Venezuelans had a rough weekend, with their government devaluing the Bolivar by 95 percent and issuing a new currency that is tied to the country’s oil-backed cryptocurrency.
This is an old game, versions of which have been played since the inception of fiat money. It’s a game that is designed to steal from a populace. It involves devaluing the currency and capturing the people’s wealth through inflation and taxes.
Saifedean Ammous, assistant professor of economics in the Adnan Kassar School of Business at the Lebanese American University and the author of “The Bitcoin Standard,” in an interview over the weekend, addressed this monetary power by governments without calling out Venezuela specifically.
“Governments everywhere will abuse their potential of printing money, and as an individual you need to look out for yourself,” said Ammous, “and I think Bitcoin, wherever you are, will protect you from that to an extent.”
Ammous considers Bitcoin like gold, but, like gold, it can be an unwieldy payment system. Although it can be and is used for payments, these are more likely to be carried out via second layers like the Lightning Network.
The new Venezuelan currency will be tied to the petro, the country’s newly created cryptocurrency that is backed by the country’s oil reserves. But anyone familiar with even a little bit of Austrian economics knows that scarcity is what creates value, and there is no inherent scarcity here.
In a speech Friday night broadcast on state television, Maduro said, “I want the country to recover and I have the formula. Trust me.”