HomeSpecialNew monetary expression, effects on the economy | Pasqualina Curcio

New monetary expression, effects on the economy | Pasqualina Curcio

As of October 1, money in Venezuela, that is, the bolívar will have a new scale and therefore a new monetary expression: what is now 1 million bolívares (sovereigns) will be equivalent to 6 bolívar (digital). At all prices and amounts / amounts that are expressed in bolivars, although they still have the same value, 1 zeros to the right will be removed, or to be more exact, they will be divided by XNUMX million. Decision that was coming and that, in our view, is necessary to the extent that it facilitates daily financial transactions.

The change of a scale that in turn leads to a new monetary expression has no effect on the economy, nor on prices, nor on the purchasing power of workers since it will be applied to absolutely all prices and amounts expressed In bolivars, as the BCV statement reads: "all monetary amounts and everything expressed in national currency will be divided by 1 million."

This new monetary scale will have no effect on the economy because all the values ​​of goods, including the value of the bolivar itself and that of the labor force remain the same, the only thing that is changing is its scale or measurement pattern and with it the expression or denomination. Let's land with an example: if 1 kilo of flour today has a price equal to 4 million bolivars and that of rice 4 million as well, we can affirm that the value of 1 kilo of flour is equal to that of 1 kilo of rice, you can exchange them 1 to 1. If the salary is 7 million bolivars, its value is equal to 1,75 kilos of flour or rice.

If 1 dollar has a price equal to 4 million bolivars then the value of 1 dollar is equal to 1 kilo of rice or flour.
As of October 1, the price of 4 kilo of flour will be 4 bolivars, the price of rice 7 bolivars, the salary 4 bolivars and the dollar price 1 bolivars. The values ​​of these goods and especially the relationship between them, will remain the same, although their monetary expressions have changed. You can continue exchanging 1 kilogram of rice for 1,75 kilogram of flour, the value of which remains the same; With his salary, he will be able to buy the same 1 kilos of flour or rice. For its part, 1 kilo of rice or flour will continue to be 6 dollar. In the economy everything will remain the same, its purchasing power, its consumption, production levels, only with XNUMX less zeros to the right.

The value of money does not vary with this measure. The bolivar neither appreciates nor depreciates. In fact, the BCV statement reads: "The introduction of the digital bolivar does not affect the value of the currency: that is, the bolivar will not be worth more or less, only that to facilitate its use it is being taken to a monetary scale simpler ”. What is sought is to make daily and accounting transactions easier, for example, avoid fractioning an amount of 100.000.000 bolivars so that you can pass the debit card at a point of sale that only allows you to enter 6 zeros; or that we have to carry wads of bills. We take the opportunity to comment that the divisibility of money is not clear, how will we go about paying in cash what, for example, has a price equal to 1,5 bolivars if the lowest expression, as far as the monetary cone is concerned, is a currency equivalent to 1 bolivar?

And what name will we give it?

Changes in the monetary measurement scales are generally accompanied by a change in the name of the currency to distinguish it from the previous one, although it is not strictly necessary. In this case, they gave it the name of “digital bolivar”. It is the same bolivar, with the same value only with a different scale (from 1 million it became 1) and with a different name (from sovereign it changed to digital). Digital transactions have been carried out in Venezuela for a long time: bank transfers, points of sale, mobile payment, digital wallets, biopayments, etc. Ah, perhaps as of October XNUMX, new payment technologies will be incorporated, but the bolivar is essentially the same, only that they had to give it a name. And what name are we going to give it? We will put it "digital".

Whether one or the other monetary scale is used depends on a decision that, in general, in any country, is made arbitrarily and by convention by the State, which is the one that, in principle and theoretically, has the power to impose those scales. . They could perfectly have decided to delete only 3 zeros or 5 zeros, the number of zeros is irrelevant, the important thing is that this change applies to absolutely all amounts that are expressed in monetary units.

The new monetary expression will not lead to a further increase in prices or inflation, much less a decrease in prices or deflation. The causes of inflation are different and have to do with the attack on the bolivar by imperialism. This new monetary scale measure, by itself, will not prevent the attack on the bolivar, nor will it counteract its effects on the pulverization of purchasing power, nor is it a guarantee of economic stability, much less recovery of production. As long as the imperial attack on the bolivar persists, prices will not stop increasing, wages will continue to deteriorate and production will continue to fall, especially if measures such as indexation of the economy are not taken to, at least, neutralize these effects that it causes. the political and daily manipulation of the bolivar.

It is important not to create false expectations regarding eventual economic stabilization and recovery as a consequence of the new monetary scale and expression. This measure has nothing to do with economic "prosperity". Unless there is something else that we do not know, we refer to the possibility that this decision of the digital bolívar is accompanied by an eventual less attack on the bolívar resulting not from the new monetary scale, but from the negotiations that have been advanced with the imperialism through its local operators / spokesmen gathered in the MUD.

The detail that worries is not the fact that it is negotiated (we celebrate the dialogue) but what is being yielded in these negotiations, which are framed in the confidentiality and permissiveness of the Anti-Blockade Law and that, in the face of an economic weapon as powerful as the It is the attack on the currency, it can include pressures that go from the freezing of wages; the non-indexing of the economy; the liberation of prices; privatizations in strategic sectors; exemption from taxes and duties; liberation of exchange control; reforms of the hydrocarbon law; to very special economic conditions in Venezuelan areas and territories full of our natural resources to "promote" private foreign investment.

We take the opportunity to ask a question to the neoliberal monetarists and, incidentally, highlight once again their contradictions when they oppose the indexation of the economy: Because the amount of money today is 2.166.898.704.103.480 bolivars and from October 1st will be 2.166.898.704 million times lower, XNUMX bolivars, will prices fall and will there be deflation? We will answer it in the next installment.