By Everett Millman – Gainesville Coins ……
If you haven’t noticed, Venezuela is in absolute turmoil. The growing calamity has economic, political, and humanitarian dimensions that are beginning to spread across South America.
Aside from a growing refugee crisis and shortages of food and medicine, the country is dealing with political upheaval and runaway inflation.
Its national currency, the bolívar, has seen its purchasing power crater over the past few years. The inflation rate over that period is approaching a staggering 10,000,000%!
Yes, you read that correctly: 10 million percent.
There is little doubt that this hyperinflation has resulted from corruption and mismanagement by the socialist government of President Nicolás Maduro. Despite widespread protests against his regime, Maduro has remained in power and still has the support of the Venezuelan military.
As the situation on the ground continues to deteriorate, several countries (including the United States) are now recognizing Venezuela’s opposition leader, Juan Guaidó, as the interim president.
This has perturbed the Maduro government, as you might imagine. Calls for the president to resign have been accompanied by economic sanctions. Now, the White House has been warning other nations not to trade with Venezuela for its gold or its vast reserves of crude oil.
These commodities are really the last resort for Caracas to raise revenue given the collapsing value of its currency. Previous forays into the cryptocurrency space have also been a failure.
On top of that, a huge chunk of Venezuela’s gold reserves is sitting in vaults at the Bank of England. President Maduro has requested that the gold be repatriated, but thus far the U.K. has resisted doing so.
A small group of Venezuela’s international partners is still standing behind the socialist regime, however.
Last year, Venezuela shipped approximately $900 million worth of gold bullion (i.e. more than 20 metric tons) to Turkey. Somewhat ironically, Turkey was buying the gold in an attempt to deal with its own currency crisis, as the Turkish lira was among the worst-performing currencies in the foreign exchange markets in 2018.
Russia is another key ally for the Maduro regime. The Kremlin has remained a steadfast supporter of the Venezuelan dictator, openly warning the U.S. against intervening.
What’s more, news broke this week that a Russian plane landed in Venezuela and is believed to have taken an additional 20 tons of gold out of the country.
There is a growing fear that the U.S. and Russia could actually find themselves mired in a proxy military conflict over the Venezuela problem. Although this possibility is remote, the mere mention of armed intervention speaks to the bubbling geopolitical tensions that are increasingly a feature of the international system.
At the time of publication on CoinWeek, one Venezuelan bolívar soberano (VES) trades for approx. $0.0003 USD.
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