Venezuela's Grim Reaper: A Current Inflation Measurement

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 peaked at 2432.94% (yr/yr) in mid-September 2017. At present, Venezuela’s annual inflation rate is 2275.78%, the highest in the world (see the chart below). 


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Kendle C's picture

I can shadenfreude same as any other guy. But this discussion, comments exist in a bubble of deception that would embarass William Colby. Clearly the issues with Venezuela have been turned into a screensaver version of a fishtank and you all are discussing the blue fish and the fake buried plastic romanesque ruins. 

The misery of the people...you think that's funny? You don't think this is corporate and banking intrigue. You don't think this country is the target of EXTRACTION and they are just a little further down the same trail as the U.S.. Venzuela is your future dickheads.

Old Poor Richard's picture

Funny thing is, Trump is getting beat up by the lamestream press for threatening war with the Little Rocket Man, but they didn't utter a peep when Obama waged economic Total War against these people for daring to have a socialist strong man for a president.

shovelhead's picture

Yup. They're stealing the oil and hiding it in the tanks under Bush W's ranch right along with the Iraqi Oil he swiped.

steveo77's picture

27 "mental health experts", all incidentailly far left liberals, wrote a book coming out soon to proved that Trump is beyond crazy.

The false arguments used by these health experts, are amazing.   If I were Trump a defamation lawsuit would be appropriate.   And why are the 27 authors all far left, liberal?

And these experts stand by, as this article states....
http://www.nukepro.net/2017/09/27-psychiatrists-and-mental-health.html

Consider this.   America is now down trodden with mental illness, way over medicated with dangerous stuff that sometimes helps depression, but we also find that mass murderers are very commonly on psychiatric drugs.

And the whole "Mental Health" industry is OK with this.   Turns a blind eye to it, participates in it, is complicit with the Pharmaceutical industry.    To call most of them "experts" when this obvious huge grievous disservice to the public is being foisted on them, is an insult to "science".

shovelhead's picture

Just proof you'd have to be crazy to go to a Psychiatrist.

ultraticum's picture

A total missed opportunity for the sub-70 IQ idiots in the District of Criminals.  One of the biggest, potentially wealthiest countries in the hemisphere . . . but all we do is sanction them to further punish the man on the street and give their criminals (leaders) an excuse to hate Merka.  A deft administration could turn this disaster into a major major long term win.  Instead, watch it burn . . .

libertyanyday's picture

IDIOTS ARE SUB 25.............as far as biggest goes...not so much.  A deft admin woud let it burn.

Village-idiot's picture

I remember reading a couple of years ago, when Americans were asked what they would do if the food sources stopped and there was no longer any food in the stores.

The most common answer, about 65%, said "My neighbours have food growing in their gardens (that would be home veggie patches); I'll take some of theirs".

That's the great solution for 2/3 of US citizens! Here in Canada it's probably about the same.

This is a warning to all those who are actually planning ahead.

Those who have prepared a vegetable patch and have learned to save their own seeds etc. will have to defend that patch, and it won't take long after the stores are empty for the entititled masses to make their move. (probably less than a week)

gilhgvc's picture

as i have always said, you may kill me and take my stuff..but there will be a bloody price to pay before I fall. THAT is a promise and a consolation for me.

Cloud9.5's picture

The Golden Horde will at some point spill out of the cities and pillage farming communities. This is an eye witness account of such events in Weimar Germany during the collapse.

“In the cart I saw three slaughtered pigs. In addition, some pieces of slaughtered cows and pigs and a few dead hens were lying in an untidy heap. 'My God, my God', wailed my aunt. 'What will things be like at home?' … Two gendarmes accompanied us in order to ascertain the damage. 'If only they didn't always destroy everything', said one of them. 'As for their being hungry, that's not surprising'. We were prepared for the worst. The gates of the farmyard were wide open. There was not a sign of the servant girls. A pig seriously injured but still living was lying in its own blood in the yard. The other pigs had run out into the road. The cow-shed was drenched in blood. One cow had been slaughtered where it stood and the meat torn from its bones. The monsters had slit up the udder of the finest milch cow, so that she had to be put out of her misery immediately. In the granary the store of grain and fodder were in a state of wild confusion … a rag soaked with petrol was still smoldering to show what these beasts had intended. In the kitchen-living room of which my aunt was so proud not a thing had been left whole. Uncle estimates the damage at 100,000 peace kronen, and no insurance company will pay him any compensation for his loss.”

When Money Dies by Adam Fergusson

 

 

Anon2017's picture

So how many Germans died of starvation in 1923? 

Joebloinvestor's picture

How many were saved by the Berlin airlift decades later?

Cloud9.5's picture

The starvation of Germany began with the Allied block aid during WWI. British historian Arthur Bryant, estimated that 800,000 died during the last two years of the blockade.  The blockade continued after the war.  So the starving time had begun before the currency collapsed.  I’m guessing a million to 1,500,000 died of starvation in Germany.

The Forecast Calls for Pain's picture

Yes, those who plan ahead will be targeted.  Many of them are also gun owners, that's a big part of planning ahead.

Automatic Choke's picture

.....and the following week they switch to soylent green   (the other other white meat).

HalinCA's picture

... and get turned into minced meat ...

TuPhat's picture

The people in the largest cities will wait for the .gov to bring the food to them.  They will be too weak to do much about it when they realize the food isn't coming.  My biggest worry is the military.  They will be provided with food and weapons and then ordered to go confiscate all the preppers food.  My neighbors are the people I will share with and they will help with defense.  I live in a small town but even so I expect trouble.

youngman's picture

Lots of new Hookers in Colombia....they had a story about a 60 year old one on the border....I didnt say they were all hotties....but they are making money..then they buy grocieries and a relative rides an 8 hour bus from Caracas and picks it up on the border and gets back on the bus....they are surviving

rf80412's picture

A woman who has nothing else going for her can still put out.  But men aren't born with a glass floor.

cheech_wizard's picture

What's even more fun is reading older ZH articles by Hanke...

Goes hand in hand with the guest article above:

If Economists Are So Smart, Why Are They Always Wrong?
TeethVillage88s's picture

Does Venezuela have access to bank accounts in Europe, G20, USA? I heard all dollar transactions go through New York and can be rigged to shut out any nation that Nationalizes it's Oil.

Q: ZH?

Did US State & Wall Street Banks bring down Chavez & Maduro? Just as they did to Qaddafi? Just as they tried to with Iran?

Old Poor Richard's picture

Downvotes confuse me.  This is exactly what happened.  Obama waged economic Total War on Venezuela, and Trump hasn't done anything to let up.  These people lived first world lives just like people in the US until the commies took over and America attacked.  More devestating than nukes, and the press have no issues with it.  The answer to your question is no, Chavez and Maduro were not brought down by archcriminal banksters, only their middle class was.  The poor are still poor, the rich are still rich and the everyday citizens are left to eating out of dumpsters and turning tricks to survive.

Cthonic's picture

The eurodollar market is around a $1.5T but not all of that is actual cash outside the borders.  Seventeen years ago, the BIS estimated up to $400B in federal reserve notes circulated outside the US.  M0 has more than tripled since then... can't see how anyone could say with a straight face that a dollar transaction had to go through a NY correspondent bank in this day and age. 

http://www.bis.org/publ/bppdf/bispap15r.pdf

http://www.chicagofed.org/digital_assets/publications/policy_discussion_...

https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr4...

 

TeethVillage88s's picture

Thanks. I probably got that from a video, Greg Morse

Affidavit Of Gregory C. Morse

Caravan To Midnight - Episode 110 Capital Kinetics with Greg Morse
https://www.youtube.com/watch?v=HmJKrhWucC0

Cthonic's picture

Thanks, it's been scrubbed from the tube but I'll find it elsewhere.  Don't know how financial sanctions are enforced, just pointing out that Venezuela's net annual dollar flow (exports - imports) would be around $10B (even unnetted only $46B) which is a drop in the bucket of global currency exchange.

Benjamin123's picture

Venezuela nationalized its oil industry in the 70s.

Iconoclast421's picture

It is amazing that so many of them can even survive such a total destruction of the currency.

jin187's picture

Well, before there was fiat currency, there was digging around in the dirt and rivers for food. That's pretty much what it's come down to there. Border jumping, black markets, growing your own, and starvation for anyone that can't do those things.

bunkers's picture

If this happened, in America, could Americans survive it?

Joebloinvestor's picture

If it does happen you can bet the survivors will be bad asses and not liberal.

Gordon_Gekko's picture

Its already been happening since 1913, became exponential after 1970...if you told someon in 1913 about today's prices, they'd be asking the same question.

jmack's picture

    The more interesting question is, if this happened in America, could America's politicians survive it?

HalinCA's picture

I sure as hell hope not

Village-idiot's picture

 

Some will; most won't.

Remember, we haven't seen the end-game in Venezuela yet. If Maduro finally gets the message (that his Swiss bank account has enough cash it) and he leaves, the US and other countries will bring supplies in very quickly.

BUT if the SHTF in the US, who will supply the millions of starving citizens? Were will the food come from? The needed supplies will not come from Canada because they'll be in the same mess.  No other country (other that maybe Russia), can export any sizable amount of food.  Socialism has destroyed farming in most African countries, so they can barely feed themselves.

Do you ever get the feeling that all this is planned?

bluskyes's picture

Canada grows plenty of grain relative to it's population.

Benjamin123's picture

Venezuelans could grow their own food if their national guards were not arresting farmers.

unsafe-space-time's picture

The only solution is to trade food for pussy. “Give me your skank, your whore, your huddled asses yearning to fuck free.”

Ol' Painless's picture

Back around the turn of the centruy I had the fortune to find myself working in an unsafe space, an off the beaten path place that I refer to as the armpit of Florida. Here, in this sweltering back water, at a state funded all girls school is where I discovered what I had heard about and saw first hand "the rot of society" and realized there was little to no stopping it. While I could go off on many observations, the relevant one here is that many of the of those girls did indeed Ho for food. That's a fact, right here in the US. Many of them came into this world as a result of their mothers having to Ho for Food. Another consistent fact was none of these girls wanted to Ho for Food. When we heard one of them yell out, "I ain't no ho!" it generally meant you had roughly three seconds to secure yourself and area before the fight broke out, which was an almost daily occurence. They loathed the idea of having to trade pussy for food, but, they hated the idea of going hungry even more. Werewolves DO exist and they would come out at night in that pit of a place. Girls would routinely be dragged off and raped and in at least one case if she got pregnant would be dragged off to have an abortion. To see one of the most vivacious, uplifting girls with always a smile on her face have that happen to her and come back with the "1000 yard stare" and empty shell of a person...sad is too simple a word. Just as sad is the community accepts this type of behavior. I happened to be travelling through this area this past February and although almost dark decided, "What the heck, let's take a drive down that road to see how it looks." Almost a very unfortunate decision. An accident had occurred on the levy, forcing traffic through a side road. Being in a convertible and not of the right color I could easily hear the comments being directed toward me by the crowd who had come out to see what had happened on the levy. Having learned the tells, I suspect had it not been for the sheriff's deputy three cars behind me in the traffic jam, my ass would have been drug from my car, fucked in the ass repeatedly and my body thrown into one of the cane fields. Welcome to the USA bitchezzz!!

 

shovelhead's picture

You had a nice fantasy working for yourself until you added the assfucking in.

Ol' Painless's picture

It was no fantasy and apparently you've not had the displeasure of living around these type of animals. There is a reason why man is the apex predator. "Civilization" is the only thing that keeps men "civilized" and there are places that are certainly on the fringe of being "civilized". One girl was 16, she had four kids. Having been only 15 at the time of being knocked up the fourth time we were obliged to report it to Dept. of Family Services(DCFS). Their investigation discovered the babies daddy was the closest thing she had to family so, it was "all good". The babies daddy, who was 30+ years old, drove around town in a Cadillac similar to that of "The Duke" in the movie "Escape from New York", the type with a nice wide dashboard which was adorned from the corner of the passenger side all the way to the driver side corner with wallet sized pictures, the kind you get from schools, of all his babies...25 of them. When he would pull onto the lot to pick up his latest babies momma a couple of women co-workers, who were locals, would sneer and show teeth, reminding me of two cats hissing at a threat. Apparently they knew an apex predator when they saw one. However, the predator and many others like him were accepted and free to roam about the community. Until we have an honest conversation about what really goes on in these pits of despair, the rot will only continue to expand.