The True Cost of Socialism: Venezuela Economy Hits New Low; Will America Follow?

According to the Foundation for Economic Education, Venezuela’s socialist economy is in deep, deep trouble as the South American nation encounters 510% inflation.

Venezuela’s currency, the bolivar, slides ever downward into irrelevancy as inflation soars and according to a report from the Foundation for Economic Education’s Steve Hanke, the inflation rate has soared even further in the past few weeks.

Venezuela’s bolivar is collapsing. And as night follows day, Venezuela’s annual implied inflation rate is soaring. Last week, the annual inflation rate broke through the 500% level. It now stands at 510%.

With free market exchange-rate data (usually black-market data), the real inflation rate can be calculated. The principle of purchasing power parity (PPP), which links changes in exchange rates and changes in prices, allows for a reliable inflation estimate.

Using black-market exchange rate data that The Johns Hopkins-Cato Institute Troubled Currencies Project has collected over the past year, I estimate Venezuela’s current annual implied inflation rate to be 510%. This is the highest rate in the world. It’s well above the second-highest rate: Syria’s, which stands at 84%.

Hanke, a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at Johns Hopkins University, also notes,

Venezuela has not always experienced punishing inflation rates. From 1950 through 1979, Venezuela’s average annual inflation rate remained in the single digits.

While Americans may roll their eyes at this backwards economy, the fact remains that America’s currency policies are reckless as well and under the façade of America’s supposed economic turnaround lies unmistakable signs of weak economic footing and potential future economic calamity.

We have been so busy warning of the dangers of “becoming Europe” that few conservatives have wondered, “What if Obama is steering us more towards Venezuelan-style socialism?”

About the Author

Greg Campbell
Greg Campbell
An unapologetic patriot and conservative, Greg emerged within the blossoming Tea Party Movement as a political analyst dedicated to educating and advocating for the preservation of our constitutional principles and a free-market solution to problems birthed by economic liberalism. From authoring scathing commentaries to conducting interviews with some of the biggest names in politics today including party leaders, activists and conservative media personalities, Greg has worked to counter the left’s media narratives with truthful discussions of the biggest issues affecting Americans today. Greg’s primary area of focus is Second Amendment issues and the advancement of honest discussion concerning the constitutional right that protects all others. He lives in the Northwest with his wife, Heather, and enjoys writing, marksmanship and the outdoors.

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