3,312.50000 VES
4/14/2019 Sunday 3,306.00000 VES
4/12/2019 Friday 3,308.50000 VES
4/11/2019 Thursday 3,306.00000 VES
4/10/2019 Wednesday 3,305.50000 VES
4/9/2019 Tuesday 3,302.50000 VES
4/8/2019 Monday 3,295.50000 VES
4/7/2019 Sunday 3,292.00000 VES
4/5/2019 Friday 3,294.50000 VES
4/4/2019 Thursday 3,292.50000 VES
4/3/2019 Wednesday 3,290.00000 VES
4/2/2019 Tuesday 3,290.18000 VES
4/1/2019 Monday 3,288.50000 VES
3/31/2019 Sunday 3,288.70000 VES
3/29/2019 Friday 3,288.70000 VES
3/28/2019 Thursday 3,289.00000 VES
3/27/2019 Wednesday 3,288.75000 VES
3/26/2019 Tuesday 3,288.50000 VES
3/25/2019 Monday 3,288.50000 VES
3/24/2019 Sunday 3,291.50000 VES
3/22/2019 Friday 3,291.42000 VES
3/21/2019 Thursday 3,293.27000 VES
3/20/2019 Wednesday 3,291.50000 VES
3/19/2019 Tuesday 3,290.50000 VES
3/18/2019 Monday 3,290.87000 VES
3/17/2019 Sunday 3,291.50000 VES
3/15/2019 Friday 3,291.50000 VES
3/14/2019 Thursday 3,294.00000 VES
3/13/2019 Wednesday 3,293.50000 VES
3/12/2019 Tuesday 3,293.50000 VES
3/11/2019 Monday 3,293.84000 VES
3/10/2019 Sunday 3,294.00000 VES
3/8/2019 Friday 3,292.50000 VES
3/7/2019 Thursday 3,293.16000 VES
3/6/2019 Wednesday 3,294.90500 VES
3/5/2019 Tuesday 3,294.81000 VES
3/4/2019 Monday 3,294.90500 VES
3/3/2019 Sunday 3,295.30000 VES
3/1/2019 Friday 3,295.30000 VES
2/28/2019 Thursday 3,292.50000 VES
2/27/2019 Wednesday 3,295.50000 VES
2/26/2019 Tuesday 3,294.35000 VES
2/25/2019 Monday 3,293.50000 VES
2/22/2019 Friday 3,293.10000 VES
2/21/2019 Thursday 3,292.14000 VES
2/20/2019 Wednesday 3,292.14000 VES
2/19/2019 Tuesday 3,292.04000 VES
2/18/2019 Monday 3,292.13000 VES
2/15/2019 Friday 3,292.13000 VES
2/14/2019 Thursday 3,292.36000 VES
2/13/2019 Wednesday 3,292.36000 VES
2/12/2019 Tuesday 3,293.09000 VES
2/11/2019 Monday 3,292.07000 VES
2/8/2019 Friday 3,291.87000 VES
2/7/2019 Thursday 3,291.65000 VES
2/6/2019 Wednesday 3,291.65000 VES
2/5/2019 Tuesday 3,291.47000 VES
2/4/2019 Monday 3,292.37000 VES
2/1/2019 Friday 3,292.37000 VES
1/31/2019 Thursday 3,292.37000 VES
1/30/2019 Wednesday 3,295.00000 VES
1/29/2019 Tuesday 3,295.00000 VES
1/28/2019 Monday 2,081.78000 VES
1/25/2019 Friday 1,570.58000 VES
1/24/2019 Thursday 1,570.58000 VES
1/23/2019 Wednesday 1,323.24000 VES
1/22/2019 Tuesday 1,323.24000 VES
1/21/2019 Monday 1,122.06000 VES
1/18/2019 Friday 1,000.49000 VES
1/17/2019 Thursday 1,000.49000 VES
1/16/2019 Wednesday 948.28300 VES
1/15/2019 Tuesday 948.28300 VES
1/14/2019 Monday 861.24200 VES
1/11/2019 Friday 794.46600 VES
1/10/2019 Thursday 794.46600 VES
1/9/2019 Wednesday 703.68900 VES
1/8/2019 Tuesday 703.68900 VES
1/7/2019 Monday 637.38200 VES
1/4/2019 Friday 637.38200 VES
1/3/2019 Thursday 637.38200 VES
1/2/2019 Wednesday 637.38200 VES
1/1/2019 Tuesday 637.38200 VES
I’m amazed at how ignorant the author of the article is about real money. The evidence is right before their eyes, but they’re more concerned about ‘illegal’ gold per government decree.
one article I posted in the other Venezuela thread had people selling their gold items to buy necessities.
unfortunately, they are nearly out of personal gold.
the situation is very bad as indicated by the recent acceptance of red cross aid. people are having trouble eating.
Would the good folk of Venezuela been better off holding US dollars or gold?
Knowledge is the enemy of fear
I assume they'd be just as well off or worse off, as they're presumably able to acquire critical stuff in this crisis using them both as means of exchange, but they will also eventually run out of either medium.
The point seems to be that people who have critical stuff ARE willing to swap it for gold, in this quasi-SHTF circumstance.
Here's a warning parable for coin collectors...
I'm a little unclear about how Venezuela got this way, and it's critical to understand the real reasons.
Some websites blame the US, but it is not true that Venezuela can't get foreign loans and that's why they are selling their government's gold?
And why do they need the loans, if for no other reason they simply can't produce enough output to pay for their foreign exchange?
Say what you will about the oil companies & capitalism, for a formerly rich country having potentially the largest oil reserves in the world, it seems clear to me that by kicking out the oil companies and nationalizing their oil industry, and by allowing the socialists to over-promise goodies for popular support, they've killed the golden goose for the forseeable future.
Those little things like technology, capital and know-how seem to go where they are most welcome and don't seem to stick around where they are treated poorly.
Venezuela should be a mandatory case study in college economics curricula, I think.
I knew it would happen.
I'll inject a statement from my sisters boyfriend. "But that wasn't real socialism."
Its fun arguing with someone who.....damn its hard not to drag him through the mud, so I'll stop.
there are those that still see the budget deficits as the initial impetus for all of this.
the initial impetus for this quick (relatively) spiral was the kicking out of foreign oil and mineral companies, although it went further than that. they kept assets and did not pay the companies for them. Out they went without a dollar compensation. Chevron is the only one left there, I think.
Unfortunately, know-how did leave and kept leaving as the country went down. Those left managed to keep things running but not well and not enough to fix things as trouble came up.
Next on the list is price controls. They fixed food prices at such a low price that it became unprofitable to farm. Similar price controls made other products unprofitable.
hyperinflation took hold because it became a competition for basics like food, and it remains this way. minimum wage mandates made things even more unprofitable and did not relieve hyperinflation as the hikes were not enough plus many could not afford to pay. As another example of a failure, the oil industry was hit by the minimum wages by actually paying the know-how too little.
Also, know-how is leaving the country as they are most able to afford to leave and have most marketability in the job world.
Venezuela is getting loans from Russia and China to simply survive. They are attempting to pay it back with direct oil payments in lieu of cash. Unfortunately know-how and parts have left the oil industry unable to pump and ship enough oil to service the debt.
$22.23T debt and climbing. Tweet away.
PS: My family would eat just fine without gold or dollars although it is nice to have a bit of both. lol
Stack on!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Venezuela should be a mandatory case study in college political sciencecurricula
Venezuela is/was a dictatorship. Power in the hands of one will always lead to disaster. Zimbabwe was a dictatorship. Argentina was a dictatorship.
Knowledge is the enemy of fear
The point seems to be that people who have critical stuff ARE willing to swap it for gold, in this quasi-SHTF circumstance
How much is the gold being discounted?
Knowledge is the enemy of fear
...or dollars, for that matter.
Here's a warning parable for coin collectors...
How much is the gold being discounted?
Just a guess, but I would think that most markets are much more localized and that the exchanges between individuals are highly dependent upon individual needs at the moment.
That being said, there will always be black market arbitrators looking to take advantage so I think it possible that one day gold is discounted and the next day it carries a premium - depending on the who, where, what and why of the situation.
I knew it would happen.
Not as much as the Bolivar is the following day.
All cute responses, but no factual answers.
Knowledge is the enemy of fear
I guess you’d have to consult the Venezuelan black market gold authorities for a less ‘cute’ response...
I believe this establishes the fact that gold is money.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Anything can be money...even cow manure.
Knowledge is the enemy of fear
Cohodk is rich!!!
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
Cohodk, I've been assuming the point was that in the inflationary massacre of the Bolivar, people were turning to barter to secure necessities to the extent to which they were able, and that said bartered items included gold (as well as dollars, Brazilian reals, and other more trusted currencies).
Gold, in other words, has apparently retained some value for people who have desirable necessities on hand in Venezuela in the midst of this crisis. This seemed significant, in view of the hypothetical discussions we've had here about the utility of gold in a SHTF scenario.
In such an atmosphere, I'd assume the "discount" for gold (or for any commodity or medium of exchange) depends altogether on the immediate circumstance of the people doing the exchange, as jmski52 pointed out. Do you really think anything such as a stable "discount" figure exists in such an atmosphere?
Here's a warning parable for coin collectors...
You would think that if one prepares for a similar event in the USA, they would at least have some knowledge regarding this very important matter.
Knowledge is the enemy of fear
In many ways.😉
Knowledge is the enemy of fear
They have the knowledge of knowing that gold is money and manure is not.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
The females of this mammal are called cows.
Some peole like to make souvenirs.
Jewelry.
Ornaments.
Edible (make sure it has the ‘m’).
Need a bit of humor when your stacking all day.
there is one news story I posted that mentioned this pawn shop's buy price. I'll leave it as an exercise for the truth seekers and right fighters to find the story and read it.
the underlying currency is not stable from one day to the next. how could the exchange rate for anything be stable?
The only true money is knowledge and labor.
Knowledge is the enemy of fear
All cute responses, but no factual answers.
So.....………...why then don't YOU provide a few factual answers???
I knew it would happen.
Can you handle the truth?
Knowledge is the enemy of fear
So.....………...why then don't YOU provide a few factual answers???
Can you handle the truth?
The article that was posted doesn't suggest that either gold or USD are being discounted, but you suggested that gold is being discounted - with no documentation to back it up.
I didn't make the unsubstantiated claim that gold is being discounted, you did.
I knew it would happen.
Gold is discounted everywhere when you sell. Bid / Ask spread
Unsubstantiated...a wholehearted LOL for that. The article in the OP says that dude got 91,000 bolivars for 0.91 grams. At an official exchange rate of 3500 for $1, he got $26. With gold at 1300, 0.91 grams is $38. Not only is that substantiated, but its substantial. The dude should have just held US dollars.
Apology accepted.
Knowledge is the enemy of fear
I’m guessing that the .91g was raw and uncertified and I would expect metal pulled out of the ground to sell for less than a refined and minted product.
Currency bugs can keep their debt based pretty paper, and I wish them luck.
Gold "discounts" there reportedly vary quite a lot. People apparently are selling gold quite commonly in order to acquire necessities in this crisis, though.
https://miamiherald.com/news/nation-world/world/americas/venezuela/article222199935.html
Here's a warning parable for coin collectors...
At an official exchange rate of 3500 for $1, he got $26. With gold at 1300, 0.91 grams is $38. Not only is that substantiated, but its substantial. The dude should have just held US dollars.
So, the article was published on 4-19. Not to belabor the point, but you don't know when the transaction took place, nor do you know if US dollars are being discounted either. You don't know what the exchange rate actually was, nor when the transaction took place. Unsubstantiated.
I knew it would happen.
🐑🐑🐑
Since you obviously cannot prove what I wrote is incorrect, and you have made zero effort to prove what I wrote is incorrect, then emojis depicted above wish you to rejoin the flock.
Unfathomable that you refuse to think critically or do your own darn research. A blind follower.
Knowledge is the enemy of fear
He recently paid 7,300 bolivares per gram of gold to one of his customers, around $20, much less than what foreign markets would pay
https://www.miamiherald.com/news/nation-world/world/americas/venezuela/article222199935.html
You see jmski, it doesnt matter when the story is written, or the currency used, or the date of transaction. What matters is that it happens. Refuse to understand this at your own peril.
Look at these poor Venzuelans...they are trading their gold for something even more valuable...food. And a hungry person will take whatever he can get.
Knowledge is the enemy of fear
So how do you know the same hungry person isn’t doing the same thing with dollars at a discounted rate?
Choice Numismatics www.ChoiceCoin.com
CN eBay
All of my collection is in a safe deposit box!
I guess jmski would call this an unsubstantiated claim and ask you to prove it.
This is a precious metals forum that subscribes to the belief that gold will bail oneself out of hyperinflation. It is not a US dollar forum.
But let's play along. How do you know US dollars are not commanding a premium?
Why jump through hoops to exchange your gold--paying a middleman to do so--when dollars are readily accepted?
https://www.washingtonpost.com/world/in-socialist-venezuela-the-us-dollar-becomes-king/2018/08/01/7af16482-9442-11e8-818b-e9b7348cd87d_story.html
https://www.theguardian.com/world/2019/mar/13/venezuela-hyperinflation-bolivar-banknotes-dollars
https://www.france24.com/en/20190305-impoverished-venezuela-dollar-king
Knowledge is the enemy of fear
Nobody said the dollar wasn't being used or that the dollar isn't subject to exchange rate appreciation. I'm not sure what your point is supposed to be since we have no idea of what discounting or gouging is going on.
Your contention is that the poorest people somehow aren't being taken advantage of when they pay for a necessity with dollars, but that they ARE being taken advantage of when they pay for a necessity with gold.
How do you know US dollars are not commanding a premium?
Because all of the articles you cite don't say so.
Why jump through hoops to exchange your gold--paying a middleman to do so--when dollars are readily accepted?
Because you've run out of dollars long ago and are down to your gold possessions.
This scenario is exactly what I'd expect as long as the dollar has a semblance of being the world (or regional) reserve currency.
I understand that you cannot fathom that the dollar would ever be in trouble. I get that.
I also get the fact that using debt instruments as money is the banking system's raison d'etre, a malicious design at best.
I knew it would happen.
If we get a deflation scenario that results in a stock market crash, dollars WILL be at a premium while ALL assets (including gold) are being sold off.
If such a deflationary crash happens, dollars will save your bacon temporarily - but that scenario assumes that the Fed won't go nuts with more money creation prior to or during a waterfall event, which would be their "go to" remedy along with some crap regulatory controls or new taxes on existing capital.
When the Fed magically creates enough dollars to quench a major debt implosion, gold will be a better asset than dollars for the obvious reason that new dollars dilute the value of every existing dollar, while gold has no outstanding obligation. But hey, at least the debt will disappear.
Nobody wants either scenario to happen, but I have yet to hear a theory on why both of these scenarios aren't coming.
I knew it would happen.
AKA, perfect stacking opportunity.
Your contention is that the poorest people somehow aren't being taken advantage of when they pay for a necessity with dollars, but that they ARE being taken advantage of when they pay for a necessity with gold
I didnt contend that. I simply asked how much gold was being discounted, to which you couldn't answer. But I did contend that you were afraid to know the truth as evidenced by your lack of effort to prove otherwise.
So use some logic. Gold is discounted right here in the USA when one needs to sell, so you really think it wouldnt be discounted when you need to eat?
Knowledge is the enemy of fear
Cohodk, I'm still not sure I'm understanding your point.
Most of us are stacking gold, I'm assuming, as a hedge against inflation. But the hedge doesn't help much in the case of hyperinflation, or the collapse of the monetary system, such as is taking place in Venezuela. Obviously, an ounce of gold will get you a wheelbarrow full of Bolivars (Ah! The hedge works!), but who wants Bolivars in this atmosphere?
When you're back to barter, value is as value does, whether it's gold, dollars or cow poop. Everything that's not a necessity becomes a "medium of exchange," "discounted" or not, based on the immediate circumstance at hand.
Here's a warning parable for coin collectors...
I did contend that you were afraid to know the truth as evidenced by your lack of effort to prove otherwise.
So use some logic. Gold is discounted right here in the USA when one needs to sell, so you really think it wouldnt be discounted when you need to eat?
What is it that you want me to prove? That gold isn't discounted during hyperinflation in Venezuela, or that dollars are discounted less than gold is discounted? Is that your "truth" that I'm supposed to be afraid of? What's your point?
Is your contention is that people in Venezuela were better off having dollars than gold? If that's your contention, I don't think you've proven your point. I've listed different viable circumstances that serve as exceptions to that contention and none of the articles you've cited say anything to the contrary.
I don't understand why you think you know what's going on in Venezuela other than the sad situation that people in need will accept gouging when they have few options.
I knew it would happen.
Spot on.
You may notice that I’ve stopped feeding the troll (not you). I’ve no time for circular arguments, and input that adds nothing to the discussion at hand.
I really like well thought out dissenting opinions, even more so than opinions that I already agree with...but some seem to play the part of contrarian in an unhelpful and unpleasant way. No thanks.
The OP says it all,
“In Guayana, it’s common for people to purchase real estate or expensive assets, such as vehicles or high volumes of merchandise, with dollars or gold.”
Then the discussion devolved into "dollars good, gold discounted". Meh. The "discussion" is there for all to read.
I knew it would happen.
And you get my point. Stackers should be aware of very possible and probable unrealistic expectations of their hoard.
Knowledge is the enemy of fear