A 5 pound chicken costs 14,600,000 bolivars in Venezuela. How do you solve this problem of needing such huge amount of cash, can you solve it by just making a new currency with less zeros?

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In: Economics

6 Answers

Anonymous 0 Comments

>can you solve it by just making a new currency with less zeros?

Yes. The logistical problem of needing a wheelbarrow to carry your lunch money can be solved like that, perfectly fine. They did that in Venezualy at least once, by introducing a new currency with a fixed exchange rate against the old one.

The problem with hyperinflation isnt so much that you need ridiculous sums of money – those sums are essentially imaginary, no one gives a fuck whether the piece of paper you pay your chicken with has 1, 5 or 10 zeros printed on it.

The problem is that hyperinflation carries on. One of the primary functions of money is to “store” value. I earn X money today, then i can spend that whenever i want. Normally, if i can buy a chicken with that today, i can do so next week. Not so in hyperinflation. Currently, the bolivar looses 90% of its value in three months. Meaning if i save enough bolivares to buy ten chickens, i can only buy a single one three months later. This makes saving essentially impossible.

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