Recently the president of Venezuela, Nicolás Maduro, has announced that he has a small gold bullion savings plan for Venezuelan pensioners, workers and housewives. The idea is to offer a savings instrument that retains its value despite the hyperinflation it is experiencing in recent times.
When I read it, I thought that the Venezuelan government was finally putting into practice something appropriate to end hyperinflation and give credibility to the currency, even if it was by the most brutal way of indexing it to gold. But when one investigates more deeply the conditions in which said gold is offered, he realizes that it is nothing but one more of the same in the list of Venezuelan financial excesses.
No, no one should buy gold from Maduro
When I saw it, it struck me that a republic that embraces socialism would have launched to index its currency in the way that many libertarians think it should be, through gold. There are those who think that it is the only way for a currency to be real, if it is indexed to gold and only gold is created in the safe of the central naco of the country.
Let’s start with the first moment, although Maduro has offered Venezuelans 1.5 and 2.5 gram “lingoticos” and claims to have thousands of these lingoticos ready (which is not really that much, because we could be talking about three or four kilos of gold), a Venezuelan who uses his bolivars to buy gold, will not be able to obtain the physical ingot.
What the Maduro government sells are certificates which claims that they are backed by real gold “inggots” that will be held by the government. These gold certificates are valid for one year, they can never be exchanged for physical gold and at expiration the government will pay us the price of gold, which is probably what the Venezuelan government considers the price of gold in new bolivars. sovereigns, which they can print as many times as they want.
Additionally,** the government plans to offer ten certificates for each physical “lingotic”**, that is, the Maduro government, faithful to its style, is already hyperinflating said certificates. They offer more than they could offer to give a minimum of credibility.
This makes saving in gold quite reminiscent of Petro, that cryptocurrency that it launched a few months ago and that nobody seems to remember. The digital currency, originally backed by oil, has been considered a kind of scam taking advantage of the cryptocurrency boom.
Will that gold exist?
Additionally, one wonders something about these certificates, Will there really be the gold foil that supports the certificates? Aside from the part about ten times more certificates being issued than “linggots,” recent news even makes that 10% real gold suspect.
And it is that the government of Nicolás Maduro has been using gold reserves of Venezuela to make international payments through the Bank for International Settlements in Basel. Venezuela’s gold reserves have been declining for years, and are being used by the Venezuelan government to make payments and get foreign currency due to the problems of PDVSA (the public oil company). In fact, agreements are being reached with international banks such as the Deustche Bank as a way to get foreign currency.
The fact that the country’s gold reserves are being reduced makes one suspect that the gold that is now offered to the population in bolivars will come into existence, since the government could exchange it for real currency that is much more valid than that currency that they are clearly willing to exchange. print when you consider.
In my opinion The Venezuelan government should have put in place a minimally sound monetary policy years ago that would not have led to absolute chaos in that country.
This means putting an end to multiple exchange rates with the aim of gradually going to a free floating system, giving the Central Bank independence to determine the money supply, making reliable statistics… Clearly these “lingotic” certificates show that the government of Nicolás Maduro does not think the same way and he prefers to use his creativity to continue on his way to disaster.
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