Venezuela on the Brink: Dollarization Could Unlock Economic Growth

Steve Hanke, a professor of applied economics at Johns Hopkins University and self-proclaimed 'Money Doctor', has proposed that Venezuela adopt the US dollar as its official currency to combat hyperinflation. The idea is to remove the risk of the central bank printing money to help the government pay its bills, stoking higher prices.

According to Hanke, taming inflation is key to restoring stability in Venezuela, and all other progress flows from that. He believes that without stable prices, you have nothing, as seen in the case study of Venezuela.

Hanke has a track record of successfully implementing dollarization in countries such as Montenegro, Ecuador, and even an informal advisory role in Zimbabwe. However, his plan for a currency board in the mid-1990s failed to win a majority in the National Assembly, and he is now on his second attempt.

Despite the ambitious plans, the US dollar is already an integral part of the Venezuelan economy due to the collapsing bolivar, which has tanked 78% against the greenback over the past year alone. Most consumers buy virtually everything with dollars, raising the chances of an official currency switch.