Venezuela is being crushed by staggering hyperinflation as a sharply divisive political crisis has the economy in ruins. Many citizens are seeking refuge in alternatives to the national currency, such as foreign fiat and cryptocurrency. The situation also calls into question the long-term trajectories of other, less volatile economies. National banks globally have struggled for decades to balance fiat value against interest rate policy.
Soaring Inflation in Venezuela
The International Monetary Fund (IMF) has projected Venezuela's hyperinflation will reach 10,000,000% sometime this year. The Venezuelan National Assembly's Finance Committee puts the final inflation rate for 2018 at 1,698,488.2%. Recent statistics suggest the number has since fallen below 1,000,000%, but reasons are unclear and data reliability is questioned. While figures from different agencies vary, it is widely agreed that the Venezuelan bolivar (VEF) has become nearly worthless. The divided government has produced an economic crisis where consistent data is scarce, and basic survival has become a daily struggle for millions.
Government Data Draws Skepticism
Recently, the Venezuelan Central Bank (BCV) released inflation data for the first time in three years, indicating month-to-month declines. However, critics argue the positive trend is misleading. According to venezuelanalysis.com, anti-inflation policies are designed to shrink purchasing power and prevent black-market dollar purchases, thereby stabilizing the exchange rate. The reported numbers may simply reflect a drastically shriveled GDP and cherry-picked research methods. On the street, the bolivar is virtually dead, and the government has issued bills of extraordinarily large denominations. People frequently pay for goods with black-market USD, purchased illegally due to high demand and strict official channel restrictions.
Global Devaluation Trends
Venezuela leads the world in national inflation, but other countries are not immune to the global trend. The top 10 hyperinflation-hit nations include Zimbabwe, Sudan, Argentina, Iran, South Sudan, Liberia, Yemen, Angola, and Turkey. Purchasing power is declining across the board. In Sweden (ranked 102nd globally), the krona (SEK) dropped to a 17-year low in April, attributed to the Riksbank's delay in rate hikes. The U.S. dollar fell below the 97 handle on June 19, reflecting the Federal Reserve's dovish stance. Since 1958, the U.S. dollar has lost about 88% of its purchasing power, while the Swedish krona has lost roughly 92%. Deutsche Bank research shows that global inflationary decline extends back centuries, accelerating in the 20th century as countries moved away from commodity-based systems toward credit and debt models.
Venezuelans Turn to Bitcoin, Yet Face Real Challenges
Attempting to weather the crash, some Venezuelans use cryptocurrencies like Bitcoin. Economist Carlos Hernández says that despite state restrictions making conversion difficult, “cryptocurrencies have saved our family. I now cover our household's expenses on my own.” However, others argue the impact is limited. Former resident Diana Aguilar notes, “There are no official statistics of how many crypto wallets exist in Venezuela. Beyond a few businesses and trusted exchanges, there are no services for crypto users.” Hernández used LocalBitcoins for peer-to-peer trading; data from the platform shows a marked increase in VEF/BTC volume since 2018. While opinions differ on the best solution, the bolivar has become an undeniable economic liability for Venezuelans.