Soaring inflation in Venezuela has left the country’s currency virtually worthless, leaving the troubled nation on the verge of economic collapse.
But while economists try to describe the nation’s turmoil with facts and statistics, the story of Venezuela’s struggles was perhaps summed up best in a Reddit forum. On Monday, user “Victorinox126” posted a photo of a man holding his empanada with a Venezuelan two-bolivar bill as a napkin.
The post has already generated over 1,770 comments and went viral across financial media outlets. And he might have a point. One bolivar is literally worth less than a penny on the popular, unofficial exchange rate market.
The photo is just another sign of Venezuela’s economic collapse in 2015. Years of reckless government spending and endemic corruption have left the country’s finances in a horrible state. The situation is so severe that supermarket shelves are empty, foodstuffs are hard to find, and basic necessities are becoming sought after luxuries.
A plunging exchange rate has also made it more expensive for citizens to import foreign goods. Last year, 300 bolivars would have given you one U.S. dollar. Today, you need roughly 600 bolivars. (Source: dolartoday.com, last accessed August 20, 2015.)
Prices are soaring as a result. Venezuelan officials claim the nation’s inflation rate is currently running at 68.5% per year, but the real number is likely much higher. However, Professor Steve Hanke, who runs the Troubled Currencies Project at the Cato Institute and Johns Hopkins University, estimates prices in the troubled country are increasing by 808% annually. (Source: The Troubled Currencies Project: Troubled Currencies, last accessed August 20, 2015.)
Unfortunately the situation is not expected to get better any time soon. The Venezuelan government is facing billions of dollars in upcoming debt payments, which will be difficult to make given the declining state of the nation’s finances. Many economists expect the country to default on its debt in the coming months, which could spark an all-out economic collapse.