The Reichsbank cash delivery office in Berlin, October 1923. Photo courtesy the German Federal Archives.
A report from the BBC this week reminded me how powerfully a photograph can convey a mind-numbing statistical concept – such as an inflation rate that threatens to reach seven digits.
Venezuela’s president, Nicolas Maduro, had just declared that his administration would tame hyperinflation by dramatically devaluing its currency and raising the minimum wage by more than 3,000 percent. Unfortunately for Venezuelans, these measures will do virtually nothing to heal the country’s economic crisis. In all likelihood, the currency overhaul will make matters worse.
As I have written before in this space, a profligate and corrupt regime wrecked Venezuela’s real economy by mismanaging and expropriating productive enterprises in the private sector while bloating the public sector with regime loyalists. When a decline in oil prices over the past several years accelerated the government’s inevitable cash shortfall, Venezuela just kept printing money – in effect, confiscating every individual Venezuelan’s savings by turning their bolivars into Monopoly money. Lopping five zeroes off the currency will change nothing, except to further emphasize the worthlessness of what the government prints.
The International Monetary Fund has predicted inflation in the country will hit 1 million percent by the end of 2018; inflation had already reached 82,700 percent as of July. Some economists warn that Maduro’s plan could drive it even higher. Desperate Venezuelans have been fleeing the country as fast as they can; more than 500,000 have fled this year alone. The United Nations estimates that about 2.3 million have left since 2014. Those who can’t flee grapple with a life of queuing, bartering and suffering.
All of this has been in the news about Venezuela a long time. But the BBC illustrated just how bad that kind of hyperinflation looks. In a series of photographs by Reuters photographer Carlos Garcia Rawlins, everyday food and household items sit next to stacks of the old bolivars – the amount necessary to pay for them. For those of us outside the country, the images drive home exactly how little value a bolivar retains.
Germany, 1923: Banknotes lost so much value that
covering a wall with them became cheaper than
buying actual wallpaper. Photo courtesy
the German Federal Archives.
I recalled images from Germany in the era of the Weimar Republic, another time and place when stacks of near-worthless cash were commonplace. I grew up hearing stories of an era when Germans used wheelbarrows as wallets. Currency became so worthless that it became more useful as wallpaper or children’s building blocks than as a means for acquiring goods and services. For comparison with today’s crisis in Venezuela, the inflation rate in early 1920s Germany reached 3.25 million percent per month; workers were sometimes paid as much as three times daily and rushed to try to spend their cash in stores where shelves were routinely empty.
While Weimar Germany may be the example most Americans know best, hyperinflation has left people similar stacks of near-worthless currency elsewhere, too. In 1940s China, piles of yuan dwarfed the equivalent value in U.S. dollars when stacked side by side. Modern Zimbabwe has struggled with hyperinflation twice, in the late 2000s and again recently, leading to currency notes in dizzyingly high denominations and citizens carrying huge piles of cash.
Venezuela now joins the list of countries where hyperinflation has turned legal tender into virtually worthless paper. And, despite Maduro’s empty boasts that “Venezuela is going to experience an economic miracle,” there is no quick fix in sight.