Venezuela abandoning the bolivar and adopting the U.S. dollar would be the biggest currency switch since the advent of the euro, Hanke says

Economist Steve Hanke, known as the "Money Doctor" for his currency advice, is now advising Venezuela to abandon the bolivar and adopt the U.S. dollar. The professor from Johns Hopkins University believes this switch would be the largest currency change since the euro's introduction in 1999.

Hanke argues that full dollarization would eradicate Venezuela's 400% inflation by eliminating the risk of central bank money printing. He acknowledges the initial challenge of losing the central bank as a lender of last resort, but remains confident that the benefits outweigh the risks.

Venezuela has already experienced "spontaneous dollarization" due to the bolivar's collapse. Most consumers now use dollars to purchase goods, and only a few, such as government employees, still use the bolivar.

While the odds may be high, adoption of the dollar faces some obstacles. Hanke notes that the Federal Reserve will take over monetary policy, a concern that even Argentine President Javier Milei, who supported dollarization, abandoned upon taking office. However, Hanke remains optimistic, predicting a surge in foreign investment in Venezuela's oil sector if the currency switch occurs.