Effects Of Hyperinflation On The Economy

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Hyperinflation, as the word suggests, is a situation where inflation is excessively high. This phenomenon has many negative consequences in an economy. Throughout history, there have been numerous cases of hyperinflation that have had negative repercussions in the economy of these countries and the international market. Among these, countries with high inflation rates often experience bad economic performance (Fisher 877). In actuality, Venezuela has the highest inflation rate in the world. Due to various political and economic problems, this South American country’s inflation rate for the year of 2015 was of 180.9% (Forero) which is extremely high compared to other countries. To put this in perspective, the Federal Reserve aims for an…show more content…
Furthermore, other factors in the international market have also affected Venezuela. The decrease in the price of petrol has affected them directly since a high percentage of their economy is based on its exploitation. Likewise, the political and economic factors have caused a shortages and lack of social cohesion in the country. In a few words, the hyper-inflation in Venezuela is the consequence of a mixture of political and economic problems, which result in a multitude of social problems. Ever since Hugo Chávez’s presidential term, Venezuela’s politics have been polarized in two big groups, supporters of the United Social Party (founded by Chávez) and the opposition, Democratic Union Party. This, was reflected in the presidential election held in 2013, where the opposition lost by 1.49% (223,599 votes). As a consequence, there has been a power struggle where the opposition has been persecuted, exiled and imprisoned. Maduro has implemented new policies that have affected the private sector, raised the minimum wages, increased the price of gasoline, and caused the depreciation of their currency. All of these measures have done nothing but worsen the situation and increase the inflation even more. The political tension that Venezuela is living right now has caused strikes, protests, riots and looting which only make matters worse. The political atmosphere and bad decisions made by the last two Presidents have not helped in any way the country’s critical
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