Venezuela is one of the world’s leading oil producers. However, the nation has been grappling with political turmoil and spiking inflation. Governments had in the past issued excessive currency, leading to a situation now where many local residents have lost confidence in the bolivar.
The nation’s inflation rate is expected to further soar 2349 percent this year from a spike of 626 percent in 2017, according to IMF data. That means a piece of bread may cost 10,000 bolivar at the beginning of the year, but the cost may soar to 234,900 bolivar at the year end. The nation is now mired in a deepening economic crisis.
To counter the hyperinflation, Venezuela plans to issue 100 million units of “petro” cryptocurrency, on February 20. Each token is priced at US$60, and its value will be pegged to price of a barrel of crude oil.
The petro currency can be used for buying food, paying for fuel, healthcare and to settle education fees.
Backed by oil, it is hoped that the purchasing power of the new currency will be more steady compared to the traditional unit.
Venezuela also intends to overcome US sanctions with the new currency. Using the blockchain technology, the petro currency stands a good chance of circulating in the international market.
The country can thus hopefully use it for trade settlement.
In Hong Kong, our problem is not hyperinflation, but rather property prices which have been soaring and creating a lot of problems,
There are a huge number of residents who feel increasingly hopeless about their chances of owning a property.
Anxious about not being able to afford a home in the future, some of them have used their parents’ life-long savings to fund their home purchase
Such demand has in turn further pushed up home prices to new highs.
The government can follow the example of Venezuela to issue some kind of mini-flats coin. The coin’s value can be linked to the average per square foot price of property, which would be around HK$15,000.
For those who cannot afford a home, they can invest in the coin to earn some money, which can somewhat narrow the wealth gap between the haves and the have-nots.
Those who have plans to buy properties but do not need a place to live immediately can store the home purchasing power with the coin.
Such measure can also cool down housing demand in the short term.
Hong Kong government is now sitting on a huge budget surplus, and the public is calling for cash handout like what authorities did in 2011. Offering one free mini-flat coin to each resident is perhaps a better idea than doling out cash.
This article appeared in the Hong Kong Economic Journal on Feb 2
Translation by Julie Zhu
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