Cuba Breaks

#finance
#financement

Cuba has just introduced new 10,000 and 20,000 peso banknotes — and that tells us a lot about how serious the country’s economic problems have become.

When governments start issuing dramatically larger banknotes, it is often because inflation and currency weakness have made the existing denominations increasingly impractical.

In this video, I look at what is happening to the Cuban peso, why people are being forced to carry larger amounts of cash, and why the introduction of these new notes is a symptom of a much deeper economic problem.

We also look at Cuba’s inflation, currency collapse, dollarisation, import shortages, fuel problems, power cuts and the growing difficulty of paying for essential goods.

And I compare Cuba’s situation with other economies that have travelled down a similar path, including Argentina, Venezuela and Zimbabwe — where ever-larger banknotes eventually became a symbol of collapsing purchasing power.

I also explain redenomination: the process where governments eventually remove zeros from a currency and replace old notes with new ones. It can make the numbers easier to manage, but it does not solve the underlying causes of inflation.

The key question now is whether Cuba can stabilise the peso before confidence deteriorates even further.

Because when the numbers printed on the banknotes keep getting bigger while the amount they actually buy gets smaller, that is usually a warning sign worth paying attention to.