The Washington PostDemocracy Dies in Darkness

Declaring war on common sense, Venezuela bans its own money

The Venezuelan president decided to pull the country's largest bill from circulation in an attempt to fight hyperinflation and crime. (Video: Reuters)
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The scale of the conspiracy is staggering: More than 300 million of Venezuela’s highest-denomination bank notes have been ferried out of the country in recent months. Huge stacks of 100-bolivar bills now sit in warehouses throughout Central and Eastern Europe — Poland, Ukraine, Switzerland, Germany, the Czech Republic, Macedonia — all part of a devious plot hatched by the U.S. Treasury Department. Working through local nongovernmental organizations and local mafia syndicates, the plotters have spirited the actual physical banknotes first by land to neighboring Colombia and later by air to Europe in an ambitious bid to overthrow Venezuela’s socialist government by choking off the supply of paper money, setting off chaos and destabilizing the economy. The notes can’t be destroyed because the Americans have offered to pay dollars for them to their proxies, but only once the government has actually been overthrown.

If this story sounds outlandish to you, spare a thought for the people of Venezuela, who sat stunned on Tuesday as the powerful interior minister, Nestor Reverol, announced this bizarre, baseless conspiracy theory as settled fact.

Reverol’s reverie was far from innocent. PowerPoint presentation in hand, he set out his story to justify the government’s cunning plan to short-circuit the threat by removing the 100-bolivar bill from circulation altogether, within 72 hours.

The announcement set off panic, as millions of people scrambled to round up their 100-bolivar bills and deposit them in bank accounts ahead of the arbitrary deadline. Everyday life — already disastrously precarious for many — was thrown into complete disarray as everyone from bus drivers to shop owners refused to accept the bills, realizing that there’s no point accumulating banknotes that will be worth nothing by the end of the week.

As a result, Venezuela’s economy, which was already one of the most dysfunctional in the world, virtually stopped altogether this week. The 100-bolivar bill, lest we forget, was only worth about 3 U.S. cents to begin with. Withdrawing it leaves the country relying on the 50-bolivar bill — now worth a penny and a half — as the biggest bill, at least until new 500-bolivar bills come into circulation. That was supposed to happen in the next few days. Surprise, surprise: The 500s are late.

Reverol’s story is so far-fetched, so plain weird, it’s easy to lose sight of the fact that it doesn’t make the least bit of sense in its own fantastical terms. If the “international mafias” that haunt the minister’s imagination really were stockpiling 100-bolivar bills purely to sell them to the United States following regime collapse, why would they possibly care if they’re legal tender in Venezuela?

The minister clearly has not thought his own conspiracy theory through. He’s proposing to fight a secret plan to withdraw money from the country in order to cause economic chaos by … withdrawing much more paper money from circulation and creating far more chaos, especially among the poor, who often don’t have bank accounts in which to deposit their banknotes in the first place.

In fairness, though, it’s probably unwise to spend too much time and effort puzzling through the official story. It is so harebrained that Reverol can’t possibly believe it.

Other government officials, including President Nicolás Maduro, have portrayed the decision as aimed more at illegal exchange bureaus along the Colombian border, which the government is convinced are manipulating the value of the bolivar.

This makes more sense than the tall tales about Macedonian warehouses, but not that much more. To believe it, you’d have to think businessmen in Colombia are choosing to hoard one of the world’s fastest-depreciating assets. This version of the conspiracy theory refutes itself just as readily as the other one. With the bolivar losing 10 percent to 20 percent of its value every single month, stockpiling Venezuelan banknotes would be a little like trying to stockpile ice in open air in Phoenix in the summer.

So why is the government doing this, really? It’s a question Venezuelan economists have been asking themselves privately all week. Perhaps the measure is aimed at one specific player, some enemy Maduro happens to know is sitting on a lot of 100-bolivar bills specifically this week. Maybe.

Or maybe the Maduro administration has just lost the capacity for making even the most minimally logical of economic decisions for the country. Maybe we’ve entered the self-harm stage of the revolution, where everyone with even a passing acquaintance with the way a modern economy works has already been purged from the ranks and major policy decisions are made almost randomly, by a leadership clique that isn’t able even to measure the harm those decisions will do not only to the country at large but also to their own political well-being.


It isn’t easy to tell at this point. Which is alarming in itself.