Letter to the Editor: Venezuela’s Phoney Inflation Rate

Dear Sir:

The authors of “In search of a solution” (Analysis, March 3) assert that prices in Venezuela “are rising at the almost hyperinflationary rate of 56 per cent a year”. This is way off the mark, in two respects.

First, hyperinflation is reached when the inflation rate exceeds 50 per cent per month. This monthly rate, if annualised, equals 12,975 per cent.

The second problem is the fact that they quote a 56 per cent annual inflation rate without telling readers that this is a phoney rate put out by the Venezuelan government. I estimate Venezuela’s current annual inflation rate to be 302 per cent. That’s more than five times higher than the official rate.

Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute in Washington, D.C.