Charts: The Top Twenty Inflation Nations
As we mentioned earlier this week, there is a growing chorus calling for further stimulus from the Federal Reserve. Of course, another round of full-blown stimulus would undoubtedly include another expansion of the monetary base. We may even know what the Fed will do by the time you get a chance to see this article.
As we can see from this chart from the Federal Reserve Bank of St. Louis, it has already reached unprecedented levels. Further dilution of currency values could eventually trigger a woefully common event – uncontrollable inflation.
"The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."
Of all people, John Maynard Keynes made that statement after studying the Weimar Republic hyperinflation in Germany.
During the first half of 1922, the German currency traded at around 320 Marks per Dollar. By December 1922, it was at 8000 Marks per Dollar. In 1923, the German government started using stamps to turn 1,000 Mark bank notes into 1 million Mark bank notes. In the end, a single gold Mark went from being worth about a thousand paper Marks to 1,000,000,000,000 paper Marks in 1923 alone.
That isn't even the worst historical example. Zimbabwe saw an inflationary rate that needs notation normally reserved for astronomical distances and incomprehensible numbers. Check out this chart...
The inflationary rate since independence for the nation was gained went from 3,840,000,000,000,000,000% in September 2008 to 89,700,000,000,000,000,000,000% in mid-November of the same year.
A lot of the extra dollars floating around in the US Dollar monetary base are functionally locked up. Official inflation is low for now and as long as the economy is sluggish and banks act as a dam, firing up the printing presses shouldn't cause a meltdown.
However, there is a lot of risk elsewhere in the world. Inflationary rates in some countries could be getting close to a breakout point. As we've seen from history, when inflation gets out of control, it goes from bad to unspeakable at an exponential rate in an extremely short period of time.
Here are the top ten worst inflation rates by nation, courtesy of the CIA World Fact Book.
As we can see, some of the poorest countries in the world are going through some of the worst inflation as well. The burden this puts on their citizens is immense.
Of particular concern is Venezuela. The country hasn't seen single digit inflation since 1986 according to the Caracas central bank's price index.
Hugo Chavez, Venezuela's extremely leftist president, has been doing everything he can to limit inflation as he tries to extend his 13 year vice-like grip on power. Unfortunately, that will only last through the next wave of elections.
According to the Bank of America Corp., inflation is likely to rise again following elections as the government devalues the bolivar. According to a median estimate of analysts surveyed by Bloomberg, Venezuela will weaken the official rate to 6.2 bolivars per dollar from 4.3 in the first quarter of 2013.
The government already regulates the price of hundreds of basic food goods. Chavez has even threatened to nationalize companies that fail to comply to price controls. If the elaborate deck of cards he has built collapses, his people will suffer as the national economy is erased and inflation spirals out of control.+19
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