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Venezuela officially entered into hyperinflation according to the IASB´s definition: 100% cumulative inflation over 3 years.
2007 22.5% inflation
2008 30.9% inflation
2009 26.9% inflation
Cumulative inflation over the last 3 years: 105.0% = hyperinflation. I predicted this in a joking way. Now it actually came about.
Julius and his friends from the ANCYL can now visit a country in hyperinflation and study how to get SA into the same situation by nationalizing the mines like Hugo Chavez did with many parts of the Venezuelan economy :-)
Actually, they can save some taxpayer money and fly over the border to Harare. At State House and the Reserve Bank of Zimbabwe they will be given a perfect plan of what to do :-)
On a serious note:
Venezuelan companies now have to implement the IASB´s IAS 29 Financial Reporting in Hyperinflationary Economies. The IASB encourages them to carry on doing business using the traditional real value destroying Historical Cost Accounting model implementing financial capital maintenance in nominal monetary units (one of the three popular IASB authorized accounting fallacies) and the stable measuring unit assumption (the second of the three popular IASB authorized accounting fallacies) during hyperinflation in this coming year.
At the end of 2010, after their accountants have unknowingly destroyed the real values of all their existing reported constant items (e.g. reported Retained Profits, capital, etc) never maintained with Historical Cost Accounting at the rate of most probably 25% this coming year, the IASB requires them to restate their year end results of what will be left of their very much destroyed companies at the year end Consumer Price Index to give them meaningless results that are suppose to make these results "more useful".
If all Venezuelan companies now immediately start valuing all non-monetary items at their black market parallel rate of exchange for the US Dollar on a daily basis - this rate already operates in Venezuela and is available in the streets on a daily basis - they would stop the destruction of real value in their real economy in its tracks: they would have zero inflation or value destruction in their real economy. It would be the only economy in the world operating like that. They could even grow their real economy this year.
This would give their government and monetary authorities a chance to work out a plan to stop hyperinflation in their money. Dollarization of the economy has already been suggested by one of their top bankers.
I do not think Hugo Chavez would be interested because this 100% secure plan comes from the west.
It may be possible to implement the above plan if he loses in the next election.
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Kindest regards,
Nicolaas Smith
PS I think the ANC´s image will take a severe knock if they finance Julius and his mates with taxpayer money to visit a country that is well known for nationalizing left, right and centre and has just entered into hyperinflation, in search of viable economic policies for South Africa.
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