Venezuela is arguably going through one of the largest economic disasters in world history, with prices soaring uncontrollably each day.
The International Monetary Fund (IMF) said this week that the Latin American nation is “stuck in a profound economic and social crisis” and that inflation will hit 1 million percent by the end of the year. The Fund compared the situation in Venezuela to Germany in 1923 and Zimbabwe in the late 2000s, where the collapse in demand for money led to historically high prices and dramatic social issues.
“Hyperinflation brings the economic system to a halt: It scares off foreign investors, discourages local business, destroys the value of savings and wages for households, thus damaging long-term economic growth,” Francesco Filia, chief executive officer at the London-based fund Fasanara Capital, told CNBC via email.
“It makes serial defaults and capital controls inevitable. Once set in motion, it is very hard to stop, as the credibility of policymakers is badly damaged,” he added.
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