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Ariana Cubillos / AP
A Venezuelan woman holds a wad of banknotes to pay for her bus ticket. The IMF predicted that Venezuela's inflation would reach a million dollars this year.
If history has taught us anything, it is that things can always get worse, even when that seems impossible – as is the case currently in Venezuela. ] Indeed, in the space of a few months, the International Monetary Fund has gone from forecasts that Venezuela 's inflation rate would reach 12.875 percent by the end of the year, to say now that it will go up to 1 million by
Now, this is not the kind of prediction you should literally take – the IMF says it's more of a "signal that the situation in Venezuela is similar to that of Germany in 1923 or Zimbabwe in the late 2000s". 19659009] More than one million Venezuelans fled to Colombia in less than two years, many of them young children. "title =" "src =" https://resources.stuff.co.nz/content/dam/images/1/q/z/p/j/m/image.related.StuffLandscapeSixteenByNine.620×349.1qzo4v.png/ 1532653122025.jpg "class =" photoborder "/>
Fernando Vergara / AP
More than one million Venezuelans fled to Colombia in less than two years, many of them young children.
Instead, as we have said, it is a reminder that even a failed state like Venezuela can still fail more. Which will almost certainly be the case
READ MORE: Venezuela's inflation rate could reach 1 million percent this year, according to IMF forecasts
How Venezuela is- he arrived at this point? debating whether its inflation rate is about to reach "only" five digits or seven?
Well, the Chavista regime's spending plans were so extravagant, and its management of its state oil company so inept that it did not have enough petrodollars to pay his bills, even when the oil cost $ 100 a barrel.
So it is not now that the shale gas revolution has caused crude oil prices to fall so much
That is, it has always been necessary to print a little money, but now he has to print a lot. The result was a downward spiral that pushed prices upwards faster and faster, to the point that, according to the black market rates, the Venezuelan currency lost 99.9997% of its value over the course of six years. last years. To put it in perspective, a value of US $ 333,333 ($ 491,495 CDN) in bolivars in 2012 would only be worth US $ 1 today.
And the truth is that no one knows how much it will get worse. That's what I said Steve Hanke, a professor of John Hopkins, one of the world's foremost hyperinflation specialists,
: "You can not predict the course and duration of hyperinfections, "he said," irresponsible. " The IMF is even trying to do it.
This is because hyperinflation is more of a political than economic phenomenon, to the point that governments choose to keep printing money even after they start killing their currency . Much longer than you think
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 your hand.
The first is what Hanke called "physical restraint on redenomination", which is just another way of saying he can not print money fast enough.
This 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 all its wars by defeating what is still the third worst inflation in history, until its currency reaches its full potential.
He had no choice but to stop. 19659007] The second way to stop hyperinflation is when people stop accepting the currency en masse.
This is not coordinated in any way, but just people who do not want to keep their money in a currency that is spontaneous dollarisation, because that is Is what everyone starts to do instead, and that's what brought Zimbabwe's hyperinflation, the second worst ever recorded, to "The citizens had just gone on strike Hanke told me, "and refused to be paid in Zimbabwean dollars," so the government had no reason to continue printing them – and so, he did not do it. . t
It's som We start seeing in Venezuela. "I can not think of bolivars anymore," a Venezuelan artisan told Reuters, "because you have to give a different price every hour." For her, this means that "to survive, you have to dollarise".
The good news, then, is that Venezuela's hyperinflation could end up depleting like the others.
The bad news, however, is it's probably far, far from happening.
– The Washington Post
