dinsdag 4 april 2017

Venezuela's Money Supply Soars By A Record 200%

Two weeks ago, Reuters reported that due to "unexplained" reasons, the Venezuela central bank had stopped publishing its M2, or money supply, data. The M2 money supply was up by nearly 180% in mid-February from a year earlier, according to the central bank before it halted the release of the weekly data without explanation in February. "If they are not publishing, you know it must be skyrocketing," Aurelio Concheso, director of the Caracas-based business consultancy Aspen Consulting, stated the obvious. The central bank and ministry of communications did not respond to a request for comment, Reuters adds. Fast forward to today when following the international outcry over last Wednesday's failed coup-attempt by Maduro, in which the Supreme Court first withdrew the power of Venezuela's opposition-controlled Congress, and then promptly reversed itself following loud international outcry and after it appeared that Maduro's precarious grip on Venezuela society was about to be lost, when Venezuela's M2 has once again mysteriously reappeared. According to the latest data, the money supply in the crisis-stricken country has surged over 200% in a year, up from 180% as of February, and the fastest rise since records began in 1940, putting it on track for the world's highest inflation. According to Reuters which first spotted the return of the data, soon after a month-long hiatus from publication, the central bank said late on Friday the total amount of local currency in circulation, M2, as of March 24 was 13.3 trillion bolivars, up 202.9% from a year earlier. By comparison, in the US, M2 rose by 6.4% in the same period...


But while M2 may have returned, official inflation data is still missing, which is probably for the best: Venezuela is in a major economic crisis, with millions struggling with food shortages and hyperinflation inflation in triple digits, if not higher. Venezuela's opposition-led National Assembly, which correctly accuses the leftist government of destroying the OPEC country's economy, says inflation reached 741 percent in the year to February. It's likely far higher. The exponential rise in M2, the sum of cash, together with checking, savings and other deposits, means an exponential rise in the amount of currency circulating. Coupled with a decline in the output of goods and services, that has accelerated inflation. Curiously, never before has Venezuela sunk so low, despite its economy being largely uniform over the years. As Reuters notes, the central bank website shows five separate spreadsheets with money supply data going back to 1940. Back then, as now, Venezuela's primary export was oil. One thing did change recently, however, roughly around the time the M2 curve started going exponential: that paragon of socialist virtue, Nicolas Maduro took over. The rest is history. Maduro says right-wing businessmen are hoarding goods to sabotage his administration, and has accused the US of coordinating with other global leaders to remove him from power (that actually may not be too far off, if only the CIA wasn't more focused on destabilizing the domestic US situation in recent months). Meanwhile, as M2 goes exponential, we have a feeling that the following chart of the Bolivar on the Venezuela black market - which reflects its true lack of value, is about to take its next step function higher, or rather lower as what little value the local currency may have had disintegrates in the coming months...


We can only imagine the awe shared by Western central bankers who watch in dumbfounded amazement as this small country has achieved precisely the final outcome all "developed" currencies will one day soon experience....