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No, no one (edit: no one I knew. I see other comments talking about the use of dollars, I would assume they are talking essentially about rich families. I would
by soneca 7y ago
No, no one (edit: no one I knew. I see other comments talking about the use of dollars, I would assume they are talking essentially about rich families. I would guess that 90% wouldn't have ever saw a US dollar bill) used dollars in hyper-inflation times in Brazil.
Saving accounts would follow inflation, so if you were rich enough to keep your money on the bank, you were relatively safe.
People would rush to quickly spend their salary in the supermarkets the day they got paid. This created the habit of having "purchase of the month". You would buy food and home stuff for the whole month and stock at home.
The supermarkets had employees whose full job was to remark the pricing tags of all products. Some products could have their price adjusted more than once per day.
From time to time the government would freeze the prices, which would give some time of a more sane world. But invariably that policy wouldn't work, and at some point the government had to unfreeze the prices and the inflation would come back harder.
The bank system evolved a lot during this time, as cash was useless, everything had to be bank transactions.
- jfengel 7y agoPrice freezes are pretty common features of hyperinflation scenarios. They aren't necessarily bad in the short term -- as you observed, they can buy breathing room for a while. But if you don't fix the root of the problem in that time, the mismatch of supply and demand works itself out in other ways. The root of the problem varies from scenario to scenario. In the case of Brazil, it was the same oil shock that hit the US so bad in the 1970s. Both countries tried to spend their way out of it, but Brazil couldn't keep up, and its military dictatorship got more and more paranoid. The resulting civil war made it impossible to put the economy on a stable footing until a real government came back in the 80s.
- eru 7y agoHow are price freezes enforced? Does the government go around and check prices for all items everywhere?
- soneca 7y agoMaybe a late response, but essentially, yes. One government made campaigns to get help from the people, that would keep an eye for markets breaking the rule. Here is a wikipedia (in BR-PT) about it: https://pt.wikipedia.org/wiki/Fiscal_do_Sarney https://pt.wikipedia.org/wiki/Fiscal_do_Sarney
- eru 7y agoInteresting. I guess people would just stop selling products that are no longer profitable? (Well, that's why you see empty shelves, I assume?)
- thanatropism 7y agoTo expand, the wealthy would hold money in commodity hedge funds. Presumably the banking system tried to diversify to the max in financial assets directly linked to the real economy. Look at it this way: an inflation index is a low-dimensional approximation of inflation in the economy as a whole. But the coefficients of this approximation are effectively random, even if well substantiated by consumer budget surveys etc. (which they were). As inflation grows you have to consider the risk that the index (or the USD, for that matter) diverges from your current and probable future cost structure. Maybe it underweighs diapers and you're about to have children. Maybe a lot of people are about to have children and renege on their debts, if you're a bank. So the USD is basically the price of all imported goods, but Brazil is a big economy that's not a simple "exports X, imports everything else". During hyperinflation my parents used it for long-term savings -- they had immigrated to Brazil, who knows if they might have to move countries again. But they mostly did big supermarket rounds to last 1 month+ of goods and otherwise trusted banks for medium-term (say, to buy a car) savings.