The Liberty Papers

Hugo Chavez must have it in mind to violate every law of economics in the book. Price controls, nationalization, and now demonetization:

CARACAS, Venezuela, March 17 — Of all the startling measures announced by President Hugo Chávez this year, from the nationalization of major utilities to threats of imprisonment for violators of price controls, none have baffled economists quite like his venture into monetary reform.

First, Mr. Chávez said the authorities would remove three zeroes from the denomination of the currency, the bolívar. Then he said the new bolívar, worth 1,000 old bolívars, would be renamed the “bolívar fuerte,” or strong bolívar.

Finally, at the behest of Mr. Chávez, the central bank said this week that it would reintroduce a 12.5-cent coin, a symbol of Venezuela’s prosperity in the 1960s and 1970s before freewheeling oil booms ended in abrupt devaluations, after three decades out of circulation.

Moves like this, of course, are common when countries are dealing with out of control inflation. Instead of dealing with the root causes of the problem, which would require a dictator like Chavez to abandon his ambitious/insane plans for Venezuela’s future, you simply change the monetary system and hope people will forget that the food they bought for 28,000 bolivars last week is the same as the food they’re buying for 28 “new bolivars” this week.

And it would appear that at least some people realize this:

The decisions to rename the currency and reintroduce the unusual coin, known here as the locha, a term thought to derive from an anachronistic practice of dividing monetary units into eighths, have dumbfounded many Venezuelans. More than a third of the country’s population of 26 million is under age 18, with no memory of the coin, which stopped circulating in the 1970s.

“I think that it’s cheap psychology,” said Jhonny Márquez, a manager at a transportation company. “I don’t believe the inflation will go down.”

Still, Mr. Chávez, 52, waxes nostalgic about the coin. Citing “the respect Venezuela’s economy has around the world” in a transmission of his television talk show this month in which he announced the coin’s return, Mr. Chávez said, “We’re going to end monetary instability in Venezuela.”

Yea, sure you are.