Hanke sees 50%-80% odds Venezuela adopts U.S. dollar, abandoning bolivar
This digest was compiled by AI from multiple sources — links to the originals are below.
Economist Steve Hanke, a special advisor to a Venezuelan National Assembly leader, proposes full dollarization to end Venezuela's 400% inflation. He puts the odds of approval at 50%-80%, calling it the biggest currency switch since the euro's 1999 introduction. The bolivar has lost 78% against the dollar in the past year, and most Venezuelans already use dollars for daily transactions.
Key Facts
- Steve Hanke, a Johns Hopkins professor and special advisor to a Venezuelan National Assembly leader, proposes full adoption of the U.S. dollar to end Venezuela's 400% inflation.
- Hanke estimates 50%-80% odds that dollarization will be approved, describing it as the biggest currency switch since the euro's introduction in 1999.
- The bolivar has lost 78% of its value against the U.S. dollar over the past year, and most Venezuelans outside government employment already use dollars for virtually all purchases.
- Hanke previously advised Montenegro's 1999 switch to the Deutschemark, Ecuador's 2000 dollarization, and Zimbabwe's 2009 dollarization.
The Dollarization Proposal
Steve Hanke, professor of applied economics at Johns Hopkins University and special advisor to a leading member of Venezuela's National Assembly, advocates full adoption of the U.S. dollar as the solution to Venezuela's 400% inflation. The plan would abandon the bolivar and the central bank, removing the risk of money printing to finance government spending and stoke higher prices. Hanke told Fortune's Shawn Tully that taming inflation is the key to restoring stability in Venezuela, and that all other progress flows from stable prices. He estimates 50%-80% odds that dollarization will be approved, calling it the biggest switch from domestic currencies to an alternative since the euro's introduction in 1999.
Hanke's Track Record
Hanke persuaded Montenegro in 1999 to replace the Yugoslav dinar with the Deutschemark. He oversaw Ecuador's switch from the sucre to the U.S. dollar in 2000, the first dollarization in Latin America since Panama a century earlier. In 2009, Hanke became an informal advisor to Zimbabwe's prime minister, and the country dollarized and reined in inflation. A new Zimbabwean government abandoned the dollar in 2013, and hyperinflation returned.
Spontaneous Dollarization and Obstacles
The bolivar has lost 78% of its value against the U.S. dollar over the past year, and most Venezuelans outside government employment or aid programs already use dollars for virtually all purchases. Hanke said this 'spontaneous dollarization' raises the chances of an official currency switch. Losing the central bank as lender of last resort and handing monetary policy to the Federal Reserve remain daunting obstacles. Argentine President Javier Milei campaigned on dollarization but backed off the idea after taking office, even as he cooled inflation by slashing subsidies and the budget deficit.
1 source
Hanke sees 50%-80% odds Venezuela adopts U.S. dollar, abandoning bolivar
