Venezuela's Grim Reaper: A Current Inflation Measurement - Current Annual Rate 2875%

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 last peaked at 3473% (yr/yr) in late October 2017. At present, Venezuela’s annual inflation rate is 2875%, the highest in the world (see the chart below).

Comments

nmewn Tue, 10/31/2017 - 18:23 Permalink

"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."I like this guy.Now queue up the usual communist apologists for Chavez & Maduro who have taken what was one of the richest countries in South America and made it into an economic basket case.

RedBaron616 nmewn Tue, 10/31/2017 - 19:05 Permalink

You are right. They will be here claiming that it is all the CIA's doing and how it would be a paradise if the CIA wasn't this or that. My thought: If the CIA were there, Maduro would be gone or dead by now. They would have given the people in the streets guns and ammo and the government would be history. But the ones beating the CIA drum won't believe anything else.

In reply to by nmewn

tangent RedBaron616 Tue, 10/31/2017 - 21:56 Permalink

They just are not socialist enough... that must have been the problem. LOL. Those communist countries are just never communist enough, and those socialist countries are never socialist enough. But how about this, every country growing fast has been capitalist enough for growth and rich-poor wealth gaps shrink for capitalist countries, while the poor in socialist paradises like Venezuela just become more poor.But no, taxation is theft. So when you think its okay to steal, then there really is no hope from the get-go. Nobody has ever found a minimum tax at which things start going badly. That has never been suggested for people thinking of the facts of the matter. And no, Somalia was not remotely close to a low tax status before it fell apart. It was high tax.

In reply to by RedBaron616

Antifaschistische RedBaron616 Tue, 10/31/2017 - 23:36 Permalink

I very well remember trying to get some projects done in Venezuela in the late 90's.  Building out some offices in Caracas and Ciudad Ojeda.  For us, it was all about money...so, of course we wanted to hire locals go get the work done.  Sending a crew from Houston was quite expensive.  Holy Shit...they were the most unreliable people I have ever worked with.  "We can start Monday at 9:00AM" = "We might swing by sometime early in the week".  I was just scratching my head thinking...how in the hell does an economy work when you can't rely on anyone to even come close to what they pretended to commit to.  ps.  that's just my experience.  I may have had a six sigma experience.

In reply to by RedBaron616

downwiththebanks nmewn Tue, 10/31/2017 - 22:00 Permalink

I appreciate Nmewn because he's a straight-up Nazi.  He doesn't play with libertarian fucktard fakery.But once he's done whimsically hoping for IMF austerity and a new Carmona decree, it's back to square one for his beloved coup plotters and his beloved MUD party!  After losing ANOTHER election, his tax money funded shitbags have no support.  Everyone in the country hates them; they're his proposed saviors!Coups are hard to start from scratch, especially when you have donkey shit for brains.

In reply to by nmewn

nmewn downwiththebanks Wed, 11/01/2017 - 06:41 Permalink

Thats a lot of projection for such a little commie bastard, are you sure you can lift it all without hurting your back?1.Chavez, his immediate and extended family have in fact been engaged in looting the national treasury of Venezuela for most of their lives.  2.Chavez & Maduro are communists. Communists, as much as you wish it were not true, can in fact be thieves.3.I have never advocated or "hoped" for any country to accept loans from the IMF. You will now provide for me where I ever did or be known as a fucking liar forever on these boards.

In reply to by downwiththebanks

RedBaron616 Tue, 10/31/2017 - 19:02 Permalink

I am not really sure this is even meaurable anymore. The currency is in freefall. No number is going to be able to show that very well. You have to go to Zimbabwe or Weimar Germany to get a feel for what's going on here.

land_of_the_few RedBaron616 Wed, 11/01/2017 - 06:10 Permalink

Well yes, not measurable from this data, particularly since the data is always from DolarToday which is a website run by an exiled Venezuelan Colonel who works in Homebase in Hoover, Alabama selling screws and bolts. Presumably he was no good at making Churros ....some say he is trying to "set" the black market rate, not just report it.Check the bottom of the graphs. DolarToday.

In reply to by RedBaron616

Ryan Langemeyer SummerSausage Wed, 11/01/2017 - 09:15 Permalink

You are throwing out the baby-with-the-bathwater, and know nothing about what socialism offers. I enjoy the socialism in my country, and am very glad to have left the viscious, mindless, outrageously consumptive capitalism of the USSA.  BTW... any article that fails to mention the over 20 years of the USSA undermining the entire country and economy of Venezuela, is a farce.    

In reply to by SummerSausage

Angelo Misterioso Ryan Langemeyer Wed, 11/01/2017 - 10:02 Permalink

Ryan - noone is forcing anyone in the US to consume - that is the beauty of the system - we INDIVIDUALLY get to choose.  All the progressives and socialists are always grouping me into a group and trying to take care of big swaths of the population rather than just leaving us alone.  I attribute this to their own fears of being unable to operate in a society where no one is protecting you and taking care of you like your mother used to.  Capitalism and living in America used to require independence and an ability to take care of yourself but now it is just evolving, like so many other countries, into a system where the government tells me how I can live, what is acceptable and what my kids are allowed to learn.  They even are now trying to tell me what I am allowed to eat.  This wasn't the original system - it is being corrupted by all the people afraid of not having someone there to watch over them - they WANT someone to make the tough decisions on their behalf. So you enjoy your socialism - please tell these Americans where you live so they can move there and stop trying to run my life here....

In reply to by Ryan Langemeyer

wally_12 Wed, 11/01/2017 - 08:32 Permalink

Bernie Sanders voted most popular Congressman. His legacy-Get more Free Shit!We will follow Venezuela down this rat hole with this policy.

Silver Savior Wed, 11/01/2017 - 10:29 Permalink

What about socialism in Europe? For a lot of those countries it has worked out quite well. Just have to have the right leadership. With capitalism it seems it's just every person for themselves. Also you as an individual are held responsible for way too much. That's why I don't like capitalism. Good thing the USA is adopting more socialist policies. UBI is going to be a huge step forward after they stop farting around and just do it.

squid Silver Savior Wed, 11/01/2017 - 10:38 Permalink

"What about socialism in Europe? For a lot of those countries it has worked out quite well. Just have to have the right leadership." Their time is coming too my friend. As Maggie used to say, "socialism is a lot of fun until you run out of other people's money." . Europe is about as socialist as the USA in as much the whole operation is run by the banks for the banks of the banks. What I find striking is that is EXACTLY what Lenin said to do to bring down the middle class, destroy them with inflation generated by unlimited credit issued by banks. Well? We're here. Squid

In reply to by Silver Savior