How Fake Money Saved Brazil • Hacker News Board

Re: How Fake Money Saved Brazil

#111

Post by ArturSoler » Tue, Oct 05, 2010, 2:02 PM UTC

jonknee wrote: post #108

Experimentalist wrote: post #91

Earlier quoted context omitted.

We already had way too much government investment encouragement with artificially low interest rates for years. People do not need more incentives to spend. btw, we still have rockbottom low interest rates. What happened in this crisis is over-investment and over-supply. That waste needs to be rolled back and we need to get back to a balanced budget - which is what Brazil did - it's not even mentioned in that article…

> People are NOT hoarding cash. Ridiculous. The numbers disagree with you: http://www.bea.gov/briefrm/saving.htm

And this is indeed a good thing.

Capital that was malinvested during the boom period has to be accumulated again to return to previous productivity levels. The method to accumulate capital is saving.

Re: How Fake Money Saved Brazil

#112

Post by forinti » Tue, Oct 05, 2010, 2:09 PM UTC

diego_moita wrote: post #37

The 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…

The most important aspect of the plan was that all the triggers that were put in place to automatically raise prices, tariffs, and salaries were turned off.

These were the biggest producers of inflation and were what made Brazilian inflation unique. It was a sort of administrative inflation.

Re: How Fake Money Saved Brazil

#113

Post by ricardo_sdl » Tue, Oct 05, 2010, 2:16 PM UTC

rlander wrote: post #75

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.…

And it definitely felt like one. You have no idea how much the country changed (for the better) because of this improbable miracle. Nobody believed it would work because the whole country had lost faith in "magical" economic reforms like the one before it, the Collor Plan. Imagine you wake up one day and all of your bank accounts are frozen - that's what happened to my parents (and most of the population) on March 16…

My father lost some money because of Collor Plan too. I'm 25 and is hard to imagine how my parents went through those rough times.

Re: How Fake Money Saved Brazil

#114

Post by devmonk » Tue, Oct 05, 2010, 2:25 PM UTC

asmithmd1 wrote: post #96

cbernini wrote: post #44

Earlier quoted context omitted.

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 Fed bought up 1 trillion in mortgage debt and no one blinked -- that is why mortgage rates are 4%. If China started dumping their T bills the Fed would just buy them up. It wouldn't hit like a train -- more like a tricycle.

But the U.S. can't do that forever without inflation, because they either have to cut spending (which wouldn't happen due to fears it might affect unemployment and the economy), raise taxes (same deal, and is even more of a political mess), or print money. Printing money in bulk over and over leads to inflation. Inflation causes people to slow spending.

Re: How Fake Money Saved Brazil

#115

Post by hnal943 » Tue, Oct 05, 2010, 2:33 PM UTC

dsspence wrote: post #68

TGJ wrote: post #62

Earlier quoted context omitted.

The New Deal never worked but oddly enough, it's trying to happen again. Bad deals happen over and over. The ones that work, the ones that require effort only happen once. http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonge...

What part of the New Deal is 'oddly' happening again? $300 billion of the $862 billion dollar stimulus were either tax cuts or credits. Here is a link seemingly debunking that guise of an academic study: http://www.openleft.com/showDiary.do?diaryId=10644 Fair warning it might cause cognitive dissonance.

..."refundable" credits to those who don't pay taxes. In other words, welfare.

Re: How Fake Money Saved Brazil

#116

Post by ricardo_sdl » Tue, Oct 05, 2010, 2:46 PM UTC

dstein wrote: post #30

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?

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…

This reminds me of this: http://www.devmaster.net/articles/mmorpg-postmortem/part4.ph... Because of a bug in the game, everybody could duplicate items with no cost and everybody became extremely rich in the game.

Re: How Fake Money Saved Brazil

#117

Post by known » Tue, Oct 05, 2010, 2:48 PM UTC

Will this trick work in America?

Re: How Fake Money Saved Brazil

#118

Post by enko » Tue, Oct 05, 2010, 2:50 PM UTC

wallflower wrote: post #29

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.

Rule of 72 Divide 72 by the periodic interest rate to find the number of periods to double the money. http://en.wikipedia.org/wiki/Rule_of_72

Funny you mention that "rule". It's not very accurate, and becomes less accurate the higher the inflation/interest rate goes.

I just worked it out; at 80% inflation it would take 1.18 months to double, not 0.9 like the rule of 72 would suggest. That's a fair difference, and certainly more in line with intuitive expectation.

Not that the OP isn't being overly finicky. Both round to 1, and only one significant digit was given anyway. But still.

Re: How Fake Money Saved Brazil

#119

Post by Symmetry » Tue, Oct 05, 2010, 4:33 PM UTC

jonknee wrote: post #108

Experimentalist wrote: post #91

Earlier quoted context omitted.

We already had way too much government investment encouragement with artificially low interest rates for years. People do not need more incentives to spend. btw, we still have rockbottom low interest rates. What happened in this crisis is over-investment and over-supply. That waste needs to be rolled back and we need to get back to a balanced budget - which is what Brazil did - it's not even mentioned in that article…

> People are NOT hoarding cash. Ridiculous. The numbers disagree with you: http://www.bea.gov/briefrm/saving.htm

That graph doesn't show that people are hoarding cash, it shows that they are saving. If they're investing in stocks the money doesn't go out of circulation and if they put it in a bank it mostly doesn't go out of circulation. All of which isn't to say that there are people or institutions hoarding money, only that your graph is irrelevant to that.

Re: How Fake Money Saved Brazil

#120

Post by noelchurchill » Tue, Oct 05, 2010, 5:28 PM UTC

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.

You're welcome for the layup opportunity to score some easy points.

This serves as a good reminder that you will be swiftly punished on HN for making a comment that doesn't add value.

In my defense, I didn't miss the trees and the forest. I was merely pointing out that the story was dumbed down, as you put it, "as simply as possible." And replying to a post pointing out their overly simplified math. Seriously, implying that 1 x 1.8 = 2 isn't even back-of-the-envelop close.

However I did enjoy learning about how the Real came to be.