Earlier quoted context omitted.
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.
So that sounds like a BOEC, no?
How Fake Money Saved Brazil
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Re: How Fake Money Saved Brazil
#22It'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 exp…
The government could do things like building roads, but they are usually just using that extra paper to pay off their debts, which makes investors demand a higher interest rate to hold the debt, which leads to a vicious cycle. Inflation is caused by the speed of money creation exceeding the speed of creation of real value, and the banking sector is not the only actor in the money creation process.
Re: How Fake Money Saved Brazil
#23Hopefully 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.
Re: How Fake Money Saved Brazil
#24Heh. 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.
Re: How Fake Money Saved Brazil
#25Heh. 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…
you mean somewhere like zimbabwe trying this? It would be particularly tough since they have 1000% monthly inflation or some other insanity.
i don't think zimbabwe has enough control on their economy to pull this off.
Re: How Fake Money Saved Brazil
#26Wow. 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 scale up this technique up to do it to the whole country!
Re: How Fake Money Saved Brazil
#27What 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.
Which would explain lead investors and other ideas about market signaling.
It also explains recent posts on lying on stage and PR efficiency.
Re: How Fake Money Saved Brazil
#28It'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.
True but there is also such a thing as money being too tight which is the current situation in the US.
Re: How Fake Money Saved Brazil
#29"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.
Re: How Fake Money Saved Brazil
#30What 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 limits. The author never expected that would ever be possible, but the exponential rate of inflation plus the exponential rate of new players joining created a giant pyramid scheme.