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Opinion
Noah Smith

Venezuela Is Living a Hyperinflation Nightmare

The country has the world's largest oil reserves and should be fabulously wealthy. Instead, children are starving.
The human toll.

The human toll.

Photographer: Roman Camacho/NurPhoto/Getty Images

In most macroeconomic models, the economy is a staid and stately thing, where prices, output and other economic variables wiggle up and down by small amounts but ultimately return to their long-term trends. And for much of the time -- excluding the occasional Great Depression or Great Recession -- developed countries conform to this picture of stability. But in some countries, and in some periods, truly spectacular things happen to an economy. Usually, they are bad things. And the most spectacular, and least understood, is hyperinflation.

Normal inflation and hyperinflation are so different in scope that they might as well be regarded as separate phenomena. Inflation in the U.S. for the past decade has hovered at or less than 2 percent, which is the Federal Reserve’s official target. In 1980, it reached a high of almost 15 percent. But at its peak in 2009, Zimbabwe’s inflation reached 500 billion percent.