It's Getting Worse In Venezuela

A man walks past big samples of Venezuelan bank notes at the Central Bank headquarters in Caracas August 22, 2013. Credit: Reuters/Carlos Garcia Rawlins

Venezuela’s Biggest Enemy — Hyperinflation -- Andres Oppenheimer. Miami Herald

When I interviewed the head of the International Monetary Fund’s Western Hemisphere division last week, he didn’t mince words about the possibility of Venezuela descending into even greater economic chaos.

Alejandro Werner, the senior IMF official, said there is a “high” probability that Venezuela, which already has the world’s highest inflation rate, will see even higher rates this year.

Noting that Venezuela’s annual inflation rate reached 56 percent last year, I asked him whether a country can maintain such inflation rates without falling into hyper-inflation —a situation in which the local currency becomes virtually worthless, merchants close down their stores, the entire economy collapses, and in many cases governments end up falling.

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My Comment: Having grown up in a society where the government controlled the price and distribution of goods (Russia) .... I know that such policies will always (I repeat always) result in shortages and the devaluation of the currency. The Venezuelans are beginning to learn this hard lesson right now.