That is roughly where Venezuela sits, and economist Steve Hanke, now advising through a member of the National Assembly, thinks there is a single move that changes everything.
Dollarization.
Hanke's argument is that the inflation rate he measures at 354.1% (the highest on earth) does not need years of adjustment programs. Replace the bolÃvar with the dollar officially and it disappears in days.
He has done this before. Ecuador in 2000. Montenegro. A currency board in Bulgaria. He also advised Caldera in 1995 to do exactly this, and Caldera agreed but never had the votes.
His view is that the failure to fix the currency then is part of what fertilised the ground for Chávez.
The country is already dollarized in practice anyway. Prices are quoted in dollars, people transact in dollars. The only holdout is the government, which keeps issuing the currency that produces the inflation.
Resistance, he says, does not come from ordinary Venezuelans. It comes from the bankers and businessmen who profit from a junk currency, and the politicians they fund.
Hanke puts the odds of it happening at between 50 and 80 percent. On a straight referendum, he thinks it wins in a landslide.
Then comes oil.
Venezuela is depleting its reserves at 0.2% a year. The majors run around 6%. At the current pace it would take 380 years to burn through half of what is in the ground. Which in economic terms means those reserves are worth roughly nothing today.
To change that you need investment. To get investment you need a stable currency, working power, and petroleum and mining laws with hard property rights. Production has fallen from 3.4 million barrels a day in 1998 to just over a million, and the physical infrastructure has rotted.
Exxon has called the country uninvestable. Hanke thinks dollarization is the confidence shock that flips that. Necessary, though not sufficient on its own.
On the dollar's own future, he is dismissive of the collapse narrative. In 2,500 years there have been fourteen international currencies, and knocking the king off the throne is rare. Add up reserves, swaps, trade and bonds over the last three years and dollar usage has ticked up, not down. The yuan is gaining fastest, but from almost nothing.
And on Canada, his read on why talks collapsed is blunt: the professionals on both sides were close to signing, then white House appointees walked in at the eleventh hour and piled on demands nobody could accept.
He thinks Carney will match tariffs dollar for dollar, with the American auto industry taking the hit.
Why would you want 85% of the Canadian public against you?
@steve_hanke
