Steve Hanke: How Venezuela Joined the Hyperinflation Club
Steve Hanke is perhaps the world’s leading inflation researcher, and on Monday he announced that Venezuela had crossed the Rubicon and entered hyperinflation territory. That is a price level rising faster than 50 percent in a single month, and it has been achieved by fewer than 60 nations in recorded history.
Director of the Troubled Currencies Project with the Cato Institute and an economics professor at Johns Hopkins University, he has been following the situation in Venezuela for many years, and he was an advisor to one of the nation’s presidents in the pre-Chávez era. He has a prescription to solve these crises, but there does not appear to be the political will to change.
In fact, in 2008 Venezuela eliminated three zeros from the bolívar to make it the bolívar fuerte (strong), but the Chavista regime continued just as before. This month the central bank had to print new denominations of up to 20,000 bolívares fuertes, since the highest before was 100 and worth only a few US cents.
- Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
- “Venezuela Enters the Record Book” by Steve Hanke and Charles Bushnell in Studies in Applied Economics.
Fergus Hodgson (@FergHodgson) is an economic consultant and Gold Newsletter‘s roving editor.