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Venezuela's Grim Reaper: A Weekly Report 9/27/2017

The Grim Reaper has taken his scythe to the Venezuelan bolivar. The death of the bolivar is depicted in the following chart. A bolivar is worthless, and with its collapse, Venezuela is witnessing the world’s worst inflation. 

As the bolivar collapsed and inflation accelerated, the Banco Central de Venezuela (BCV) became an unreliable source of inflation data. Indeed, from December 2014 until January 2016, the BCV did not report inflation statistics. Then, the BCV pulled a rabbit out of its hat in January 2016 and reported a phony annual inflation rate for the third quarter of 2015. So, the last official inflation data reported by the BCV is almost two years old. To remedy this problem, the Johns Hopkins – Cato Institute Troubled Currencies Project, which I direct, began to measure Venezuela’s inflation in 2013. 

The most important price in an economy is the exchange rate between the local currency and the world’s reserve currency — the U.S. dollar. As long as there is an active black market (read: free market) for currency and the black market data are available, changes in the black market exchange rate can be reliably transformed into accurate estimates of countrywide inflation rates. The economic principle of Purchasing Power Parity (PPP) allows for this transformation.

I compute the implied annual inflation rate on a daily basis by using PPP to translate changes in the VEF/USD exchange rate into an annual inflation rate. The chart below shows the course of that annual rate, which peaked at 2432.94% (yr/yr) in mid-September 2017. At present, Venezuela’s annual inflation rate is 2275.78%, the highest in the world (see the chart below). 

By Steve Hanke
Past Blogs

Venezuela's Grim Reaper: A Weekly Report 9/20/2017

September 20, 2017

The Grim Reaper has taken his scythe to the Venezuelan bolivar. The death of the bolivar is depicted in the following chart. A bolivar is worthless, and with its collapse, Venezuela is witnessing the world’s worst inflation.

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Only Private Property Will Save Africa's Wildlife

September 18, 2017

At 72 years of age, Leakey is still going strong. Among other things, he is chair of the Turkana Basin Institute, which he founded. The Institute is a world-class research center located on the site in northern Kenya where the Leakeys made many notable discoveries, including an almost complete 1.6 million-year-old skeleton known as Turkana Boy. But, that’s not all Leakey is up to. In 2015, Leakey, founder and former director-general, was appointed by President Uhuru Kenyatta to chair the Kenya Wildlife Service.

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Forget The Hype: Public Infrastructure Generates Waste, Fraud And Abuse

September 14, 2017

Economic policy is subject to fads and fashions. The most recent economic-policy fad is public infrastructure. Its advocates include progressives on the “left” and populists on the “right.” It is an undefined hallmark of President Trump’s economic program. They all tell us to take the chains off fiscal austerity and spend — spend a lot — on public works. They allege that this elixir will cure many, if not all, of our economic ills. Let’s take a look at their arguments and evidence.

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Inflation Is Among The Costs Of Venezuela's War On The Private Sector

September 13, 2017

Venezuela is engaged in a multifaceted “war.” The Bolivarian Republic of Venezuela’s main enemy is the private sector of the economy (read: those who hold title to private property) and anyone else (internal or external) who opposes Chavismo (read: socialism). Wars always wreak havoc; life, property, and dreams are destroyed. In the process, wars – like Venezuela’s – progressively consume a country’s accumulated capital stock, too. In other words, as wars rage on, the destructive war economy gradually eats away at productive assets like land, factory capacity, and raw materials.

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