wonderful article.. I really love it :) it raises lots of question how this is possible, how many people get impacted.. Anybody did any significant financial loss?? or few people know about this able to take any benefit?? but this is definitely a bold decision and executed well towards result..
How Fake Money Saved Brazil
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Re: How Fake Money Saved Brazil
#42It'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.
The people who are asking for more inflation in the USA are asking for something in the 2% range, or (for those who are truly bold) asking for prices to rise to the level they would be at if inflation had remained in the 2% range for the past five years or so.
Stable money is good, but so is providing people with an incentive to spend and invest, rather than incentives to hoard cash and default on their debts.
Re: How Fake Money Saved Brazil
#43Re: How Fake Money Saved Brazil
#44Hopefully the U.S. won't ever have to deal with this type of issue (out of control inflation). I'm very surprised that inflation hasn't hit the U.S. yet in a big way, but from what I hear that is because China and the U.S. are buying U.S. treasury bonds in a big way.
but the big problem for you guys is: it's expected that China holds something around 1 trillion of the US GDP in treasury bonds. So whenever they feel the US economy isn't trustworthy anymore, selling these will hit like a train.
their growth rate is really high right now, so it's a delicate situation.
Re: How Fake Money Saved Brazil
#45Earlier quoted context omitted.
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.
Which would explain lead investors and other ideas about market signaling. It also explains recent posts on lying on stage and PR efficiency.
On a market crash, all that vanishes is what never actually existed. It's when we wake up from that consensual hallucination.
The catch is that not all people wake up at the same time.
Re: How Fake Money Saved Brazil
#46The 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…
It's also valid to mention that the impeached president also ended up helping out in one way: he froze the saving accounts, since one way to stop inflation is to cut down the buying power of the population.
Re: How Fake Money Saved Brazil
#47Re: How Fake Money Saved Brazil
#48"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 dominate…
> It only works the first time you try it.
Once for every generation. Don't overestimate people's ability to remember.
Besides, if you do it correctly, you only need to do it once.
I don't trust the current favorite candidate to keep doing it right, BTW.
Re: How Fake Money Saved Brazil
#49The 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…
It's also valid to mention that the impeached president also ended up helping out in one way: he froze the saving accounts, since one way to stop inflation is to cut down the buying power of the population.
That is what classic theory says and, in truth, for a brief period of time, inflation receded when Collor (the impeached) froze savings.
However the fact is that it recovered back again to high levels during Collor's mandate.
The cut down in buying power was achieved mostly through fiscal policy, not consumption restriction.
Re: How Fake Money Saved Brazil
#50Hopefully the U.S. won't ever have to deal with this type of issue (out of control inflation). I'm very surprised that inflation hasn't hit the U.S. yet in a big way, but from what I hear that is because China and the U.S. are buying U.S. treasury bonds in a big way.
but the big problem for you guys is: it's expected that China holds something around 1 trillion of the US GDP in treasury bonds. So whenever they feel the US economy isn't trustworthy anymore, selling these will hit like a train. their growth rate is really high right now, so it's a delicate situation.
The problem is not even in selling. They would need someone to sell to. Once China stops buying it will be the beginning of the spiral down in the prices of US bonds.
China is the only emerging market that needs the US economy going and for the American consumer to keep its purchasing power. China can only stop buying when their domestic market gets big enough to sustain the hit that it will eventually come.