HomeSpecialThe new monetary expression and the amount of bolivars | Pasqualina Curcio

The new monetary expression and the amount of bolivars | Pasqualina Curcio

When you check your bank account on October 1, you will notice that what on September 30 was, for example, 50.000.000 sovereign bolivars (BsS) will become 50 bolivars of digital ones (BsD). Do not worry, they will simply divide your balance by 1 million, as well as divide by 1 million the balance of your debts with the bank, the price of all the goods you buy, the salary you are paid, even GDP, the amount of money circulating in the economy and of course the exchange rate. Everything that is expressed in bolivars will be divided by 1 million.

The GDP will go from BsS 160.304.505.261.110.000 to BsD 160.304.505.000, not because production will drop 1 million times overnight, the same amount will continue to be produced, only that the GDP values ​​will be expressed in a new monetary scale. Perhaps an example helps to illustrate this: suppose that in an economy only 10 loaves are produced at a price of Bs 1.000.000 each loaf, the GDP is Bs 10.000.000 (10 loaves multiplied by 1.000.000 Bs each loaf). If the State decides to change the monetary scale and eliminate 6 zeros, the price of each loaf will be 1 bolivar, therefore, the GDP will become 10 bolivars (10 loaves multiplied by 1 Bs each loaf). In that economy, there is no less production, 10 loaves are still being baked.

The public administration spending budget will go from BsS 3.972.000.000.000.000 to BsD 3.972.000.000. This is not a budget cut, the goals remain the same and the purchasing power of the public administration will not change. For its part, the exchange rate will be, for example, 4,1 BsD / US $ and not 4.100.000 BsS / US $. It is not that our bolivar will appreciate overnight, this will also be an effect of the new monetary scale and expression.

The amount of money circulating in Venezuela will go from BsS 2.166.898.704.103.480 to BsD 2.166.898.704, that is, from one day to the next it will be 1 million times less. In the example of loaves, if in that economy whose GDP was 10 million bolivars 10 million bolivars circulated, once the monetary authority decides to change the scale and the GDP becomes 10, the amount of money will also be reduced. 10 million to 10. Why would 10 million bolivars be needed if 10 is enough to exchange the breads that are produced? Here, what really matters, the relevant indicator, is the proportion between the amount of money that circulates and the level of production (GDP), it will remain the same: today in Venezuela it is 1,31% (it results from dividing BsS 2.166 billion between BsS 160.304 billion) on October 1 will continue to be 1,31%.

Monetarists claim that any increase in the quantity of money will generate inflation, we ask them, can we say then that, on the contrary, the decrease in the quantity of money from 2.166 trillion to 2.166 million will imply a fall in prices and therefore a improvement of the purchasing power of the working class? They know not because all monetary expressions will be adjusted based on the new scale.

Let's do the exercise in reverse. Imagine that the State, instead of removing 6 zeros, adds them as of October 1st. What will happen? All, absolutely all prices and monetary expressions / amounts, everything that is expressed in bolivars will have to be multiplied by 1 million, including the salary, the public spending budget, but also and necessarily the amount of money. In that case, 1 million times more bolivars will circulate to meet merchandise exchange needs whose prices will be 1 million times higher and therefore a GDP that will be 1 million times greater.

We ask the monetarists, will this increase in the quantity of money 1 million times greater as a consequence of the new monetary scale and expression imply inflation and a deterioration in purchasing power? The answer is no because the new scale will apply to all monetary expressions.

Imperial attack on the bolivar. Change of criminal scale

When imperialism attacks the bolivar, what it really does is manipulate the scale of the bolivar. For example, when the exchange rate suddenly went from 730 BsS / US $ in December 2018 to 3.155 in January 2019, it is not that the value of the bolivar changed, there is no way to explain that it has depreciated 330% in less than 1 month, but it was the scale and with it the monetary expression that was manipulated in the context of the execution of the Southern Command Plan that included Guaidó's self-proclamation, the euphemism for humanitarian aid that would enter through Colombia, and the CITGO theft.

Unlike the States that do it from one day to the next, imperialism does it gradually seeking to “legitimize” its power to set the exchange rate by making use of the hegemony of the media. Since 2006 and on the rise they have been in that plan, positioning those web portals. Since 2013 they have manipulated the bolivar measurement scale and with it the monetary expression by adding 10 zeros to the right, multiplying it by 10.000.000.000. In 2014 the exchange rate was 40 BsS / US $, today it is 400.000.000.000 BsS / US $. Attack by the way more than confessed by themselves. The important thing here is to recognize that what changes is the monetary scale and expression and not the value of the bolivar.

But there is a detail if we compare it with the previous examples. When imperialism manipulates the exchange rate, it is not that all monetary expressions / amounts change in the economy, only the prices of goods and services do. Not so the salary, nor the public budget of expenses, nor the amount of money that circulates resulting in a great economic, social and political destabilization. If every time that imperialism attacks our currency, that new scale were applied to absolutely all prices and amounts expressed in bolivars, the economy would remain identical, only with several zeros to the right, but the effect of deteriorating purchasing power and capacity of execution in the public administration would be neutralized.

Indexing the economy

Indexing is nothing more than guaranteeing that this new monetary scale and expression criminally imposed by imperialism is applied to all prices and amounts of the economy, including salaries and public budget, but also and necessarily to the amount of money that circulates. . Any increase in the amount of bolivars as a consequence of this criminal manipulation of the monetary scale will not only not imply higher inflation, but will also guarantee that the amount of money necessary to produce and exchange the goods produced will circulate.

Today, in Venezuela, the amount of sovereign bolivars that should be circulating is 80% of GDP as in 2014 and not 1,31%, that is, 132.696 trillion should circulate and not 2.166 trillion. Money necessary for the adjustment and indexation of wages, the public spending budget and the entire economy and so that, incidentally, our bolívar is recovering the space that was given to the dollar through monetarist policies that implied not increasing the amount of money within the framework of a new criminal monetary scale imposed by imperialism.