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I'm Brazilian. It was not fake money that "saved Brazil". It was reducing / stagnating inflation (temporarily). The fact that they changed the currency even mad

by henvic 5y ago

I'm Brazilian. It was not fake money that "saved Brazil". It was reducing / stagnating inflation (temporarily). The fact that they changed the currency even made poor people who had savings in cash (awful idea!), poorer when they forgot to exchange it. By the way, I've recently posted this https://henvic.dev/posts/bitcoin/ https://henvic.dev/posts/bitcoin/ where in the inflation section I explain how, with time, government tried to change the term inflation (to what is essentially a market basket) so they could... make it even worse and get away with it.

I_Byte 5y ago
But if it wasn’t the fake money that allowed them to stagnate inflation then what did? As someone not very well versed on economics I find this whole thing interesting and would like to get a good picture of what actually happened. Edit - I just opened your website and I think I found a mistake. > Quantum Computers - It won't affect Bitcoin in either a positive or negative manner Bitcoin wallet addresses are based on the Ed25519 elliptic curve, and to my understanding, a quantum computer is able to break the current major forms of public cryptography that we use to date (RSA, EC). A quantum computer can be used to break wallets private keys and steal bitcoins. So a quantum computer would be pretty bad for Bitcoin in its current state.
- mrnotcrazy 5y ago
  Isn't bitcoin still being developed? So can't they just update the cryptography when we get to that point? I guess I don't really how how much bitcoin can change over time
  - I_Byte 5y ago
    Bitcoin is still being developed yes. However, what are the chances that old stagnant wallets, like Satoshi’s, are moved to a new quantum proof wallet? Are we to trust whoever tries to move Satoshi’s fortune 30 years from now when all the old wallets are considered “broken”?
  - schoen 5y ago
    Smaller changes have resulted in hard forks in Bitcoin: https://en.wikipedia.org/wiki/Bitcoin_Cash https://en.wikipedia.org/wiki/Bitcoin_Cash https://en.wikipedia.org/wiki/Bitcoin_Gold https://en.wikipedia.org/wiki/Bitcoin_Gold So yes, it is conceivable to change the fundamental algorithms, but it would certainly be experienced as a fork to the extent that not everyone involved in Bitcoin participated. Also, changing the digital signature algorithm is a bigger and more difficult change than the hashing algorithm in some ways, because you need a strategy to preserve people's existing balances, either one that requires, or one that works without, their active involvement (that is, generating signatures). If there is a feasible attack to forge signatures, then a method that can work without existing Bitcoin owners' involvement will leave them vulnerable to having their holdings stolen by forgeries in the future. You can think of this as somewhat akin to weak RNGs in Bitcoin clients (there have been a couple of these) generating vulnerable private keys -- if legitimate owners knew about the problem before attackers acted, they could act to protect themselves, but if not, not. A feasible signature forgery attack based on a quantum computer would put everyone who owns cryptocurrency wallets based on the vulnerable signatures in a position like that of people using a client with a weak RNG. :-(
  - cakoose 5y ago
    As others have said, changing the Bitcoin protocol can be tricky. Another issue with replacing Ed25519: the best "post-quantum" asymmetric crypto we have so far is a lot less efficient and compact: https://en.wikipedia.org/wiki/Post-quantum_cryptography#Comparison https://en.wikipedia.org/wiki/Post-quantum_cryptography#Comp... That'll probably make it more disruptive than, for example, swapping out SHA-1 for SHA-256.
- bogota 5y ago
  Not going to comment on the validity of your statement. However… if what you said was true the least of our problems would be Bitcoin.
  - I_Byte 5y ago
    You’re right.
- memorysafety 5y ago
  > [...] So a quantum computer would be pretty bad for Bitcoin in its current state. Your reasoning is sound. But it won't be as bad. I'd claim, not much worse than dealing with leap seconds. For 2 reasons: • Post-Quantum Cryptography exists. • The updated (quantum-resistant) Bitcoin will get renamed back to Bitcoin. I agree your parent could use a review. I failed to read them any far.
photojosh 5y ago
> The fact that they changed the currency even made poor people who had savings in cash (awful idea!), poorer when they forgot to exchange it. Given the inflation rate of almost 2000% in 1993 and 1994, if poor people had savings in cash they would very quickly have been worth nothing anyway. (I was a kid in Peru in the 80s-90s when they also had hyperinflation and 3 different currencies.) Reading your article, while I agree with you on the absurdity of Bitcoin... > that day when you wanted to eat lentils, you had to go through the trouble of exchanging potatoes for beans, then beans for rice, then rice for lentils. Potatoes came over from the New World and weren't commonly eaten in Europe until the late 1500s. Lentils are likely from Mesopotamia. Rice wasn't common in Europe until sometime after the 10th century. > Metals, even more so scarce ones, such as silver and gold, quickly emerge in your community as an answer to this demand. No they don't. Metals at first only were used for long-distance trading, ie luxury goods, and it's not until the rise of states that metal currency becomes a common thing (required for taxation and military), and it was devalued constantly at the whim of the rulers anyway. > the United States, the Gold Reserve Act forbid the Treasury and financial institutions from redeeming dollar bills for gold in 1934. It was the last remaining nation with a national currency to uphold the gold standard and one of the fundamental reasons, along with free trade, that made the nation prospered so much – not wars! Huh? You have this precisely backwards. The fundamental reason the US prospered so much was that it was continually expanding its borders much later than other countries (through war!), right up until the 1900s. (See also: every empire in history prospers while it's growing.) The US also had high tariffs for a long time, and it wasn't until the period of the late 1930s and early 1940s when they actually started signing free trade agreements. > The Keynesian party of state-issued inflationary currency might be over within the following decades. If I had to make a bet, I’d say stock from publically traded companies might be the base asset for the upcoming currencies. Publicly traded companies... in which country exactly? The USD has its power and stability because it has the US economy and military behind it. This is my fundamental disagreement with libertarianism: your statement "I want the free market to thrive and the state entirely out of everyone's lives" is a complete paradox. The "free market" is a creation wholly enforced through the power of the state (and ironically always requires a lot of regulation to stay that way). I will gladly change my mind if you can give me an example of where this is not true.
- 5y ago
wahern 5y ago
> It was reducing / stagnating inflation I think the point was that Brazil attempted multiple times to stop inflation. The problem in a cycle of hyperinflation is that it runs away from you--any measure you enact to stabilize prices is immediately out-of-date. Depending on your approach, that leaves various segments of the economy, e.g. consumers, screwed. If you have 100% inflation per month, if you freeze wages (e.g. through state-owned enterprise) one week but market prices continue increasing for another month because of momentum, you can only buy half as much. This creates enormous political pressures and animosities as you allude, which usually results in the government returning to money printing. Ultimately, a government can't dictate prices even temporarily across an entire market, at least not instantaneously amidst hyperinflation. The point of the fake money was to prime market expectations, presumably especially in the supply chain. Because attempts to manage and slow the built-in expectation of inflation of the existing currency repeatedly failed, instead they created an alternative denomination against which people didn't have set expectations, notwithstanding shifting conversion rates. And it apparently worked. This seems notable because the usual fix for hyperinflation is to just adopt a foreign currency. The fact it worked highlights how the problem at hand was fundamentally a matter of managing market sentiment, not some intrinsic quality of a currency or its issuer.
- photojosh 5y ago
  > the usual fix for hyperinflation is to just adopt a foreign currency. Or just peg your own to the USD. From the Wikipedia article another comment posted [0]: > URVs were quoted in cruzeiros reais and its intrinsic value was pegged to three price indices and had a fixed parity of 1-to-1 to the daily U.S. dollar exchange rate. I'm a tad confused as to how they pegged it both to price indices AND the USD exchange rate. The problem with pegging your currency is that you get a disconnect between the official value and the private value. So introducing this new currency which was pegged, and transferring over only once the disconnect was resolved was the stroke of genius. [0] https://en.wikipedia.org/wiki/Unidade_real_de_valor https://en.wikipedia.org/wiki/Unidade_real_de_valor
  - bobthepanda 5y ago
    This peg kind of worked because the government also introduced fiscal and monetary policy to contract the money supply at the same time. If you stick to old habits no one will believe the new currency won't inflate and you get stuck in the same cycle. Pegs don't have a great history; the UK was painfully ejected from the ERM peg (which would be superseded by the Euro) and the 1998 Asian Financial Crisis brought an end to several USD pegs.
kqr 5y ago
Your story of the origin of money is one that anthropologists have been trying to debunk for decades, because there's simply no evidence that any group of people have gone through the timeline "self sufficiency--barter--money". In most money-free societies, you'd simply go to your lentil friend and say, "Hey, I'd like some lentils. Come by any time you want potatoes." (Or more likely, you might let your lentil friend overhear you say to someone else, "Oh, what would I not do for lentils right now?" and the desire for credit is implicit.) Barter only happens between complete strangers, and only under large doses of suspicion. (For what is barter if not trying to pawn off some worthless junk to a less suspecting person in exchange for something cool? It suffers from a perpetual lemon problem and is a business fraught with threat of violence.) It's also important to consider separately money as a numeraire (in which capacity it has been around for a long time in e.g. legal codes) and money as a medium of exchange (in which capacity it's primarily been used imperially, to make the feeding of armies more efficient.) I highly recommend reading about money and value from a historical anthropology perspective. Few things are what they seem in this field.
- henvic 5y ago
  Interesting. Do you suggest any specific material? Thank you in advance.
  - casualrandomcom 5y ago
    Debt - the first 5000 years, by David Graeber You can also find further references there
    - kqr 5y ago
      That is a good one. I'd also like to add (if my memory serves me right) - Savage Money (Christopher Gregory, 1996), - Indians, Settlers, and Slaves in a Frontier Exchange Economy (Daniel Usner, 1992), - Money: the True Story of a Made Up Thing (Jacob Goldstein, 2020), and - Lombard Street (Walter Bagehot, 1873).
matheusmoreira 5y ago
It also made a lot of people richer. > President freezes prices and/or bank accounts People who saw this coming and withdrew their cash from the bank immediately became richer when it happened.
- rglullis 5y ago
  Wrong president and wrong economic plan. (May I ask you how old you are? Seems like you are too young to actually have lived at the time.)
  - matheusmoreira 5y ago
    27. I remember the stories my parents told me about those times, especially the part I quoted about freezing bank accounts.
    - rglullis 5y ago
      Well, your parents should know that it was Collor that confiscated savings accounts, on the 1990 plan (named Plano Collor) which failed to control inflation. Plano Real is from 1994, when Itamar Franco was president, FHC was Finance Minister. No bank accounts were frozen. So, to repeat: wrong president and wrong economic plan. Seems like your sources (your parents) are a bit biased?
      - matheusmoreira 5y ago
        They know. It's probably me who's wrong then. I saw that quote in the article and assumed that's what it was talking about.
jiofih 5y ago
URV is what stagnated inflation in the first place. There seems to be a need by the new Brazilian right to downplay what happened for some reason, don’t get caught into it.
- ulzeraj 5y ago
  For someone to accused me of "having a stance" you seem to be very opinionated on political currents. When you mean "the right" are you referring to economists like https://einvestidor.estadao.com.br/mercado/gustavo-franco-roda-viva/ https://einvestidor.estadao.com.br/mercado/gustavo-franco-ro... who actually played a big role in Plano Real?
  - jiofih 5y ago
    Can you describe that “big role”? He is only a footnote in the story and later wrote a book about it. Revisionism at its finest.
    - ulzeraj 5y ago
      https://pt.wikipedia.org/wiki/Gustavo_Franco https://pt.wikipedia.org/wiki/Gustavo_Franco I have no idea where you are getting your data but it seems to come from a very politically biased source. And before you criticize "the right" I should note that both the stupid sides of the right _and_ the left opposed Plano Real: https://veja.abril.com.br/economia/bolsonaro-e-pt-votaram-contra-o-plano-real-ouca-audios-da-epoca/ https://veja.abril.com.br/economia/bolsonaro-e-pt-votaram-co...
      - jiofih 5y ago
        What am I supposed to look for in that Wikipedia page? Did you read it? I did. The section on the Real is a generic article almost longer than the Real article itself, yet makes zero mentions of any of Franco’s contributions to it. Is that your source for his “big role”? I’m not concerned with politics at the time, but now - he, or his party, whatever, are clearly capitalizing on his minor role to try and make him a stronger political force. At this point there are already three or four books and a movie by/about himself, while downplaying the economists who actually devised and implemented the plan (Árida and Resende). And trying to spin it as a success story for neo-liberalism and privatization instead of the economic policy play it was. The fact you’re out here defending his particular role might give you a hint of whats going on.

by henvic 5y ago

I_Byte 5y ago

But if it wasn’t the fake money that allowed them to stagnate inflation then what did? As someone not very well versed on economics I find this whole thing interesting and would like to get a good picture of what actually happened. Edit - I just opened your website and I think I found a mistake. > Quantum Computers - It won't affect Bitcoin in either a positive or negative manner Bitcoin wallet addresses are based on the Ed25519 elliptic curve, and to my understanding, a quantum computer is able to break the current major forms of public cryptography that we use to date (RSA, EC). A quantum computer can be used to break wallets private keys and steal bitcoins. So a quantum computer would be pretty bad for Bitcoin in its current state.

mrnotcrazy 5y ago
Isn't bitcoin still being developed? So can't they just update the cryptography when we get to that point? I guess I don't really how how much bitcoin can change over time
- I_Byte 5y ago
  Bitcoin is still being developed yes. However, what are the chances that old stagnant wallets, like Satoshi’s, are moved to a new quantum proof wallet? Are we to trust whoever tries to move Satoshi’s fortune 30 years from now when all the old wallets are considered “broken”?
- schoen 5y ago
  Smaller changes have resulted in hard forks in Bitcoin: https://en.wikipedia.org/wiki/Bitcoin_Cash https://en.wikipedia.org/wiki/Bitcoin_Cash https://en.wikipedia.org/wiki/Bitcoin_Gold https://en.wikipedia.org/wiki/Bitcoin_Gold So yes, it is conceivable to change the fundamental algorithms, but it would certainly be experienced as a fork to the extent that not everyone involved in Bitcoin participated. Also, changing the digital signature algorithm is a bigger and more difficult change than the hashing algorithm in some ways, because you need a strategy to preserve people's existing balances, either one that requires, or one that works without, their active involvement (that is, generating signatures). If there is a feasible attack to forge signatures, then a method that can work without existing Bitcoin owners' involvement will leave them vulnerable to having their holdings stolen by forgeries in the future. You can think of this as somewhat akin to weak RNGs in Bitcoin clients (there have been a couple of these) generating vulnerable private keys -- if legitimate owners knew about the problem before attackers acted, they could act to protect themselves, but if not, not. A feasible signature forgery attack based on a quantum computer would put everyone who owns cryptocurrency wallets based on the vulnerable signatures in a position like that of people using a client with a weak RNG. :-(
- cakoose 5y ago
  As others have said, changing the Bitcoin protocol can be tricky. Another issue with replacing Ed25519: the best "post-quantum" asymmetric crypto we have so far is a lot less efficient and compact: https://en.wikipedia.org/wiki/Post-quantum_cryptography#Comparison https://en.wikipedia.org/wiki/Post-quantum_cryptography#Comp... That'll probably make it more disruptive than, for example, swapping out SHA-1 for SHA-256.
bogota 5y ago
Not going to comment on the validity of your statement. However… if what you said was true the least of our problems would be Bitcoin.
- I_Byte 5y ago
  You’re right.
memorysafety 5y ago
> [...] So a quantum computer would be pretty bad for Bitcoin in its current state. Your reasoning is sound. But it won't be as bad. I'd claim, not much worse than dealing with leap seconds. For 2 reasons: • Post-Quantum Cryptography exists. • The updated (quantum-resistant) Bitcoin will get renamed back to Bitcoin. I agree your parent could use a review. I failed to read them any far.

photojosh 5y ago

> The fact that they changed the currency even made poor people who had savings in cash (awful idea!), poorer when they forgot to exchange it. Given the inflation rate of almost 2000% in 1993 and 1994, if poor people had savings in cash they would very quickly have been worth nothing anyway. (I was a kid in Peru in the 80s-90s when they also had hyperinflation and 3 different currencies.) Reading your article, while I agree with you on the absurdity of Bitcoin... > that day when you wanted to eat lentils, you had to go through the trouble of exchanging potatoes for beans, then beans for rice, then rice for lentils. Potatoes came over from the New World and weren't commonly eaten in Europe until the late 1500s. Lentils are likely from Mesopotamia. Rice wasn't common in Europe until sometime after the 10th century. > Metals, even more so scarce ones, such as silver and gold, quickly emerge in your community as an answer to this demand. No they don't. Metals at first only were used for long-distance trading, ie luxury goods, and it's not until the rise of states that metal currency becomes a common thing (required for taxation and military), and it was devalued constantly at the whim of the rulers anyway. > the United States, the Gold Reserve Act forbid the Treasury and financial institutions from redeeming dollar bills for gold in 1934. It was the last remaining nation with a national currency to uphold the gold standard and one of the fundamental reasons, along with free trade, that made the nation prospered so much – not wars! Huh? You have this precisely backwards. The fundamental reason the US prospered so much was that it was continually expanding its borders much later than other countries (through war!), right up until the 1900s. (See also: every empire in history prospers while it's growing.) The US also had high tariffs for a long time, and it wasn't until the period of the late 1930s and early 1940s when they actually started signing free trade agreements. > The Keynesian party of state-issued inflationary currency might be over within the following decades. If I had to make a bet, I’d say stock from publically traded companies might be the base asset for the upcoming currencies. Publicly traded companies... in which country exactly? The USD has its power and stability because it has the US economy and military behind it. This is my fundamental disagreement with libertarianism: your statement "I want the free market to thrive and the state entirely out of everyone's lives" is a complete paradox. The "free market" is a creation wholly enforced through the power of the state (and ironically always requires a lot of regulation to stay that way). I will gladly change my mind if you can give me an example of where this is not true.

5y ago

wahern 5y ago

> It was reducing / stagnating inflation I think the point was that Brazil attempted multiple times to stop inflation. The problem in a cycle of hyperinflation is that it runs away from you--any measure you enact to stabilize prices is immediately out-of-date. Depending on your approach, that leaves various segments of the economy, e.g. consumers, screwed. If you have 100% inflation per month, if you freeze wages (e.g. through state-owned enterprise) one week but market prices continue increasing for another month because of momentum, you can only buy half as much. This creates enormous political pressures and animosities as you allude, which usually results in the government returning to money printing. Ultimately, a government can't dictate prices even temporarily across an entire market, at least not instantaneously amidst hyperinflation. The point of the fake money was to prime market expectations, presumably especially in the supply chain. Because attempts to manage and slow the built-in expectation of inflation of the existing currency repeatedly failed, instead they created an alternative denomination against which people didn't have set expectations, notwithstanding shifting conversion rates. And it apparently worked. This seems notable because the usual fix for hyperinflation is to just adopt a foreign currency. The fact it worked highlights how the problem at hand was fundamentally a matter of managing market sentiment, not some intrinsic quality of a currency or its issuer.

photojosh 5y ago
> the usual fix for hyperinflation is to just adopt a foreign currency. Or just peg your own to the USD. From the Wikipedia article another comment posted [0]: > URVs were quoted in cruzeiros reais and its intrinsic value was pegged to three price indices and had a fixed parity of 1-to-1 to the daily U.S. dollar exchange rate. I'm a tad confused as to how they pegged it both to price indices AND the USD exchange rate. The problem with pegging your currency is that you get a disconnect between the official value and the private value. So introducing this new currency which was pegged, and transferring over only once the disconnect was resolved was the stroke of genius. [0] https://en.wikipedia.org/wiki/Unidade_real_de_valor https://en.wikipedia.org/wiki/Unidade_real_de_valor
- bobthepanda 5y ago
  This peg kind of worked because the government also introduced fiscal and monetary policy to contract the money supply at the same time. If you stick to old habits no one will believe the new currency won't inflate and you get stuck in the same cycle. Pegs don't have a great history; the UK was painfully ejected from the ERM peg (which would be superseded by the Euro) and the 1998 Asian Financial Crisis brought an end to several USD pegs.

kqr 5y ago

Your story of the origin of money is one that anthropologists have been trying to debunk for decades, because there's simply no evidence that any group of people have gone through the timeline "self sufficiency--barter--money". In most money-free societies, you'd simply go to your lentil friend and say, "Hey, I'd like some lentils. Come by any time you want potatoes." (Or more likely, you might let your lentil friend overhear you say to someone else, "Oh, what would I not do for lentils right now?" and the desire for credit is implicit.) Barter only happens between complete strangers, and only under large doses of suspicion. (For what is barter if not trying to pawn off some worthless junk to a less suspecting person in exchange for something cool? It suffers from a perpetual lemon problem and is a business fraught with threat of violence.) It's also important to consider separately money as a numeraire (in which capacity it has been around for a long time in e.g. legal codes) and money as a medium of exchange (in which capacity it's primarily been used imperially, to make the feeding of armies more efficient.) I highly recommend reading about money and value from a historical anthropology perspective. Few things are what they seem in this field.

henvic 5y ago
Interesting. Do you suggest any specific material? Thank you in advance.
- casualrandomcom 5y ago
  Debt - the first 5000 years, by David Graeber You can also find further references there
  - kqr 5y ago
    That is a good one. I'd also like to add (if my memory serves me right) - Savage Money (Christopher Gregory, 1996), - Indians, Settlers, and Slaves in a Frontier Exchange Economy (Daniel Usner, 1992), - Money: the True Story of a Made Up Thing (Jacob Goldstein, 2020), and - Lombard Street (Walter Bagehot, 1873).

matheusmoreira 5y ago

It also made a lot of people richer. > President freezes prices and/or bank accounts People who saw this coming and withdrew their cash from the bank immediately became richer when it happened.

rglullis 5y ago
Wrong president and wrong economic plan. (May I ask you how old you are? Seems like you are too young to actually have lived at the time.)
- matheusmoreira 5y ago
  27. I remember the stories my parents told me about those times, especially the part I quoted about freezing bank accounts.
  - rglullis 5y ago
    Well, your parents should know that it was Collor that confiscated savings accounts, on the 1990 plan (named Plano Collor) which failed to control inflation. Plano Real is from 1994, when Itamar Franco was president, FHC was Finance Minister. No bank accounts were frozen. So, to repeat: wrong president and wrong economic plan. Seems like your sources (your parents) are a bit biased?
    - matheusmoreira 5y ago
      They know. It's probably me who's wrong then. I saw that quote in the article and assumed that's what it was talking about.

jiofih 5y ago

URV is what stagnated inflation in the first place. There seems to be a need by the new Brazilian right to downplay what happened for some reason, don’t get caught into it.

ulzeraj 5y ago
For someone to accused me of "having a stance" you seem to be very opinionated on political currents. When you mean "the right" are you referring to economists like https://einvestidor.estadao.com.br/mercado/gustavo-franco-roda-viva/ https://einvestidor.estadao.com.br/mercado/gustavo-franco-ro... who actually played a big role in Plano Real?
- jiofih 5y ago
  Can you describe that “big role”? He is only a footnote in the story and later wrote a book about it. Revisionism at its finest.
  - ulzeraj 5y ago
    https://pt.wikipedia.org/wiki/Gustavo_Franco https://pt.wikipedia.org/wiki/Gustavo_Franco I have no idea where you are getting your data but it seems to come from a very politically biased source. And before you criticize "the right" I should note that both the stupid sides of the right _and_ the left opposed Plano Real: https://veja.abril.com.br/economia/bolsonaro-e-pt-votaram-contra-o-plano-real-ouca-audios-da-epoca/ https://veja.abril.com.br/economia/bolsonaro-e-pt-votaram-co...
    - jiofih 5y ago
      What am I supposed to look for in that Wikipedia page? Did you read it? I did. The section on the Real is a generic article almost longer than the Real article itself, yet makes zero mentions of any of Franco’s contributions to it. Is that your source for his “big role”? I’m not concerned with politics at the time, but now - he, or his party, whatever, are clearly capitalizing on his minor role to try and make him a stronger political force. At this point there are already three or four books and a movie by/about himself, while downplaying the economists who actually devised and implemented the plan (Árida and Resende). And trying to spin it as a success story for neo-liberalism and privatization instead of the economic policy play it was. The fact you’re out here defending his particular role might give you a hint of whats going on.