Venezuela's New Currency

CNN/Money reports: 

Venezuela launched a new currency with the new year, lopping off three zeros from denominations in a bid to simplify finances and boost confidence in a money that has been losing value due to high inflation...

"We're ending a historical cycle of ... instability in prices," Finance Minister Rodrigo Cabezas said Monday, adding that the change aims to "recover a bolivar that has significant buying capacity."

To begin with, I see no reason why knocking off three zeros will "boost confidence" in the currency. The only thing that may boost confidence is to stop the printing press. Individuals will then feel confident that the money they hold will not continually lose value. However such a move runs contrary to the idea of having a fiat currency in the first place. The whole point of fiat money is to remove all restraints on its creation.

Second, prices are not meant to be "stabilized." Prices provide valuable information as to the supply and demand of the good(s) in question. If prices are oscillating rapidly, they are merely reflecting the reality of the situation at hand. To artificially "stabilize" any price is to distort the situation even further.

The article continues: 

"It was necessary to leave behind the consequences of a history of high inflation," Central Bank president Gaston Parra said in a televised year-end speech.

The only way to leave behind the consequences, is to eliminate the cause...which is the constant creation of money out of thin air.