Exclusive: Venezuela, sick with hyperinflation, engages the ‘money doctor’ Steve Hanke for a dose of dollarization medicine

Over four decades, Steve Hanke has pursued a worldwide quest to tame the hyperinflation that so frequently ravages developing nations.

His solution: tying their currencies to the U.S. dollar so their governments are no longer free to unleash an avalanche of pesos or sucre to fund their giant overspending, at the expense of their citizens, who pay for the blowout in rocketing bills for rent, medicine and groceries that way outpace their incomes.

The success that the professor of applied economics at Johns Hopkins University has had in advising governments across three continents — whether achieving straight “dollarization” or establishing Hong Kong-like currency boards that fix their monies to the greenback — has won him the title, you might even say the “brand,” of globetrotting “Money Doctor.” Now, the doctor’s making the most important house call of his career.

Venezuela’s National Assembly has just named him Special Adviser on Economic, Monetary, and Energy Affairs, tasking him with curing hyperinflation now running at a 400% annual clip — the worst in the world — as the country tries to rebuild after the ouster of Nicolas Maduro.

Hanke’s fix: a full dollarization law that would abolish the bolivar and the central bank outright.

He told Fortune he puts the odds of passage at 50% to 80% — the best shot that sound money has had in Venezuela since the country rejected the money doctor’s last surgery attempt, three decades ago.

What does a money doctor have to do with oil? The problems are deeply interconnected.

The nation of 29 million boasts arguably the greatest “underground” wealth in Latin America via holding the world’s largest crude oil reserves and immense wealth in minerals from copper to lithium, and still harbors a highly-sophisticated professional class.

Meanwhile, an exiled intelligentsia numbering in the millions stands ready to return and rebuild their stricken homeland.

They won’t return until the oil-driven economy revives and Venezuela is producing just 1.1 million barrels per day, around 1.3% of the world total and one-third the pre-Chavez mark of 3.4 million in 1998.

Shockingly, it’s only a little over 7% more than before Maduro’s exit, not what the administration hoped after the U.S.

Special Forces raid on January 3rd that removed Maduro, the dictator who savaged the economy.

“Taming inflation is the key to restoring stability in Venezuela, and all the other progress flows from that,” Hanke told Fortune .

“Stability isn’t everything, but without stability, which means stable prices, you have nothing.