In late 2013, Venezuela's inflation rates increased even higher, to 54.3%,
As of January 2014, the official exchange rate is 1 USD to 6.3 VEF while the black market exchange rate is over ten times higher since the actual value of the bolívar is overvalued for Venezuelan businesses.
The last report of shortages in Venezuela showed that 22.4% of necessary goods are not in stock
The nation has erupted in protests and opposition leaders have been put in prison as the nation struggles to address its economic problems.
My question is regarding the original cause of the inflation:
Venezuela has had runaway inflation since the economy rebounded following the oil glut in the 1980's. According to Wikipedia:
As the economy contracted in the 1980s, inflation levels (consumer price inflation) fell, remaining between 6 and 12% from 1982 to 1986. In the late 80s and early 90s inflation rose to around 30 - 40% annually, with a 1989 peak of 84%. The mid-1990s saw annual rates of 50-60% (1993 to 1997) with an exceptional peak in 1996 at 99.88%. Subsequently inflation has remained in a range of around 15% to 30%
The inflation rate before this was obviously too high, if it "fell to 6-12%". Why was it too high? What about the policies of the late 1980's caused the government to lose control of the inflation rate. (In 1994, there was a banking crises and half the banks in the country went bankrupt.)
I found this Wikipedia page on Chronic Inflation, which was once known as "Latin Inflation." Chronic Inflation is decades long periods of high inflation caused by paper currencies. After time higher inflation becomes an expectation and is very difficult to dislodge, as well it creates other negative effects to the economy that can worsen inflation. Before WWII, paper currencies were only used by nations experiencing wars, so this effect was not understood. Those currencies would collapse under hyperinflation, but that is not always the effect.