This “Money With Mak and G” podcast episode, we dive deeper into some of the financial issues Venezuela is facing, what happens when a country’s currency goes into hyperinflation, and the problems a country faces when all their skilled professionals start emigrating.
What happens when a country’s currency becomes worthless and people lose all faith in the Government?
This episode, Mak and G dive deeper into the history of Venezuela and the problems they’ve faced with a corrupt government, a currency going through hyperinflation, and a population who are looking for a better life elsewhere.
“One day you’d have lots of bolivars and the next they literally dropped 14 zeros.” – Mak and G
“Supply and demand is key.” – G
00:35 – Why Chavez’s death resulted in many people fleeing Venezuela.
01:19 – How many people have left Venezuela since President Maduro came into power.
02:50 – The problem with Governments subsidising food costs.
05:15 – Different types of corruption in the Venezuelan Government.
06:20 – What hyperinflation is and how it affected people in Venezuela.
07:45 – How the black market for US dollars started in Venezuela.
08:44 – The problem with having skilled professionals emigrating.
Connect with Ben Jones:
MAK: Last week we had Mr. Daniel with us and he started to lay some groundwork on some very interesting stuff in his country, Venezuela, about money. We welcome him back for more:
MAK/GRANT: WELCOME BACK DANIEL!!
DANIEL: Thanks for having me back. I wasn’t sure after last week. We only got through a few things, so I’m glad we can cover some more.
GRANT: We’re glad too. You know we never asked you about how and why you came here?
MAK: Yeah, so why did you come to the US?
DANIEL: Well, you have to understand what happened after Chavez messed up a lot of stuff. He knew he was going to die and told everyone to pick Maduro. He asked everyone to vote for him. Maduro seemed to be almost worse than Chavez and Chavez hurt or killed many people who either protested or challenged him.
GRANT: No way. So, the economy actually got worse a couple of years ago, after Chavez?
DANIEL: Yes, it’s been terrible. It was hard for me to find a job. Food, clothes, medicine, and gas were either expensive or difficult to find. I came to the US for a better life.
MAK: It’s good you have family here. Have many left while Maduro was President?
DANIEL: Almost 6 million, and that’s out of the 30 million who lived there. That’s almost 20%.
GRANT/MAK: 6 MILLION??
GRANT: That’s absolutely unbelievable. But, your mom stayed, right?
DANIEL: Yep, she couldn’t think about living outside Venezuela without her family and friends. She has it tough. She was a school teacher with a pension. After 25 years she gets $200/mo. Can you imagine living somewhere with money problems without the help of her family?
MAK: Seriously, $200? How can you live on that? That’s like 3 video games.
DANIEL: Plus, with inflation, it’s super tough. The most difficult thing about coming here is that it’s very different from my country and I miss a lot of family back home.
GRANT: It’s colder too, with more snow and really low temperatures for a long time each year.
DANIEL: Yep, it is hard sometimes. And as you know G, the food is very different.
GRANT: I agree, I’ve never seen anything like that before.
MAK: But, you’re girlfriend Andre-ina is here, right? She’s really pretty. That must help.
DANIEL: It does. And, the people here are nice. Even your dad.
MAK/GRANT: No way!! Just kidding.
DANIEL: Ok, are you ready to get back into things? What do you remember from last week?
MAK: Chavez sounds like he might have messed some things up.
GRANT: There are long lines at the gas station.
MAK: Chavez nationalized companies
GRANT: We started to talk about rationing things.
MAK: So you couldn’t get everything you want or need.
DANIEL: Exactly. So, when you ration things you only get what they let you. Chavez did begin to subsidize food by reading the price from normal and holds the cost down.
GRANT: Isn’t that a good thing, to help those who are poor or don’t have much?
DANIEL: Absolutely, someone always has to pay. The government might pay part to the farmer through taxes, or farmers have to take less, but when it does, production is lower.
MAK: That means you have to ration it, just like when the oil isn’t pumped fast enough, the government would rather sell it to other countries at a higher price, than to its own people.
DANIEL: Yep, gas is very cheap when subsidized. It’s about 40 cents a gallon, but if you can’t get it, or get what you need, it doesn’t help much. So there are also Non-Subsidized stations.
GRANT: Isn’t this where you said gas costs $2 per gallon? Not bad.
DANIEL: It is. When a country is doing well, they produce and sells lots of products and prices are stable. But, if you don’t have much supply, people wait and waste time which would be better working. From around 2013-to 2018, they subsidized food and people had to wait in lines.
GRANT: I’m rethinking this Venezuelan thing. That doesn’t sound like any fun.
DANIEL: Just like gas, they had subsidized and non-subsidized food. If you wanted to get subsidizd food you’d wait in line for 2-3 hours to get eggs, then meat, then rice, and then you wait in line to check out.
MAK: Costco seems like it takes forever and that’s 10 minutes. That was is a whole day in line!
DANIEL: As a family, we’d work together. My uncle would get all the rations for meat, my aunt gets all the eggs, and my sister would get the bread. Then you divide up back at home.
GRANT: More time spent on just doing basic errands. Wow, glad that’s the only issue with food.
DANIEL: Well…I left out something VERY important. Remember how Mak said politicians bought votes? In order to be able to get that lower-priced food, you need your Cedula card.
MAK: That’s like our social security card, right?
DANIEL: Exactly. The last couple of numbers on the card tell you which days you could come to the store. One time per week for your rations. If you don’t go, you miss your food for the week.
GRANT: Wow. Forcing you to go every week. But, what’s buying votes have to do with it?
DANIEL: For you, there are Democrats and Republicans. In Venezuela, you don’t get as many benefits if you aren’t a part of those in power. Less food, gas, and other stuff. People have to sign an official document as part of the ruling party or they lose food and other benefits.
MAK: Seriously, that sounds like some real arm twisting.
DANIEL: In addition, we saw how the government used oil money to buy refrigerators, stoves, washers and dryers, and other stuff to get a vote. They’d give you a stove, then a bus would come on Election Day, and someone would knock on your door and make sure you’d vote.
GRANT: That is so hard to believe, but I guess if I got a PS5, I might think about doing it.
DANIEL: It does make you think. You know I learned something from your podcast on McDonald’s and Burgernomics. Your talk on exchange rates is a big part of my story.
GRANT: We understand a thing or two about exchange rates. Supply and Demand is key.
DANIEL: Well, our supply went up and our demand went down, which has and still does cause major problems. When Chavez was in power, our currency, known as the
DANIEL: Perfect. It traded 2 Bolivar for one dollar. But with our financial issues, political issues, and more, it became very weak and went to more than 500 Bolivar for a dollar.
MAK: This sounds like Hyperinflation when prices go up a ton, almost daily.
DANIEL: It did. Prices changed daily, you might be able to buy two apples today, and in a day you could only buy one. So, people would take their pay and spend everything the day they got it to buy as much as they could.
GRANT: Doesn’t that mess up the price for food? Since it’s bought as fast as it comes in when people spend everything, the supply runs out quickly. High demand and low supply.
DANIEL: That’s a “vicious circle”. You have to buy everything now before it goes up, but because you buy it all, it pushes prices up, which makes you buy everything now before it goes up.
MAK: You’re talking in circles. That’s right, a vicious circle.
DANIEL: People couldn’t afford food, medicine, or anything. Dollars were great to have. If you got more Bolivar for each dollar, you’d love to hold dollars. But, the government stepped in.
MAK: Is there when they didn’t allow you to have dollars?
DANIEL: Yep, they made it tougher to hold strong currency, like the dollar. So, people made money in the black market.
GRANT: Is this where it was illegal to trade US dollars, but they did it anyway?
DANIEL: Yep. The government tried to make its own citizens only have Bolivars, so it would get stronger as all 30 million of us would only use them. But, nobody wanted them.
MAK: Because they kept getting weaker and weaker each week. Isn’t this where you said they devalued your currency? So, one day you’d have a lot of Bolivars, and the next…
GRANT: They literally dropped 14 zeros. Yes, FOUR….TEEN ZEROS!! Then they called it a Bolivar Fuerte, which means a Strong Bolivar. Not sure about that.
DANIEL: It is weird to think about. Plus, if you wanted to travel, you would only be able to spend $5,000 USD in total, and the government had to approve your travel plans.They did continue to cut that down too.
MAK: So, your money was worth less, you couldn’t travel, you couldn’t have US money, and your mom could barely survive. That sounds absolutely terrible.
DANIEL: By coming to the US, I could send money back to her so she could afford food, clothes, medicine, and other stuff she needed, but we couldn’t do it easily.
GRANT: Is this where you said many in your generation and in colleges started to leave?
DANIEL: Yes, many smart people left. It’s called a brain drain. Since they left, it will make it very hard to rebuild the economy even if we had a new government that wanted to.
MAK: If you aren’t efficient in building products and selling them, you lose wealth, and Venezuela has lost a tremendous amount over several years.
DANIEL: I still love my country, and hope it will change someday very soon.
GRANT: We do too. Inflation is important to get under control. We are so happy you were our special guest. It has helped open my eyes to what could happen in a tough economy out of control.
MAK: Daniel, you’re always welcome to come back. Thanks for making it so interesting, and fun.
DANIEL: You are welcome and thanks again for having me. It was my pleasure.
GRANT: Until next week, we’ll see you here for more Money with Mak & G.