Thursday, December 1, 2016

Strange Things Afoot - Inflation

2 1/2 months at post and "strange things are afoot at the Circle K." (Circle K is a convenience store chain founded in Texas and referenced in Bill & Ted's Excellent Adventure. Be excellent to each other!)

It's already hard to find some items like milk, sugar, toilet paper, deodorant, or other various imports people actually need for a normal life. Regardless of their lack of Circle K stores, I have a feeling strange things are afoot here. Prices are all over the place from really cheap to expensive when I compare them to home.

There's 3 different exchange rates at play. It makes it harder to understand why anything is priced the way it is. I'm sure a lot of the pricing troubles are caused by these various exchange rates.

First, there's a preferred rate that rarely changes. It's 10 bolivars to 1 USD for important basic stuff like milk, sugar, and cornmeal. It's part of how those products are subsidized along with the price controls. Low prices on some stuff does nothing to help curb demand, which makes those items run out faster when they have them.

There's a second official floating rate currently at 663 to 1. It hasn't moved much for several months. It's supposed to be for everything else, but it's also government controlled and hard to access for foreign currency exchanges even though it's supposed to be the official rate. I think some stuff is imported at this rate.

Finally, there's a "parallel rate" or unofficial street rate. A lot of money transfers are around the parallel rate and some stuff is imported at this rate too. Well, that rate just took off like a rocket over the last couple of weeks. I'm paid in dollars and spend in bolivars so I don't know what to think of this new financial environment we live in now.

Inflation was bad before. The parallel rate went from 173 to 833 in 2015 or 381% for the year. It seemed to stabilize and was at 1,023 when I got here, but in the last 2 1/2 months it shot up 348% (428% for the year) to 4,587 with huge jumps in the last 9 days:

It took a little over 2 months to double from 1,023. It quickly shot up in the last 9 days to 4,587 which is more than another doubling in a much shorter time. Recent inflation has been 7% to 24% per day to achieve that feat. Inflation in the U.S. averages around 2% per year. I can do the math but I don't know what to do with it for daily living since I've never been in this kind of environment.

$100 when I got here is worth $22.30 now. That's not the worst part. If I transferred $100 just 9 days ago then it's worth $51.98 now. That's losing half in just 9 days. I can't wrap my mind around the steep curve we just entered. Is this the start of hyperinflation? I've been reading about previous hyperinflation in Yugoslavia and Zimbabwe. It won't be good for anyone if it reaches those levels.

It's bad if you move money or goods back and forth out of the country, which I don't. I only transfer money here to buy local things as I need it. It isn't a quick process so I'm losing value just waiting on the transfer, but then prices aren't shooting up as fast as the exchange rate so some things get cheaper for now. People who have been here longer say price increases will catch up with the exchange rate and more shortages will probably happen as a result. Import prices will increase which causes more scarcity which increases prices which... makes my head spin.

All I know is a stack of 20,000 bolivars (below) was worth $19.55 when I first got it and now it's worth $4.36. It's good to have a local currency debit card instead of bags of cash as prices go up. The highest denomination is currently 100 but I hear higher bills are on the way. If hyperinflation truly sets in then it may not be enough. Zimbabwe had a 100 trillion dollar banknote at one point! Things can always get worse.

The only thing I can do right now to deal with inflation is to transfer only what we need because it loses a lot of value every day. Strange things are afoot indeed...

No comments:

Post a Comment