Venezuela’s Grim Reaper – A Weekly Report

Steve H. Hanke's picture

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

The Grim Reaper has taken his scythe to the Venezuelan bolivar. The death of the bolivar is depicted in the following chart. A bolivar is worthless, and with its collapse, Venezuela is witnessing the world’s worst inflation. 

As the bolivar collapsed and inflation accelerated, the Banco Central de Venezuela (BCV) became an unreliable source of inflation data. Indeed, from December 2014 until January 2016, the BCV did not report inflation statistics. Then, the BCV pulled a rabbit out of its hat in January 2016 and reported a phony annual inflation rate for the third quarter of 2015. So, the last official inflation data reported by the BCV is almost two years old. To remedy this problem, the Johns Hopkins – Cato Institute Troubled Currencies Project, which I direct, began to measure Venezuela’s inflation in 2013. 

The most important price in an economy is the exchange rate between the local currency and the world’s reserve currency — the U.S. dollar. As long as there is an active black market (read: free market) for currency and the black market data are available, changes in the black market exchange rate can be reliably transformed into accurate estimates of countrywide inflation rates. The economic principle of Purchasing Power Parity (PPP) allows for this transformation.

I compute the implied annual inflation rate on a daily basis by using PPP to translate changes in the VEF/USD exchange rate into an annual inflation rate. The chart below shows the course of that annual rate, which previously peaked at 1823% (yr/yr) in early August 2017. At present, Venezuela’s annual inflation rate is 1892%, the highest in the world (see the chart below).

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Iconoclast421's picture

It is amazing they're even able to survive such a complete and utter destruction of their currency. I would have expected a 10% or more dieoff.

William Dorritt's picture

Somehow they still have the money to subsidize Cuba in exchange for loaned secret police.

The US should green light Brazil to end the misery.

GunnerySgtHartman's picture

At this rate, the bolivar won't even be worth using as toilet paper or kindling.

BigJim's picture

Sure it will, it'll be a damn sight cheaper than actual toilet paper

silverer's picture

When they can't fit more zeroes, that's no reason to give up like Zimbabwe did. Go to some smaller type to fit the number. Then, it's time to feature exponents on the money to denote the amount. That way, you can keep it going longer. Plenty of forward space left for the monetary club.

million
billion
trillion
quadrillion
quintillion
sextillion
septillion
octillion
nonillion
decillion
undecillion
duodecillion
tredecillion
quattrordecillion
quindecillion
sexdecillion
setendecillion
octodecillion
novemdecillion
vigintillion
unvigintillion
duovigintillion
tresvigintillion
quattuorvigintillion
quinquavigintillion
sesvigintillion
septenvigintillion
octovigintillion
novemvigintillion
trigintillion
untrigintillion
googol
trestrigintillion
quattuortrigintillion
quinquatrigintillion
sestrigintillion
septentrigintillion
octotrigintillion
noventrigintillion
quadragintillion

Then you can start to shrink the font on the exponents.

So what the hell, guys. Relax! The FED is just getting started at a trillion!

I am more equal than others's picture

Weimar Republic Part II, WW III next on the list.

DeadFred's picture

I'm glad Venezuela has no panzer divisions.

1033eruth's picture

All the wealth has been siphoned off by the oligarchy.  Forbes has their list of the wealthiest but that's only if you can trace the money/assets.  Naturally the money is going to be hidden well.  Wouldn't want to be a target for the peons with their tar and feathers would we?  

Money that would normally have gone towards militarization was bypassed in this country.  It went directly into the pockets of the few.