So they used the real, which was fake, to make the money that was real fake, so they could make real money out of the fake real.
Dr. Seuss would be proud.
How Fake Money Saved Brazil
31–40 of 136 posts
Re: How Fake Money Saved Brazil
#32Wow. Last night I was thinking... if I was a supermarket manager in an inflation-ridden country, how would I save money by not changing price tags everyday? And my answer was to set one of my products as "1 Unit" and just price every other product in multiples of that "Unit". That way I only had to change the price of a single product! And then today I read this! What a coincidence! I never would've thought you could…
During the hyperinflation in the Weimar Republic, grocers dealt with this by changing the organization of their stores. Instead of grouping like-kind items together, they grouped like-priced items, then they would just bump the prices for each aisle.
Re: How Fake Money Saved Brazil
#33Heh. 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 initia…
I would assume that the Brazilian real is named after the Portuguese real which does mean "royal". It is an odd name in a democratic country, though.
Not totally odd considering Brazil started out as an Empire (after independence).
Re: How Fake Money Saved Brazil
#34An extra level of indirection?
Reminded me of the quote: "All problems in computer science can be solved by another level of indirection"
Re: How Fake Money Saved Brazil
#35What are the implications of this for startups? Has a startup ever benefited from using a fake currency? In what ways?
Inflation is a useful tactic to make RPG style games addictive. I worked with someone who built a popular facebook RPG game, and part of what made it popular was that as you became an established player the amount earned per day rose exponentially. As the game became more and more popular the virtual economy started to hyperinflate almost out of control, and the established players started hitting the MySQL integer l…
Good story, reminds me of a favorite quotation: The greatest shortcoming of the human race is our inability to understand the exponential function. — Albert Bartlett
Re: How Fake Money Saved Brazil
#36"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.
I just listened to this story on the radio and I distinctly heard them say "about $2 a month later". This could just be a transcription error, as it was produced for radio first.
Re: How Fake Money Saved Brazil
#37The article doesn't tell lies, but it certainly spices up a lot the story. Some points to clarify:
* The "finance minister who knew nothing about economics" was actually a very respected sociologist, a senator and a very intelligent and skilled politician. He later became known as president Fernando Henrique Cardoso. I.M.O. one of the best 3 presidents this country had.
* What Edmar Bacha, Pedro Malan and others did was to break inflation's inertia/momentum. A lot of people already knew it was necessary; but no one else knew how to do it.
* The article doesn't comment on the strict and cautious monetary policy implemented by Fernando Cardoso. It was as much important as the "fake money" trick.
* Big inflation was a huge tax on the poorest people. Because they were poor, they didn't have the knowledge and means to protect against rising prices. It is because inflation ended that they began consuming more and the country increased their internal markets.
[Edit]Wikipedia has a more comprehensive explanation about what we call here Plano Real : http://en.wikipedia.org/wiki/Plano_real [/Edit]
Re: How Fake Money Saved Brazil
#38Earlier quoted context omitted.
I would assume that the Brazilian real is named after the Portuguese real which does mean "royal". It is an odd name in a democratic country, though.
Not totally odd considering Brazil started out as an Empire (after independence).
Exactly - Brazil's history and relationship with Portugal bear little resemblance to the USA's relationship with the UK. Brazilians in general are, if not proud, then at least amused by their country's royal history, and most major Brazilian cities have streets named after famous royals.
http://en.wikipedia.org/wiki/History_of_the_Empire_of_Brazil...
Re: How Fake Money Saved Brazil
#39"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.…
If you’re a politician, it’s easier to admit your ignorance when your five predecessors who claimed to know what they were doing got brutally mugged by reality.
Re: How Fake Money Saved Brazil
#40Heh. 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 initia…
I would assume that the Brazilian real is named after the Portuguese real which does mean "royal". It is an odd name in a democratic country, though.
You are correct that 'real' means royal but it also means true or authentic (similarly in English).
I think that probably more accurately describes their intention behind the meaning of the name.
When I lived in Brazil in the 1990's, shortly after the currency changed from Cruzeiros to reais, the exchange rate was around 1.5. Today, it's 1.69 - there have been some relatively mild fluctuations since then but it has stayed remarkably stable.