Behind a concrete protective wall in Beyda, Libya, there sits a 48 year-old British made vault with an $184 million pile of gold and silver coins. Libya’s central bank needs that money because of a currency shortage. But they’ve not been able to access it…until now.
Where are we going? To currency problems created by cheap oil.
Libya’s Currency Problem and Solution
At home, Libya’s economy has been devastated by a civil war and low oil prices. Even with Africa’s largest oil reserves, their oil revenue has declined by so much that they need more money to pay for government spending and imports. Yes, they do have that $184 million that could help solve their currency difficulties. However, because of the civil war, Libya has central bankers whose loyalties conflict. The monetary authorities with the vault’s 5-digit access code will not give it to the central bank that controls the vault. So the bank has hired two safe crackers to get the money for them.
The Money that Venezuela Cannot Afford
Meanwhile in Venezuela, it keeps on getting worse. With an annual inflation rate that could exceed 500 percent, the country needs more currency as everyday spending requires extra bolivars. To solve the problem (but actually contributing to it), the Venezuelan monetary authorities flew in 36 Boeing 747 cargo planes filled with cash from foreign printers. Still not enough, the government’s currency orders have increased.
It turns out though that they have been slow in paying for their money. As a result, Venezuela is having a tough time finding a printer willing to accept a Bolivar order.
Our Bottom Line: Externalities
Defined as the impact of a transaction on an uninvolved party, the externalities of cheap oil have rippled somewhat unpredictably. In Libya, we have safe crackers getting more business while because of Venezuela, bolivar printers might not be paid.