Hyperinflation | Case of Venezuela | Lessons from it

Hyperinflation | Case of Venezuela | Lessons from Hyperinflation in Venezuela | How to stay SAFE

Topics - How it happens - Story of Venezuela (Current Example of Hyperinflation) - Economic Condition of Bangladesh - What happens to Stock Market - How to stay safe In economics, hyperinflation is very high and typically accelerating inflation. It quickly erodes the real value of the currency, as the prices of most or all goods increase. What causes the hyperinflation? - Significant increase in the money supply not supported by GDP growth. - When a country's expenses is very large as compared to its income from taxes. - During or after War Time So the reason is printing more and more money Current Example Venezuela - Venezuela is rich in oil - 95% of its export earnings come from oil - Imported the necessary goods from abroad and produced less domestically - Oil price started falling in 2014. 107 in 2014 to Below 30 in 2015 - Venezuela was faced with a shortfall of foreign currency - Lack of foreign currency made it difficult to import goods at the same level as before - Price of imported goods went up - Government printed more money and increased wage so that people can afford to buy at higher rate - This lead to Hyperinflation Economic Condition of Bangladesh - GDP Growth: 7% + - Inflation Below: 6% - Interest Rate Deposit: On Average 3%-8% Lending: On Average 10%-16% - GDP per Capita (USD): 1500+ and growing - Good amount of domestic crop production - Exchange Rate (vs USD): Around Tk. 84 - Current Account Deficit: $9.3 Billion (11m) What happens to Stock Market? IBC Index from the Caracas Stock Exchange (Venezuela) (15 highest capitalized stocks traded on the Caracas Stock Exchange) gave return of 35,856% in less than 8 Months How to Stay Safe - Investing in Stock Market - Reduce Exposure in Fixed Interest bearing Bonds and FDR - Invest in Property and Gold - Increase borrowing (Fixed Interest Rate) and invest in real asset For Example Take loan of 100(Local Currency) @20% Interest Rate Buy 100 (Local Currency) real assets where expected inflation is 50%. Sell the asset at 150 at the end of the year and pay the loan with interest 120. Net Profit = 150-120= 30 (Local Currency) without investment. - Store food and other necessities - If possible foreign currency Bond

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