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Venezuela Cup of Coffee Index Reaches the One Million Bolivars Mark! (43,378% Inflation)

This is a syndicated repost courtesy of Online Course Notes For Financial Markets and Banking. To view original, click here. Reposted with permission.

Thanks to President Nicholas Maduro and friends’ gross mismanagement of the Venezuelan economy, it now costs one million Bolivars for a cup of coffee.

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(Bloomberg) — A cup of coffee now costs one million bolivars in Caracas.

It’s an astonishing sum of money.

Consider that just two years ago, when we launched the Bloomberg Cafe Con Leche Index, a coffee cost 450 bolivars. Or that today’s price is the equivalent of almost one-fifth of the monthly minimum wage. Or that to buy a cup with the most common bill in circulation — the 100-bolivar note — you’d need to gather up a stack of 10,000 of them.

And yet, at the same time, one million bolivars is really nothing. When converted into dollars, it comes to a mere 29 cents. This contrast — a coffee burns through much of a worker’s entire monthly wage but costs just pennies — illustrates the devastating effects of the government’s frantic money-printing policies and how they are sinking the country deeper into poverty.

With the latest price increase — from 800,000 bolivars just a week earlier — inflation over the past 12 months in Venezuela climbed to 43,378 percent, according to the index. And if you examine a snapshot of the past three months and project that pace out to a full year, it paints an even grimmer picture: inflation of 482,153 percent.


This is not the result of monetary policy. Rather, it is the result of government-controlled supply of goods at artificially low stated prices.

As Milton Friedman once said, “If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.”

And if you put Venezuelan Socialists like Nicolas Maduro in charge of an economy, you get 43,378% inflation.


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