World Economy

Venezuela Faces Hyperinflation

Venezuela Faces HyperinflationVenezuela Faces Hyperinflation

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

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,” NewsNow reported.

Hanke added, “The underlying inflation, which I’m figuring daily, is 615%. That’s the real inflation of Venezuela.”

Venezuela’s official rate of inflation hit 64% last year, the highest in the world. At the end of the year, the rate was above 68%. 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%.”

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 US 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.