Venezuela in crisis as inflation spirals out of control

This stash of Venezuelan Bolivares is worth about $21. Photo / Reddit

It looks like enough cash to bankroll a high-flying lifestyle, but this stack of currency is worth a measly $21 in its country of origin.

Venezuela has the highest inflation rate in the world and locals are known for weighing piles of 50 bolivar notes on scales to avoid the laborious task of counting them.

To illustrate the bizarre situation, a Reddit user posted an image of his mother's spare change after returning home to the United States after a trip to the South American republic, which is in the midst of a political and economic crisis.

"In 2001 this stack would have been worth $US71,000," he wrote.

While the currency has been volatile for years, economic turmoil in Venezuela has pushed it to the brink.

The rate of inflation of the bolivar has risen by 50 per cent in the past month, according to a report published Monday by Steve Hanke, an economics professor at John Hopkins University.

Some experts say it could reach 2000 per cent this year amid a chronic shortage of basic foods, goods and medicines.

A government decree to remove the highest denomination 100 bolivar note from circulation last month prompted looting and rioting resulting in four deaths, as millions of Venezuelans desperate to change over the currency formed long queues at the banks.

President Nicolás Maduro, elected after the death of socialist firebrand Hugo Chávez, explained the shock move - which gave citizens just 72 hours' notice - by accusing US-backed "mafias" of conspiring to destabilise his country's economy by hoarding bank notes.

I've been watching the #bolivar on the #BlackMarket since 2005. VEF's death march started in the summer of 2012. pic.twitter.com/5yCAnfyibv

— Steve Hanke (@steve_hanke) December 14, 2016

He promised to roll out six new higher-denomination notes between 500 and 20,000 bolivares, and closed the border neighbouring Colombia, where Venezuelans have been crossing over to exchange the currency for US dollars or buy essentials.

A stay of execution for the old notes was announced after the new ones failed to arrive on time.

With the new denominations expected to arrive this week, the problem was only likely to get worse, Professor Hanke said, dubbing the government's new policy "misguided and foolhardy".

"If you go to a market in Caracas today, you either need a wheelbarrow of cash or bigger bills - much bigger," he wrote in a blog post.

If you go to a market in Caracas today, you either need a wheelbarrow of cash or bigger bills - much bigger.

"So, President Maduro and the BCV hope that, by printing 20,000-bolivar notes, they can skirt around the hyperinflation problem until it goes away. And that's a mug's game."

Instead, he said, the currency should be replaced with the American dollar, backed by US Federal reserves.

Meanwhile, Venezuela's opposition politicians this week unsuccessfully sought to trigger early elections by passing a key censure motion against Maduro, accusing him of having effectively "abandoned his post" by failing to stem the crisis.

The opposition blames Maduro for an "unprecedented economic crisis", which he has said is part of a US-backed conspiracy against his socialist policies inherited from Chavez.

- additional reporting wires.