Three-dozen 747 cargo planes have arrived in Venezuela, all stuffed with newly printed money. This is what hyperinflation looks like.
WSJ reports that Venezuela’s central bank’s own printing presses in the industrial city of Maracay don’t have enough security paper and metal to print more than a small portion of the country’s bills.
This is what happens when massive amounts of new money are printed, the desire to hold cash balances shrinks to near zero.
Venezuela’s 30 million people can’t seem to get cash fast enough, said Steve H. Hanke, an expert on troubled currencies at Johns Hopkins University. “People want cash because they want to get rid of it as fast as they can,” he said.
While use of credit cards and bank transfers is up, Venezuelans have to carry stacks of cash as many vendors try to avoid transaction fees. Dinner at a nice restaurant can cost a brick-size stack of bills. A cheese-stuffed corn cake—called an arepa—sells for nearly 1,000 bolivars, requiring 10 bills of the highest-denomination 100-bolivar bill, each worth less than 10 U.S. cents.
The printing spree is good business for banknote printers. WSJ again:
The huge order for 10 billion notes can’t be satisfied by a single firm, the people familiar with the deals said. So it has generated interest from some of the world’s largest commercial printers, each vying for a piece of the pie at a time when low profits in bank-note printing have pushed many of them to cut back on capacity.
Reprinted with permission from Economic Policy Journal.