Venezuela Runs Out of Money to Print New Money

So what actually happens when a nation prints so much money that they run out of money to pay the printers who actually print the money?

Well....Venezuela is about to find out.  And maybe the rest of us will watch and learn?

Back in February, when we commented on the unprecedented hyperinflation about the be unleashed in the Latin American country whose president just announced that he would expand the "weekend" for public workers to 5 days...

... we joked that it is unclear just where the country will find all the paper banknotes it needs for all its new physical currency. After all, central-bank data shows Venezuela more than doubled the supply of 100-, 50- and 2-bolivar notes in 2015 as it doubled monetary liquidity including bank deposits. Supply has grown even as Venezuela has fewer U.S. dollars to support new bolivars, a result of falling oil prices. 

This question, as morbidly amusing as it may have been to us if not the local population, became particularly poignant recently when for the first time, one US Dollar could purchase more than 1000 Venezuela Bolivars on the black market (to be exact, it buys 1,127 as of today).

And then, as if on cue the WSJ responded: "millions of pounds of provisions, stuffed into three-dozen 747 cargo planes, arrived here from countries around the world in recent months to service Venezuela’s crippled economy. But instead of food and medicine, the planes carried another resource that often runs scarce here: bills of Venezuela’s currency, the bolivar.

Mr. Maduro and his allies say galloping consumer prices reflect a capitalist conspiracy to destabilize the government.

Well, no, but at this point one may as well sit back and laugh at the idiocy of it all.  But at least we will give Maduro one thing: he has done away with the pretense that when push comes to shove, the state and the central bank (and thus commercial banks) are two different things: "the president in late December changed a law to give himself full control over the central bank, stripping congressional oversight just as his political opponents took control of the National Assembly for the first time in 17 years."

Sadly, that did nothing for the imploding economy and country, whose morgues are now overflowing due to rampant social violence.

Of course, the punchline of all the above means that Venezuela has to buy bolivars from abroad at any cost. "It’s easy money for a lot of these companies," one of the people with details on the negotiations said. 

The problem is that it is "very difficult money" for Venezuela which needs to pay in hard dollars to print its rapidly devaluing domestic currency. In fact, among the sources of funds to purchase its own money was the liquidation of its gold reserves, which as we reported recently, Venezuela has been quietly selling to willing offshore buyers.

Here;  http://www.zerohedge.com/news/2016-04-27/end-venezuela-runs-out-money-print-new-money

"Wow Dennis!  That's quite a story about some crazy country that believes it can spend more than it takes in for years and years!  Those are crazy socialists!  Now I guess those people are going to get what they deserve...for allowing their government to spend more money than it has!"

Ummmm.....do you want to take a look at America?  Or Greece, Italy, France, Portugal, Brazil and lots of other nations?

"Yeah, but Dennis....that could never happen here.  We aren't as stupid as Venezuelans to believe that we can just give endless money in social programs and just print money to pay for them all out of thin air....besides...this is America!"

America has 48,000,000 on food stamps and a massive failing health care system called ObamaCare and Medicare.  Also we have an upside down monstrosity called SOCIAL SECURITY that has already gone into the mode of paying out more money than it takes in.  And don't even you dare think of the $50,000,000,000,000 in unfunded liabilities our nation has promised to all the Baby Boomers in the next 20 years.....