The good news is that Venezuela will not have 1 million percent inflation soon. The bad news may be later.

If history tells us has learned something, it is that things can always get worse Even if it seems impossible – as is currently the case in Venezuela

Indeed, in the space of a few months, the International Monetary Fund has gone from predictions that Venezuela 's inflation rate would reach 12.875% by the end of the year now say that it will go up to 1 million percent . Now, this is not the kind of prediction you should take to the letter – the IMF says it's no longer a "signal that the situation in Venezuela is similar to that of Germany in 1923 or Zimbabwe in the late 2000s ". This is a reminder that even a failed state such as Venezuela can still fail more. Which will almost certainly be the case

How has Venezuela reached this point, as we discuss whether its inflation rate is about to reach "only" five or seven? Well, the Chavista regime's spending plans have been so extravagant, and his management of his state oil company so inept, that he has not had enough petrodollars to pay his bills even when the oil was $ 100 a barrel – really does not know now that the shale revolution has so much lower crude prices. Which means that it has always been necessary to print a little money, but now you have to print a lot. The result has been a downward spiral that has pushed prices up ever faster, to the point that, given the black market rates, the Venezuelan currency has lost 99.9997% of its value over the last 6½ years. years. To put things in perspective, a value of $ 333,333 worth of bolivars in 2012 would only be worth $ 1 today.

And the truth is that no one knows how much it will get worse. That's at least what I've said Steve Hanke, a professor at John Hopkins, one of the world's leading hyperinflation specialists. "You can not predict the course and duration of hyperinflations," he said, and it is "irresponsible" on the part of the IMF to even try to do it. This is because hyperinflation is more of a political than economic phenomenon, in that governments choose to continue to print money even after they start killing their currency, which which can last much longer than expected. Part of the problem is that this kind of self-destructive behavior on the part of the government is not always self-defeating for the government. In fact, the opposite. Diets that go through hyperinflation, you see, will often try to deny that this happens by establishing an official exchange rate that is not, an exchange rate at which only party leaders and their acolytes have access.

This means that they can get dollars for just a few cents on the dollar, even if that. In Venezuela, estimates Mr. Hanke, you can make a profit of 2,092% in one day – and that is after they've gotten rid of the super-darling deal that insiders had the habit of getting. It's a way, "said Hanke," that the diet is able to keep its chosen group around them. "

But like all things unsustainable, hyperinflation ends up stopping. What makes it happen? Well, in cases where the government does not do it late, there are two things that can force the hand. The first is what Hanke called "physical restraint on redenomination," which is just another way of saying that he can not print money fast enough. This might sound like something "onion" – Central Banker of Zone puts an end to hyperinflation by trying to print more money – but it is actually a very good description of what happened in Yugoslavia in the 1990s. At the time, the strong man Slobodan Milosevic had been trying to pay for all his wars by setting off what is still the third worse hyperinflation of history, until its currency reaches its full capacity. So he had no choice but to stop. This is obviously an extreme example, but a similar thing is already happening in Venezuela. The difference is that she does not print her own money, but rather imports it from a specialized dealer – when that is possible. It's hard to do that, though. Venezuela, in other words, has barely enough dollars that are worth something to create bolivars that are not.

The second way to stop hyperinflation, is when people stop accepting the currency en mbade. It's not coordinated at all, but it's just people who do not want to keep their money in a currency that is noticeably diminishing on a monthly, weekly, or even daily basis. This is what is called spontaneous dollarization, because that's what everyone starts to do instead, and that's what brought about the hyperinflation of Zimbabwe, the second worst ever, to stop abruptly almost 10 years ago. "The citizens just went on strike," said Hanke, "and refused to be paid in Zimbabwean dollars," so the government had no reason to continue printing them. – and this is not the case. "I can not think of bolivars anymore," a Venezuelan artisan told Reuters, "because you have to give a different price every hour." For her it means that "to survive, you must dollarize."