Venezuela Inflation Rate Passes 1 Million Percent, and It's Costing Lives Every Day: This Is What Devastating Hyperinflation Looks Like

"Do you see this bill?" asked Venezuelan journalist and cyberactivist Luis Carlos Díaz, as he held up a 50 bolivar note. "This is the new bolivar [Venezuela's currency] called 'bolivar soberano' [sovereign bolivar]. This doesn't have any value at this moment for me because I need to have 10 of this to buy 1 U.S. dollar, and I have to spend it fast because these bills lose value every single day."

Diaz's conundrum describes the effects of strongman Nicolás Maduro's failed economic policies in a bid to reduce Venezuela's hyperinflation, which has reached 1.29 million percent in November, according to a Monday report from the opposition-controlled legislative branch known as the National Assembly. Inflation rate is projected to jump 10 million percent by 2019, based on estimates from the International Monetary Fund.

The assembly forecasts that Venezuela would even hit 4.3 million percent by the end of this month. Econoanalítica, a Venezuelan private financial firm, affirmed that hyperinflation would reach at least 2 million before December ends, local reports indicated.

With such a staggering rate, it's no wonder Venezuelans like Diaz have rushed to spend money before prices continue their increase. Last month, after Maduro announced its sixth minimum wage increase in 2018, the price of a cup of coffee went up 285,614 percent—which is equivalent to 400 sovereign bolivars or $0.76—and the black market exchange rate, considered the real measure to know real costs in Venezuela, dropped to 526 bolivars per dollar from the previous 460, Bloomberg's Cafe Con Leche Index reported early this month. Pan de jamón, a bread filled with raisins and ham (a staple food for Venezuelans during Christmas) increased 52 percent in late November, Bloomberg added.

"You can't have savings in the bank," Díaz told Newsweek in a video interview from Caracas. "The central bank is doing this because they're printing and covering the money that the government of Nicolas Maduro is not producing. Hyperinflation is the culprit of this phenomenon and we, the population, are the victims."

Last summer, Maduro launched his Economic Recovery Program in the hopes of reining in a rampant inflation that has stifled the South American country's economy. In a televised speech, he vowed to raise the minimum wage by 3,000 percent and introduced the sovereign bolivar, a new banknote that slashed five zeroes from the "strong bolivar" currency—launched in 2008—that had lost absolute value due to high inflation rates. The minimum wage hike, however, can never catch up to a seven-figure hyperinflation because workers are still unable to afford basic items.

Another move to mitigate currency devaluation and "anchor" the sovereign bolivar was the launch of Petro in February, a cryptocurrency that is backed by oil, diamonds and gold reserves. However, the mining of Petro, the process whereby transactions are verified and added to a public ledger, does not build trust among market participants, especially in light of Venezuela's history of economic mismanagement.

Venezuelans have endured skyrocketing inflation rates for years. The then-Hugo Chávez administration declared in 2003 that the government should have control over foreign exchange following a strike from state-run oil company Petróleos de Venezuela workers earlier that year, which greatly affected the country's GDP. In addition to the government's exchange rate policy that pegged the Venezuelan central bank's rate of exchange to that of the U.S. dollar, the expropriation and nationalization of industries and social programs funded by oil revenue—which in 2014, a year after Chávez's death, plummeted—are all considered the root causes of high inflation in the country.

GettyImages-1021018338
A woman shows bills of the new Venezuelan currency, the bolivar soberano, at a barbershop in the border city of Pacaraima, Roraima State, Brazil, on August 21. Hyperinflation has reached 1.29 million percent, according to data revealed by the National Assembly. MAURO PIMENTEL/AFP/Getty Images

Strict price controls from the chavista regime, a decline in domestic production, the population's overreliance on the government to provide basic goods—which wound up in empty shelves at stores—and a shrinking economy that causes large fiscal deficits have exacerbated a humanitarian crisis that has seen 3 million Venezuelans leaving their country since 2015, according to the United Nations. The country's economy shrank 30 percent from 2013 to 2017, and foreign reserves went down from $30 billion in 2017 to less than $10 billion to date, a report from Forbes found.

"Food and medicine are missing. Venezuela at this moment is losing production of oil. It's not an important producer of oil today, and that was our main source of income for Venezuela. We're just surviving every day," Diaz said.

The Chávez government introduced the "bolivar fuerte" currency 10 years ago in an attempt to assuage high inflation and make financial transactions easier, but to little avail. In 2016, the "bolivar fuerte" depreciated 60 percent against the U.S. dollar on the black market, leading many Venezuelans to carry bags full of cash to purchase a bag of rice, a whole chicken or one toilet paper roll. Images of Venezuelans using scales to weigh stashes of money instead of counting them mirrored scenes from countries that had dealt with hyperinflation like post-World War I Germany, Yugoslavia in the 1990s and Zimbabwe in the late 2000s, Bloomberg reported in July.

As hyperinflation made banknotes less valuable every day and demand outpaced supply, local artisans began creating handbags, bird sculptures, wallets and belts out of bolivar bills. Some of the vendors sold items between $10 and $15 U.S. dollars, a large return of investment considering that bolivars were only worth 17 U.S. cents at money exchange houses in places like Cucuta, a Colombian city near the border with Venezuela, The Miami Herald reported in June.

In essence, hyperinflation has affected almost all aspects of life. Some Venezuelans can't afford to hold a wake for their loved ones because there is a scarcity of wood and metals to create coffins, and crematories are struggling to meet a high demand in funeral services because they're unable to obtain propane gas, thus increasing cremation costs by 108 percent within a week, Reuters reported early this month.

GettyImages-1024834280
A few bottles of soft drinks sit on the empty shelves of a supermarket in Caracas, on August 28. Scarcity increases as Venezuela's government controls prices in commercial establishments in an attempt to curb hyperinflation. RONALDO SCHEMIDT/AFP/Getty Images

The country's economic woes are pushing Venezuelans to rely on credit cards, but their use also poses limitations.

"Cash is hard to see. Cash is only used for gasoline and bus fares and ATMs have limits. Everything else is done through points of sales that take debit and credit cards or bank transfers. Venezuela today shows us what hyperinflation looks like in the digital age," said Guillermo Zubillaga, senior director of public policy programs and corporate relations at the Washington, D.C.-based think-tank Americas Society and Council of the Americas.

Díaz also echoed this problem. "The government is creating money every day, but not just physical money, but also digital money in order to pay off debt and the salary of public institutions and corporations," he said. "At this moment, we have credit cards, but our credit cards have a two-dollar limit. It's a rally to spend money really fast. The government is covering its debts with more money printing, which deepens this hyperinflation problem."

For some economists, U.S. sanctions that ban Venezuela from restructuring or issuing new debt, as well as the restriction of American citizens and entities to make business dealings with Venezuelan officials and several companies, make it difficult for the Maduro administration to fix its economy. Nevertheless, Venezuela could still get rid of hyperinflation by trying to establish an exchange-rate-based stabilization program (ERBS), meaning that the bolivar is fixed to the U.S. dollar at a sustainable exchange rate, according to Washington, D.C.-based Center for Economic and Policy Research Co-Director Mark Weisbrot.

GettyImages-1021478366
People at the entrance of a supermarket in Caracas on August 22. Venezuelans were confused about the new bank notes the government had put in circulation in an attempt to curb hyperinflation. FEDERICO PARRA/AFP/Getty Images

"There are different ways to accomplish ERBS. The most extreme method would be dollarization, to adopt the dollar as Venezuela's currency," Weisbrot added in an essay sent to Newsweek. "The problem with this method is that once the dollar is adopted as the national currency, it becomes politically extremely difficult to get rid of. And if a country does not have its own currency, it gives up its control of most monetary policy as well as exchange rate policy."

Weisbrot noted that "this is a sacrifice that does not have to be made permanent; however, it does have to be made temporarily. That is, the government will have to temporarily give up its use of monetary policy to finance deficit spending, in order to change peoples'expectations about inflation, and to put an end to the hyperinflation," adding that "there will also have to be fiscal reform; the government cannot afford to give away gasoline and other energy for free."

Zubillaga, however, believed the U.S. sanctions have no direct role in the country's inflation. Instead, other measures must be implemented.

"The only significant policy that would start mitigating inflation would be a 180-degree shift towards the rule of law, which would entail calling for free and fair elections," he said. "Maduro's new presidential term starts on January 10; however, the elections that handed him this new mandate weren't recognized by most of the international community so there will be no real confidence in his administration or the country's currency until Venezuela returns to institutionality."

The sovereign bolivar, other experts argued, would only provide a temporary solution and the president will continue to slash zeroes in a matter of weeks or months. Until Maduro decides to stop the massive printing of banknotes and instead take on a disciplined fiscal and monetary policy, hundreds of thousands of children will continue to grapple with malnutrition, patients with cancer and other serious illnesses will lack medicine, infrastructure will crumble and basic goods will be out of Venezuelans' reach.

"This hyperinflation has a great cost in life," Diaz said. "We are losing lives, including the lives of children, every day."

GettyImages-461489172
People line up outside a supermarket in Caracas on January 13, 2015. Venezuela suffers under a shortage of almost a third of its commodities. FEDERICO PARRA/AFP/Getty Images