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I grew up in Brazil in the 80's. There was hyper inflation, though not quite up to the 1M percent level that Venezuela is facing. (1M percent is a collapse, som
by zorked 8y ago
I grew up in Brazil in the 80's. There was hyper inflation, though not quite up to the 1M percent level that Venezuela is facing. (1M percent is a collapse, something else entirely)
Coping mechanisms:
- Money in saving accounts gets instantly shifted into more stable financial assets so the "returns" are approximately the inflation rate.
- Banks get really good at working fast. We had same-day nation-wide cross-bank settlement of checks.
- "Proxy" stable semi-currencies are used. The government would post several daily indexes like UFIR, TR, which could be used to refer to approximately stable values over a period of time. (one of those indexes, URV, eventually became the currency that is used today.)
- Products don't have prices stamped on them. For example, monthly magazines would have alphabetic codes that could be converted to their actual cost by looking at a table which was updated every few days. (You can see the remains of this system in used book stores where books are sometimes still stamped with small zodiac signs, though the tables are no longer updated)
The basic flow of life is: get paid, _immediately move money to a bank account or you are dead_, get used to the idea that value denominations increment over time. In practice you are constantly thinking in terms of indexes rather than the "real" monetary value.
- toadworrier 8y ago> _immediately move money to a bank account or you are dead_ So the "bank account" you are refering to is (or is a practically automatic gateway too) one of those "more stable financial assets" you mention above. The fact that the banks can be trusted to do that is a sign of some kind of orderliness. I wonder if such an option exists in Venezuela right now.
- zorked 8y agoOh, for sure. Inflation was the result of the government failing to manage its debt. Institutions, businesses and the law still existed. Even the mechanisms for coping with hyperinflation were market innovations (like incredibly fast banking in a gigantic third world country in the 80s, or the financial instruments backing savings accounts). I'm not sure that Venezuela has any of that at the moment.
- flycaliguy 8y agoDo employers offer some sort of dynamic pay system where they can move money to staff with that same sort of urgency?
- zorked 8y ago(This was in the 80s/early 90s so none of the mechanisms are needed anymore) The urgency of payment was handled implicitly by the banks. Salary payment was traditionally done using checks (back in those times, later bank transfer) where one would go personally to the employer's treasury, get a check, and absolutely had to go deposit that check on the same day or lose a non-trivial chunk to inflation. Settlement happened on the same day before midnight. (A system based on physical pieces of paper and signatures moved money faster in the 80's in Brazil than electronic bank transfers in Europe today.) As for deciding what amount should be paid: there were rules to define by how much salaries would grow month after month, compensating for inflation, so it would even be possible to prepare the checks a few days before pay day. Inflation was high but the inflation rate wasn't that unpredictable month-to-month.