The Troubling Trajectory of Hyperinflation in Venezuela

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The Troubling Trajectory of Hyperinflation in Venezuela

The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.

Extreme shortages of food and power continue to ravage the country of Venezuela, and ordinary people have been paying the price.

With triple-digit inflation, that “price” is expected to continue to soar even higher. The International Monetary Fund (IMF), in its most recent set April forecasts, expects inflation in Venezuela to hit 481% by the end of 2016.
Even scarier is the estimated pace of acceleration – by 2017, the IMF expects Venezuelan hyperinflation to climb to a whopping 1,642%.

Our brains have trouble computing numbers of this magnitude, so we created today’s infographic to put things in perspective. We look at it from two angles, including a historical comparison as well as a more tangible example.

This Pattern Looks Familiar…

If the chart for the Venezuelan bolivar looks eerily familiar, it may be because its trajectory thus far is almost identical to that of the Papiermark during hyperinflation in the Weimar Republic from 1918-1923.

Although the Papiermark would eventually peak at an inflation rate of 3.5 billion percent in 1923, the pace of inflation started relatively modestly. It started in the double-digits after the war in 1918.

This is similar to today’s bolivar. In 2013 and 2014, the pace of inflation in Venezuela was increasing, but still confined to double-digits. Now things are accelerating fast, and if the IMF is correct with its predictions, there could be huge consequences.

Could hyperinflation in Venezuela ever hit the peak levels associated with Weimar Germany? It’s hard to say, but it’s not impossible.

A More Tangible Example

To put things from a more tangible perspective, let’s do the math based on IMF projections to see what may be in store for ordinary Venezuelans.

• In 2012, one U.S. dollar could buy approximately four bolivars.
• At the end of 2015, one U.S. dollar could buy 900 bolivars at the black market rate.
• Based on IMF projected inflation rates, by the end of 2017, one U.S. dollar should be able to buy 90,000 bolivars.

Where things go after that is anybody’s guess.

About the Money Project

The Money Project aims to use intuitive visualizations to explore ideas around the very concept of money itself. Founded in 2015 by Visual Capitalist and Texas Precious Metals, the Money Project will look at the evolving nature of money, and will try to answer the difficult questions that prevent us from truly understanding the role that money plays in finance, investments, and accumulating wealth.