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Hey Buddy, Can You Spare 2 Million for Coffee?

Hey Buddy, Can You Spare 2 Million for Coffee?

(Bloomberg) --

ONE. MILLION. PERCENT. That's how high inflation will climb in Venezuela by year's end, according to the latest forecast by the International Monetary Fund.

The troubled South American country, once the region's wealthiest, is caught in an economic crisis and hyper-inflationary maelstrom experienced only by a handful of states such as Zimbabwe and the Weimar Republic. The comparison comes from the Fund itself.

Venezuela's economy has collapsed since crude prices nosedived nearly four years ago and authorities refused to adjust. Misguided price and foreign exchange controls have added to the distortions. Hyperinflation has taken root over the past year, sinking the population deeper into poverty. But while Venezuelans flee, President Nicolas Maduro says the crisis results from an “economic war” waged by his political opponents.

The administration has been resorting to policies that paper over the problem — the latest being a new currency that will lop off zeros from bills in circulation. The new money was scheduled to hit the streets in August but Maduro now says the release will be a bit delayed and five zeros dropped from the bolivar.

Escaping hyperinflation is challenging, with few countries managing without a monetary shock or axing their central banks. Adopting currency boards or abandoning the currency, usually in favor of the U.S. dollar, was the way out in some cases.

There's no indication Maduro and his team are considering such routes — for Venezuelans, this means daily life will continue to descend into chaos.

Hey Buddy, Can You Spare 2 Million for Coffee?

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What to Watch

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  • Trump is once again commenting on economic indicators before their publication, predicting at a visit to an Illinois steel mill that data set for release this morning in Washington will show the U.S. economy is in “terrific” shape. A Bloomberg survey points to a 4.2 percent expansion in the second quarter.
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And finally... Stargazers in Europe, Africa and Asia will witness the longest lunar eclipse this century tonight when the sun, moon and Earth align. Known as a "blood moon," Earth will cast a red shadow on its celestial companion for nearly two hours, from about 8:30 p.m. Central European Time. Mars will appear below the moon at its closest distance to Earth since 2003. Some viewers will also be able to see Jupiter and Venus. Read all about the New Space Age in our Bloomberg Businessweek special issue and on our Hyperdrive website.

Hey Buddy, Can You Spare 2 Million for Coffee?

--With assistance from Kathleen Hunter and Stuart Biggs.

To contact the editor responsible for this story: Michael Winfrey at mwinfrey@bloomberg.net, Caroline Alexander

©2018 Bloomberg L.P.