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