Why are Venezuelans using banknotes for artistic purposes rather than buying necessities?
Updated: Dec 10, 2022
Using banknotes as a raw material for artistic purposes is an example of the unintended consequence of government printing too much currency. The excessive increase in bills printing has led to a movement called "money-art". Money-art means to create art with money or about money.
Venezuela faces one of the highest fiscal deficits in the history of the world. There are many causes, but they all end up in Venezuelan natural resources' mismanagement by the current "socialist" government.
According to the International Monetary Fund, the inflation rate in Venezuela is currently 1,360,000%. This is known as hyperinflation. Throughout history, many countries have experienced this hyperinflationary phenomenon too but never at such as higher levels. A few case histories are Germany in 1920s, the United States in 1970s, Iraq in 1980s-90s, Zimbabwe in 2008, onwards.
The current Venezuelan government has spent more money than what was in the national treasury. To finance the public deficit, this government has used 'monetizing debt policies', which means that the central bank aims to help the government pay off public debt with newly issued money. However, the monetization of debt can cause the loss of value (devaluation) of banknotes and a decrease in a nation's currency's purchasing power.
Economists would argue that this monetization will conduct to:
Prices rise as the government increases the amount of money on offer/supply by printing new money.
People spending more and demanding more goods and services as the increase in money supply encourages to do so.
Firms attempting to maximize their production, hire more workers and invest in extra capacity to make and procure those additional products.
Yet, as resources in an economy are limited at any given moment, supply cannot change instantaneously, and firms may not fulfil the excess of demand. The sum of all these factors put prices up creating inflation.
Inflation becomes noticeable when the level of prices is continuously increasing over a short period. When inflation begins to increase dramatically, there can be shortages of goods, long waiting lists and queues. Besides, creditors stop trusting the central bank financial products' quality, such as liabilities - selling them at a significant discount.
Finally, when local money loses its function as a means of payment, a more extreme case may occur - people use the bills to make art - money-art. Two examples of this are mention as follow:
Jose Leon, a Venezuelan graphic designer, draws on devalued bills (see Photo below). Jose claims this is his way to earn his living while also manifesting his disappointment with high Venezuelan inflation creatively and peacefully.
Venezuelan artisans making wallets with 800 paper bill that sell for 15$ each. This transaction gives them a considerable profit margin. On the other hand, if people used those same 800 bills, all they could get would be just half a kilo of rice.