Venezuela's Hyperinflation Hits 80,000% Per Year In 2018

Venezuela is the only country in the world that is currently experiencing the ravages of hyperinflation. As 2018 came to a close, Venezuela’s hyperinflation, which I am able to accurately measure by applying Purchasing Power Parity (PPP) to high frequency, reached 80,000%/yr and has lasted 25 months. Devastating as it is, 80,000% is a far cry from the International Monetary Fund’s unbelievable end-of-the-year inflation forecast for Venezuela of 2,500,000%/yr. One should never forget that one can measure episodes of hyperinflation with great precision, but no one can reliability forecast their durations or magnitudes—a fact that has failed to penetrate the walls of the IMF’s insular bureaucracy.

As 2018 came to a close, Venezuela’s hyperinflation, which I am able to accurately measure by. applying Purchasing Power Parity (PPP) to high frequency, reached 80,000%/yr, and has lasted 25 months.PROF. STEVE H. HANKE

How can Venezuela pull itself out of its economic death spiral? Venezuela must officially dump the bolivar and adopt the greenback. Official “dollarization” is a proven elixir. I know because I operated as a State Counselor in Montenegro when it dumped the worthless Yugoslav dinar in 1999 and replaced it with the Deutsche mark. I also took part in the successful dollarization of Ecuador in 2001, when I was operating as an adviser to the Minister of Economy and Finance.

Countries that are officially dollarized produce lower, less variable inflation rates and higher, more stable economic growth rates than comparable countries with central banks that issue domestic currencies. There is a tried and true way to stabilize the economy, which is a necessary condition required before the massive task of life-giving reforms can begin. It is dollarization. Stability might not be everything, but everything is nothing without stability.

Just what does the Venezuelan public think of the dollarization idea? To answer that question, a professional survey of public opinion on the topic was conducted in March 2017 by Datincorp in Caracas. The results are encouraging: Sixty-two (62%) of the public favored dollarization. Since things have considerably deteriorated since that survey, my conjecture is that the proportion of Venezuelans favoring dollarization has substantially increased. It’s time for enlightened, practical politicians in Venezuela to embrace the dollarization idea. The fact of the matter is that the public has already spontaneously dollarized the economy.

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