Expansion of the Monetary Cone

By Pasqualina Curcio

The new notes of 10,000, 20,000 and 50,000 sovereign bolivars will neither accelerate nor decelerate inflation. They will only make it possible to facilitate commercial transactions that are made in cash.

In hyperinflation, more money is needed to buy the same goods. If in August 2018 the carton of eggs had a price of 80 BsS and today of 28,000 BsS, we need 35,000% more money, whether electronic or cash, to buy it. With the new cone, instead of using 56 bills of 500, we will use 3 of 10,000.

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Whether inflation accelerates or decelerates depends on the intensity of the criminal attack on the currency. The highest monthly inflation we registered was in January of this year: 196.6%. Just that month we were victims of the biggest attack on the bolivar: dolartoday was manipulated by 332% in connection with the constitutional inauguration of President Nicolás Maduro and the illegal self-proclamation, worth the redundancy, of he who still believes himself president of the Republic.

Inexplicably, that month of January and according to that portal, the exchange rate went from 730 BsS / US $ to 2,916 BsS / US $. The attack was of such magnitude that its effects were maintained in February: inflation was 114% that month.

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The second highest monthly inflation was registered in September 2018: it was 128%. During that month they manipulated the exchange rate 147%: it went from 35 BsS / US $ to 87 BsS / US $. They attacked the bolivar after the announcement of the recovery plan.

Inflation slowed down in March, April and May of this year. Prices, although they increased, did so at a lower level than in January (inflation was 34.8%, 33.8% and 33.3% respectively). The cause is that the enemy lowered the intensity of attack those 3 months: they manipulated the bolivar -1%, 36% and 27%. The criterion, only they know it.

Neither inflation nor the supposed depreciation of the bolivar have to do with the amount of money circulating. Let the BCV explain why, despite the fact that in its orthodox economic equilibrium trap, the real money amount decreased 67% from August 2018 to May 2019, inflation during the same period was 28.403% and the exchange rate varied by 17.519%: 36 BsS / US $ passed to 6347 BsS / US $.

Expanding the monetary cone again will depend on the magnitude of the attack on the bolivar and on what the BCV does to defeat it.

Source URL: 15 y Ultimo

Translated by JRE/EF

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Pasqualina Curcio
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Economist (Central University of Venezuela). PhD in Political Science from Simón Bolívar University (Venezuela). Master in Public Policies of the Institute of Advanced Studies in Administration (Venezuela). She is a Full Professor of the Department of Economic and Administrative Sciences of the Simón Bolívar University. She was Deputy Minister of Collective Health Networks.

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Pasqualina Curcio

Economist (Central University of Venezuela). PhD in Political Science from Simón Bolívar University (Venezuela). Master in Public Policies of the Institute of Advanced Studies in Administration (Venezuela). She is a Full Professor of the Department of Economic and Administrative Sciences of the Simón Bolívar University. She was Deputy Minister of Collective Health Networks.

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