Graphic detail | Daily chart

Calculating the half-life of a currency

Venezuela’s hyperinflationary horror is far from unprecedented

By THE DATA TEAM

FOR those not enduring it, hyperinflation can seem mind-bendingly abstract. In Venezuela’s faltering economy, prices rose by 223.1% last month alone, according to Ángel Alvarado, an economist and opposition politician (the government has long ceased publishing official statistics). Inflation could reach 1m percent for the full year, according to a (somewhat loose) forecast by the IMF. Such a figure is far from unprecedented, however. In the worst month of its postwar hyperinflation, Hungarian prices rose by 41,900,000,000,000,000%. The government had to print a 100 quintillion note (with 20 zeroes), the highest denomination ever produced.

If Venezuela’s monthly inflation gets no worse, its hyperinflationary horror will rank only 23rd out of the 57 episodes identified by Steve Hanke of Johns Hopkins University and Nicholas Krus (see chart). To make the numbers easier to grasp, they calculate how long it would take for prices to double, if inflation persists at its peak monthly pace. Their results provide a kind of “half-life” for a currency, showing how long it takes for it to lose 50% of its value (relative to the country’s consumer goods and services).

This alternative calculation turns the astronomical percentages of hyperinflation into more mundane intervals of time: millions into days and quintillions into hours. In Venezuela’s case it took less than 19 days in August for the currency to lose half its value. In the worst month of Hungary’s hyperinflation, it took just 15 hours.

Read more about hyperinflation here

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