Venezuelans can no longer afford the most basic necessities. During the first quarter of 2018, consumer prices rose again, this time by 454%. Hyperinflation has made the bolivar essentially worthless. The country experienced 8,900% inflation in just 12 months.
The original article has been edited here for length (…) and clarity ([ ])
While the bolivar has turned into mere paper, Venezuela continues to print the currency at breakneck speed. The money supply has risen 2,900% over the last year, while goods are becoming scarcer and scarcer. Welcome to hyperinflation 101…
While most global economies are growing, even if only slightly, Venezuela’s economy is expected to tumble by 15% by the end of the year. Its GDP is expected to decline by 50% since 2013. Venezuela is hanging on by a thread, and the thread is fraying.
Venezuela has depended on oil for 90% of its exports but corruption and lack of investors have left oil industry in a state of chaos and the economy in shambles. Many Venezuelans are looking for relief abroad as they flee the country in hopes of something better. The majority of households have a family member who has emigrated abroad. Many of these are young and eager workers whose only chance lies beyond Venezuela’s own borders…
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Hyperinflation is not an unusual phenomenon. 33 countries have experienced hyperinflation over the last 100 years of which no less than 22 have experienced it in the past 25 years and 4 in the past 10 years. The United States is one of the few countries to have experienced two currency collapses during its history (1812-1814 and 1861-1865). Could it happen again?
In the following infographic we look at 5 occasions when currencies crashed in a big way.
There is a difference between inflation and hyperinflation…and there is no gradual path from one to the other. To wind up with true hyperinflation, some very bad things have to happen. The government has to completely lose control… the populace has to completely lose faith in the system… or both at the same time. [Are we there yet? Let’s take a look.]
After seeing the latest string of events unfold right before our eyes, many are openly pondering whether we may see hyperinflation hit the US shores. Rather than ponder Trump’s latest executive orders or over the top pronouncements, let us first look at what hyperinflation is and how it works.
5. Hyperinflation Is Coming To The U.S. But…
Without pricing power or a large fiscal deficit and large foreign currency demands, it simply isn’t credible to claim that hyperinflation in the U.S. or the U.K. is in the offing now or anytime in the immediate future.
While I believe that the U.S. is heading towards a Weimar style hyperinflationary depression there are several developments that point to the possibility of another deflationary depression, similar to the 1930’s. Let me explain.
The Great War ended on November 11th, 1918, when the signed armistice came into effect, but the peace agreement lead to additional destruction – the destruction of wealth and savings – in the form of an hyperinflation event in Germany from 1921 and 1924 that caused millions of people to have their savings erased.
Hyperinflation is perhaps the darkest side of a government fiat money regime. Among mainstream economists, hyperinflation typically denotes a period of exceptionally strong increases in overall prices of goods and services, thus denoting a period of exceptionally strong erosion in the exchange value of money.
There is a general pattern for the stages of hyperinflation – the stages of the “death of a fiat currency”. Here they are.
The Fed, together with other central banks from around the world, have created the perfect crescendo of worldwide credit bubbles and asset bubbles leading to the excesses and decadence which are the normal finale to a secular trend. They have totally destroyed all major world currencies and left the world with debts that cannot and will not be repaid with normal money. As such, there are only two alternative outcomes, debt default or hyperinflation. Both will have disastrous consequences for the world economy.
13. U.S. Economy: Reduce Spending (Future Depression) OR Keep Spending (Future Hyperinflation)
The U.S. government is in what is known as a “debt death spiral”. They must borrow money to repay prior debts. It is as if they are using their Visa Card to make an American Express payment. The rate of new debt additions dwarf any rate of growth the economy can possibly achieve. The end is certain, only its timing is unknown, and, once interest rates begin to rise, and they will, it’s game over.
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