Venezuela the World’s Worst Central Bank

The Banco Central de Venezuela (BCV) wins the prize as the world’s worst central bank – at least for the time being.  Venezuela’s annual inflation has been in triple-digit territory for more than three years.  As the accompanying chart shows, the implied annual inflation rate soared as high as 800% last summer.  Since then, inflation has fallen to its current 320% annual rate.  This is still well above the phony 180.9% annual rate reported by the BCV in December.

Yes, the BCV’s inflation number is phony.  The only reliable method for calculating inflation in countries where the rates are elevated, like Venezuela, is to observe changes in the black market (read: free market) exchange-rate data.  These changes can then be translated into implied inflation rates.  It’s nothing more than an application of standard purchasing power (PPP) theory.  When inflation is elevated, it is deadly accurate, and it is the method I use to estimate Venezuela’s inflation rate.

While the triple-digit inflation tragedy coincided with the rise of the late Hugo Chávez and his Bolivarian Revolution, serious inflation problems have plagued Venezuela – courtesy of the BCV – for over 30 years.  The accompanying chart makes that clear.

Past Blogs

Egypt: The Pound Plunges

March 07, 2016

The Egyptian pound is plummeting, again, losing 6.1% of its value against the greenback over the past week. As shown in the accompanying chart, the black market premium has soared to 25.2%.

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China Meets the Zombies

March 04, 2016

Beijing can be big and bold when it meets reality. Remember when Zhu Rongji, China’s former economic tsar, gave 30 million workers pink slips, privatized hundreds of state-owned enterprises (SOEs) and swept many others into the dust bin?

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Egypt’s Dire Dollar Shortage

March 02, 2016

Ever since General Sisi ousted the Muslim Brotherhood, the Egyptian economy has remained in shambles. Businessmen are fed up. They are ignoring government gag orders, and are making their voices heard. And why not? They are losing sales, missing deadlines, and scrapping expansion plans because of limited access to U.S. dollars.

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Time for a New Calendar, One with a Leap Week

February 29, 2016

How about an extra week every six years, starting in 2020? That’s what you would enjoy if we adopted the Hanke-Henry Permanent Calendar (HHPC). Faced with the Gregorian calendar’s plethora of problems, my colleague Dick Henry, a professor of astrophysics at The Johns Hopkins University, and I devised the HHPC.

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Nigeria’s Little Problem: Lying Statistics

February 26, 2016

Nigeria’s currency (the naira) has been officially pegged in a range of 197-199 NGN/USD for nearly a year. But, that’s a phony government rate. As shown in the accompanying chart, the black market (read: free market) rate has exploded since October, and currently stands at 350 NGN/USD.

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