Money Makes the World Go ‘Round

We have all dreamt at one time or another about winning the lottery or providing all the right questions on the game show Jeopardy! in order to win the big payoff. As a kid, I prayed that the Publisher’s Clearinghouse “prize patrol” would show up at our front door with a bunch of helium balloons and that enormous cardboard check. I remember selling everything from lemonade and cookies to worthless magazine stamps to my kind neighbors thinking that I would somehow strike it rich by the age of 12. As I look at my own kids today, scheming to earn a few extra dollars in order to buy the latest video game, I realize that not much has changed in the desire to acquire from my generation to theirs. Whether you call them francs, Euros, cobre, or greenbacks – money really does make the world go round.

I studied economics in college, but it never really came to life for me until I lived in Europe and learned about the volatility of exchange rates first hand. I can remember watching the daily rise and fall of the rates and waiting for the precise moment to exchange my dollars to get the best return possible. Exchanging money is a lot like gambling and there were times when I would have profited by holding out for another day or two. I’ve never been much of an expert and I suppose it’s because my frugal parents always taught me that gambling was like throwing your money out the window. It wasn’t until years later that I developed a real fondness for the sights and sounds of a casino where I tried my luck at Caribbean Stud Poker.

Traveling in Europe during the late 80’s/early 90’s was challenging on the currency front since crossing national boundaries meant the need to carry multiple currencies. I often felt like a banker in a Monopoly game with all the colorful bills and oddly-shaped coins that resembled play money. We all talked about how great it would be to have a single, European currency to facilitate our cross-border travels and despite writing an A+ paper on the Euro, I never believed that it would ever come to fruition.

Much like a real life Monopoly victory, I have often wistfully thought about a life without any financial worries. Interestingly enough, I was a millionaire during my time in Venezuela and didn’t really appreciate it. In fact, I didn’t live any more blissfully there than my humble existence in the U.S. (a mere “thousandaire”!). In a country where gasoline is cheaper than water, I quickly learned that having a live-in maid/nanny as well as a driver was nothing out of the ordinary for anyone in the educated and professional class. Despite the fact that imported goods were quite expensive in Venezuela, we could afford to travel to Miami or Aruba to stock up on essentials while enjoying a few days of vacation. We lived in a comfortable apartment, had a very active social life, and never felt materialistically deprived.

I had a good job in Caracas and originally was paid a salary in dollars. However, as the local currency devalued, it became increasingly difficult for the company to sustain the incremental salary increases that the rising exchange rate represented. I remember on one occasion being paid in cash instead of by check when cash flow challenges made it difficult for our company to make the bi-weekly payroll. It was like something out of a movie to see our finance manager doling out stacks of cash to each employee. On the walk home, I was hyper-aware of the bolivare stash in my purse and felt like a bank robber looking over my shoulder for fear that someone would jump me. I couldn’t help but hum Tevya’s “If I Were a Rich Man” as I unloaded all that cash on my bed when I safely arrived home with a giddy sense of prosperity.

Buying US dollars on the black market is terribly expensive in Venezuela today, making imported products inaccessible for many Venezuelans.

The Venezuela I knew in the early 1990’s had only a handful of bills in circulation (with the highest denomination being the Bs. 5,000) and no coins. It was often easier to just let merchants keep the change than trying to make transactions precise with such a limited number of currency units. The ticket vending machines in the Metro that were originally designed to accept moneda (coins) sat dormant for years until they introduced the first coins and additional bills of Bs. 10,000, Bs. 20,000, and eventually Bs. 50,000. I had left the country by the time the fuerte had been introduced and despite the name, I always have doubted its strength.

In 2002, the same year that my youngest child was born, an exchange control was mandated by the Chavez regime, and the Venezuela I had known became a lot more like the USSR where I, as a teenager, went on a spending spree to get rid of the worthless, non-convertible currency. Giving it away was so liberating and fun. Now that my son is in middle school, I see that the exchange control originally put into place to slow the exodus of dollars out of the economy has done very little to bolster monetary stability in this oil-rich country. Today, the divide between the “official” exchange rate of roughly Bs. 6 to the dollar and the black rate of Bs. 60 (and climbing!) is just too great to be sustainable. Imported goods cost a fortune and diners at McDonald’s fork over a month’s salary for a simple ice cream treat.

Money really does make the world go around, in both good times and bad. In our world today where global economies are increasingly interconnected, the economics lessons of my past still ring true.