Venezuela Hyperinflation: This Is Where Socialism Goes, and So Do We

Both Greece and Venezuela show us slightly different versions of the future we are being led into, but no one tries to stop it.

I think the most frustrating thing about what is going on in the world right now is that we are all simply accepting that there is no other path we can travel.

We are just standing in a single line to a very unpleasant crisis, with no thought of breaking out of it. Our only comfort is that other nations are ahead of us in line. That doesn’t help unless we use the time to completely change directions.

John Sexton writes at, “Venezuela Faces Hyperinflation ‘Death Spiral’ as Inflation Hits 615%.”

Venezuela has stopped publishing official data on its rate of inflation, but one expert on monetary policy says the current rate is 615 percent.

Professor Steve Hanke is director of the Troubled Currencies Project at the Cato Institute. Earlier this week, he told El Nuevo Herald, “The economy is in a death spiral, moving from a bad situation to a worse situation.” Hanke added, “The underlying inflation, which I’m figuring daily, is 615 percent. That’s the real inflation of Venezuela.”

I think Hanke is saying he is refiguring the inflation rate every day. Surely the daily inflation rate can’t be 615 percent! The country would be over already.

Venezuela’s official rate of inflation hit 64 percent last year, the highest in the world. At the end of the year, the rate was above 68 percent. So starting in January, the socialist government simply stopped publishing any monthly inflation data. A Venezuelan opposition leader claimed the inflation rate for the first three months of 2015 was “around 30 percent.”

However, Professor Hanke believes the officially published rates have always underestimated the actual rate of inflation in Venezuela. He bases his estimates on the black market exchange rate where the bolivar has been sinking like a stone versus the dollar. Dolar Today, a website which tracks the exchange rate, says it takes 611 bolivars to equal one U.S. dollar; that’s up sharply from just a month ago.

The real world result of Venezuelan hyperinflation was highlighted by the BBC’s Daniel Pardo in a video report published Tuesday. Pardo tallied the cost of ingredients for a simple Venezuelan sandwich called an Arepa. Two weeks later, Pardo bought the same ingredients and found the price had doubled.

We’re not Venezuela, yet. Our economic crisis will probably be more like Greece where prices suddenly plummet through the floor and the government, instead of letting prices reset and allowing wages to do so also, will make the situation worse by trying to “fix the economy.” At that point, if Congress is panicked into doing something stupid, perhaps we can set up our own version of hyperinflation.

But we know we are standing in line to our own financial destruction, as our own CBO has testified. Furthermore, we never know when the nation ahead of us in line who goes plunging into the abyss might pull the rest of us in along with him faster than we expect.

And in all of this, do our leaders sound like they even care? Do they sound like they can imagine anything happening in the future that will represent a real economic disaster?

No, they just keep walking in the same direction as if they expect us to levitate when we step over the edge.

We are not exempt from economic law.