The Venezuelan Abyss

Steve Hanke of Johns Hopkins University is one of my favorite economists, and he has done some of the best original analysis of inflation around the world, calculating real inflation rates instead of just going by official government-reported rates or World Bank figures, which have defects. He is the originator of the Hanke-Krus World Hyperinflation Table, which found, among other eye-popping findings, that the world’s worst hyperinflation was not Germany in the 1920s, but Hungary in July 1946, when the price level doubled every 15 hours, and Zimbabwe back in November 2008, when the price level doubled every 24.7 hours; that’s a daily inflation rate of 98 percent.

Hanke has a new paper out with co-author Charles Bushnell on Venezuela’s staggering hyperinflation, which last month reached a daily inflation rate of 3.96 percent. The price level is doubling every 17.8 days. Hanke’s chart looks like this:


Of course, the Venezuelan government is attempting to control the dollar exchange rate, but Hanke has calculated what the black market exchange rate is, and the chart looks like this:


Another sterling triumph of socialism. After a whole lot of complicated math explaining how he reached his findings, Hanke sensibly concludes:

Venezuela, welcome to the record books. You have now entered the inglorious sphere of hyperinflation. It is a world of economic chaos, wrenching poverty, and death. Its purveyors should be incarcerated, and the keys should be thrown away.