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How Fake Money Saved Brazil

npr.org

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Re: How Fake Money Saved Brazil

#11

Post by gamble »

frossie wrote: post #2

"He said, 'Well, I've just been named the finance minister. You know I don’t know economics, so please come to meet me in Brasilia tomorrow,' " Bacha recalls. So, three things had to happen: 1. A politician had to admit his ignorance 2. Some bright spark technocrat somewhere had the right solution to a seemingly impossible problem. 3. The right politician asked for help from the right technocrat They're not kidding.…

It only works the first time you try it.

Afterward, everyone with a stake in the country's direction realizes that having a technocrat who shares your views and has personal access to the administration is a great way to influence policy. The money spigot opens, and pretty soon having the 'right' opinion is far better for your career than independence. Survivor bias eventually ensures that the technocracy is dominated by people with the 'right' opinion.

And that's when you'll know that your country has achieved parity with the United States.

Re: How Fake Money Saved Brazil

#12

Post by rbanffy »

noelchurchill wrote: post #4
tkeller wrote: post #3

"Brazil's inflation rate hit 80 percent per month. At that rate, if eggs cost $1 one day, they'll cost $2 a month later." Really.

It's like this article was written by a high schooler.

I am an engineer. I frequently do such approximations ;-)

For most uses, like prices of eggs, it's close enough.

Re: How Fake Money Saved Brazil

#13

Post by KiwiNige »

brc wrote: post #7

It's an interesting story but the frightening thing is the comments of people wondering out loud what's wrong with inflation, or asking for more inflation in the USA. Out of control inflation is a terrifying, society-destroying phenomenon. Stable and prosperous societies rely on stable money values.

A friend of mine who lived in Peru around this time told me that when he got paid he would literally run as fast as he could to change the money to US$ because the longer he took to change it, the less it was worth.

Re: How Fake Money Saved Brazil

#14

Post by rbanffy »

anodari wrote: post #6

It's a 100% real story. I lived in these days. I had to put a feature called "currency change" in my softwares because every year we had to divide by 1000 all values in databases. One major work was to adjust fields sizes because currency values are allways causing data overflow.

> we had to divide by 1000 all values in databases

Those were the days!

It's absolutely impossible for me to say how much I paid for my first car. I know it were 4000 monetary units, but I cannot recall its name nor how much it cost. That's weird.

Re: How Fake Money Saved Brazil

#15

Post by rbanffy »

noahc wrote: post #9

What are the implications of this for startups? Has a startup ever benefited from using a fake currency? In what ways?

It's a very interesting story of out-of-the-box thinking at country-scales. Most impressive indeed.

It's about gaming the market. It really drives the idea that the market is only a shared somewhat consensual hallucination.

Re: How Fake Money Saved Brazil

#16

Post by panacea »

noelchurchill wrote: post #4
tkeller wrote: post #3

"Brazil's inflation rate hit 80 percent per month. At that rate, if eggs cost $1 one day, they'll cost $2 a month later." Really.

It's like this article was written by a high schooler.

I think you need to listen to the audio podcast version before you disparage the style of exposition they use.

The Planet Money folk unashamedly try and explain economic current affairs and stories as simply as possible. It's essentially their self professed raison d'être and they do a good job of it.

Quibbling about the the accuracy of their simplified examples is missing the trees and the forest.

Re: How Fake Money Saved Brazil

#17

Post by csomar »

It's a matter of governement control (assuming your are not connected to the outside world/Internet and don't have, therefore, a real-time currency update).

Let's assume gov. X, printed an additional $3bn. Will prices increase? No, they won't. The gov. can use this money, to do things, like building roads, schools... These expenses has to be considered as investments; if roads are built, industry will benefit and exports will increase lowering the inflation that the gov. had already made.

So the gov. can print as much papers as they want. It's paper in the end. But the ROI of the money they spent/printed, is going to decide if inflation will happen or not (in the future).

If inflation is spiking, it means the gov. lost control over the banking sector and a new currency needs to be made to return confidence to people and companies.

Re: How Fake Money Saved Brazil

#18

Post by tkeller »

panacea wrote: post #16
noelchurchill wrote: post #4

Earlier quoted context omitted.

It's like this article was written by a high schooler.

I think you need to listen to the audio podcast version before you disparage the style of exposition they use. The Planet Money folk unashamedly try and explain economic current affairs and stories as simply as possible. It's essentially their self professed raison d'être and they do a good job of it. Quibbling about the the accuracy of their simplified examples is missing the trees and the forest.

I am going to have to steal that line about the trees and the forest.

Re: How Fake Money Saved Brazil

#20

Post by pavlov »

Heh. I always assumed that the name of the currency, real, has the meaning "royal". Instead, it's literally the same as the English word. What an interesting story.

Have any other governments suffering from high inflation tried this?

Instead of calling it a fictional unit, they could also just use an existing currency like the euro for the transitional period, then switch to a new national currency that has an initial exchange rate of 1:1 against the euro. (I'm picking the euro because it has a fairly neutral image, with over 20 countries using it already.)

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