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In this series, you will look at what life is like for a family man living in a social and economic collapse. The writer of these posts is a middle-class Venezuelan, in a country which has the world’s highest inflation rate at 254.9%. Venezuela is a financial collapse nightmare with extreme shortages of food, riots severe hunger, a crippled Venezuelan economy, crumbling infrastructure, collapsed healthcare system, and a failing government.
The Venezuelan collapse has escalated to a breakdown in social order, putting Venezuela at the top of Latin America’s most homicidal nations. The rate of Venezuelans murdered is now 20 times that of the US.
Here is the second post in a series of updates from the Venezuelan Prepper.
Every kind of collapse has different traits. In our modern world, there is a lot of indications of problems, and often, a lot of information that generally results in the bias does not get to the core of the issue.
The 2008 financial crisis was a good example of that. There were plenty of indications of problems. In Venezuela, there were some indications as well, but the crisis is something barely seen in some other countries, as the Venezuelan economy has particularities of its own. This crisis is partially induced, but a great portion is generated by the sheep mentality and consumerism.
Years ago I wrote down some important alerts that I defined as very important to measure how bad things were going. They were:
Several of this events were appearing, one after another, and with the cash crisis and the food trafficking mafias, that was the final warning. This crisis has generated something never seen in Venezuela (and hardly in any other country as far as I know): different prices for the same articles if paid with cash (cash is very very scarce) and merchants asking for twice the price if paid with debit or credit card.
The cash issue is generating an increase in social stress, as should be expected. People can’t get enough cash to pay for their daily public transport payment, or to get lower food prices by paying in cash. The difference between electronic money and physical cash is 95%. So go figure. If they can’t get to their jobs, they can get fired. It is a cycle, and a downward spiral to oblivion. They sell packages of cash, charging twice or twice-and-a-half their value in bank transfer.
This is happening, and it is one of the practices that is damaging deeply the economy. The authorities just don’t do anything: it is a problem so large, that they are technically unable to mitigate the issue. That is the truth.
If the authorities of any government find a problem so large, and so extended that they know they can not solve, they will ignore it, and avoid all the publicity related to it. They will deny it and dodge it, until they don’t have any other option. The reason is simple: most of the people don’t care about screwing their own customers. It is survival. The importing of many goods is now so scarce that the prices are dollarized, and there is not enough money paper to make something practical of the economic exchange.
The result is, some people has gone to buy white cheese (our farmers have a tradition of white cheese production since the Spaniard colony times) with some eggs, or some corn, or they trade corn flour for arepas, or sugar, pasta, deodorant, any staple, instead of money. With an inflation around the 1200%, this is logical.
With such turmoil in the current economy, some Venezuelans have turned to alternative currencies. Some people have told me they are trading in cryptocurrency, but with the prosecution of people who use cryptos, they band together in very tight trading groups, and are very careful with outsiders.
The Venezuelan intelligence organization has already been getting into people who are mining cryptocurrencies such as Bitcoin, and have had their mining equipment confiscated, and landed in jail. This is so the same police who arrested them can use their equipment to mine Bitcoin for themselves. This has happened several times already.
There is no legal ruling about cryptocurrencies. But, generally speaking, there are no laws in the country except those used to protect the people in power.
Something that has made me rethink about the use of cryptos is a very positive feature of these, which is that for a country in disarray, the government can’t control its value. Countries like Venezuela, who have become banana republics because their government has induced rampant inflation via over-printing currency, can get the benefits of such cryptocurrency.
The value of bitcoin changes, for example. But its volatility is not even close to that one suffered by the Venezuelan Bolivar. The people have been forced to use their imagination to be able to survive this cash crunch. Bartering, or paying with working hours or some sort of service is now common. Despite the electricity service being a deficient one, the electricity is so cheap that Bitcoin mining has become a large and profitable activity in the country. It works in the shadows, though. And it has become the main income source for some anonymous family heads, who have decided to risk themselves in mining operations to provide for their families.
Cash collected by corrupt individuals who seem to hold the balance of power in the Venezuelan economy. It is subject then to a laundering process, as would be expected from criminals. This money is then being used to buy apartments, houses, luxury cars, and other goods of people who are leaving the country. You see, those people who worked hard for their cars and houses are forced to leave due to the struggling Venezuelan economy. In desperation, they sell their hard earned properties at discount prices.
This is how an economy evolves after a financial collapse. Those who are corrupt or greedy will find a way to further themselves. If someone believes that it can not happen in some other country, then they should ask why I take my time to write about this.
The plan to make the currency worthless was executed, and all the problems that generated have even killed people in the resulting turmoils. Our central bank, in an effort to provide some relief, partially at least, tried to introduce higher-denomination bills with a 100,000 bolívares note. These new banknotes are being printed in Europe. The problem with that is the government, dealing with a massive falling oil production as a result of oil industry employees running away from the country looking for a better place to live, simply doesn’t have the needed money to pay for the import of those new notes.
For those that are not in the know, Venezuela has a severe currency control exchange, something that Hugo Chavez said that he would never allow. Of course, he did it anyway, and that was one of the things that started the poisoning of our economy.
Nowadays, cash is so scarce that it is being saved for real emergencies. The bad news is, you just can’t save so much because what you could buy this week with a package of 100’s notes, will not be able to be bought next week.
The black market of food and supplies is entirely dominated by corrupt military and policemen, banding with the terrible colectivos criminals who have been keeping the barrios under control by fear and threatening. Drugs, food, medicine, and cash are being controlled by these criminal organizations, everything sponsored by the government to keep under control the annoyed population.
There is a theory that the Colombian government is inducing the cash scarcity. If this is true or not, I can not say. But being honest, why would a government sabotage another government’s economy, when all of those people trying to flee away from the problems are going to come across the border? This does not make any sense, I think.
Thanks to the entirely wrong approach to the Venezuelan economy by the government, the Venezuelan people struggle for days to withdraw from the bank as little as 6 cents of the dollar. It is so bad, that some banks cannot offer cash. The ATMs are practically useless. They empty so fast that many times the bank staff does not bother in refilling them once they empty the first time.
A smart move, I think Venezuelans should start a network of same-minded people, and start using cryptocurrencies. Once this effect can be appreciated locally, its influence will spread by itself.
This could be a nice, harmless and transitional way to stabilize the Venezuelan economy. The tools needed would be the information to provide to the people about how cryptos work, and how to use them.