Hyperinflation is the rapid increase of prices by more than 50% a month. It’s caused by an increase in the money supply and demand-pull inflation, which is when a government prints money for its own spending. One of the most recent examples is Venezuela, in 2013 the prices rose by 41%, and by 2018 the annual inflation rate was at 80,000%.
Economic Impact
Most of Venezuela’s economic prosperity was highly dependant on oil exports, with more than 90% of the export earnings coming from oil. These export earnings had allowed the government to pay for social programs that intended to help inequality and poverty, but in doing so the government’s spending obligations were much too high. Subsequently when the global price of oil dropped there was less demand to buy Venezuelan oil, which caused the currency value to fall and the price of exported goods to rise. The government’s solution to this was to print more money which caused the value of the money to decrease.
Social Impact
In 2013 the president of Venezuela announced a state of emergency due to the failing economy. With more money being printed the value of it started to decrease and this caused prices to rise. At one point it had gotten so bad that stores stopped putting prices on things and had the cashiers calculate the prices themselves, which might be 2x as much as, or more than an hour earlier. With the prices rising fewer people could afford to buy things with their increasingly worthless money, which caused companies to stop stocking their shelves. This caused more than 3 million Venezuelans to relocate because of the shortage of practically everything, this is now the largest human displacement in all of Latin American history.
Polical Impact
The president of Venezuela, Nicolas Maduro was serving his first term when the economy started its downward spiral. Many citizens blame Maduro and his socialist government for the decline of their economy. In May of 2018, Maduro was re-elected in highly controversial polls and many from opposite parties boycotting. Many candidates were barred from running, jailed, or even fled the country for fear of being imprisoned, which lead many to argue that it was unfair. This caused the election to not be recognized by the National Assembly, which was controlled by Maduro’s opposition, meaning that the presidency was considered vacant. With the presidency considered vacant, Juan Guaido declared himself acting president; many countries recognized him as president but China and Russia still recognized Maduro as president which has lead to a tense situation for those involved.
Could This Go Global?
I think that the impacts of hyperinflation in Venezuela has the potential to have a global effect. For example, the Venezuelans that are fleeing into different countries could cause issues for the countries that they are moving into. It could possibly cause even more political tension around the world creating an unsafe environment for many people. In conclusion, hyperinflation is a major issue that can affect the entire world if ignored and let out of control.
Sources: https://www.bbc.com/news/world-latin-america-36319877 and https://theconversation.com/what-caused-hyperinflation-in-venezuela-a-rare-blend-of-public-ineptitude-and-private-enterprise-102483