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This has always been my favorite event in economics. What they essentially managed was collective emotions of the masses. Once they successfully convinced the
by kumarvvr 5y ago
This has always been my favorite event in economics.
What they essentially managed was collective emotions of the masses.
Once they successfully convinced the masses that everything was ok, all did go well.
- aphextron 5y ago>"What they essentially managed was collective emotions of the masses." i.e. economics
- joshspankit 5y agoHot take: Very similar to the 2008 recession. People stopped spending because they were worried about the recession, not the other way around. (Yes: more complicated than that, I’m only talking about the psychological effects to those people who were affected)
- matheusmoreira 5y agoThey just created a new currency. Seems like a pretty standard solution when the previous one becomes hopelessly inflated to the point of uselessness. My parents remember at least 3 different currencies being used throughout their lives.
- rglullis 5y agoYour first sentence contradicts the second.
- matheusmoreira 5y agoHow so?
- rglullis 5y agoBecause you can not dismiss the URV (and the Plano Real at large) as "just creating another currency". If URV was "just another currency", then it would have failed like all the previous attempts have. But Plano Real actually controlled inflation, de-indexed the economy and public debt, etc.
- matheusmoreira 5y agohttps://en.wikipedia.org/wiki/Unidade_real_de_valor https://en.wikipedia.org/wiki/Unidade_real_de_valor > Its main purpose was to establish a parallel currency to the cruzeiro real, free from the effects of inertial inflation on the latter, which exceeded 1,200% per year prior to the implementation of the new currency, the real. Seems like they didn't create one but two new currencies: URV and the real we use today. There were exchange rates and everything. Not sure what's so special about it.
- rglullis 5y ago> There were exchange rates and everything. So did many other economic plans and countries that tried to control inflation by keeping an artificial peg to the USD. That also didn't work. > Not sure what's so special about it. That fact that it worked. That's what it is special about it. It wasn't "just the creation of another currency". It was the fact that URV allowed to de-index the economy. It made it possible for people to separate the price from the value of things when they were spending. It made it possible for people to stop rushing to gas station or the groceries as soon as they got their paycheck, because now their salaries were nominated in URV and they didn't have to spend as possible before its value corroded. It wasn't URV by itself that solved the issue of hyperinflation in Brazil. Inflation would come back if FHC didn't continue with the budget-balancing reforms, the privatizations, the increased taxes. But it was URV that gave people some faith that things could be stable, which is an absolute requirement. If people didn't believe that the money in their pockets will hold their value, they will simply spend all of it as fast as possible, which leads to... inflation. This is why I asked about your age in the other thread. You never lived in hyperinflation, so you simply can not fathom what it was like.
- ulzeraj 5y agoNo it wasn't that simple as the article suggest. By the time there was a huge inflation because states had their own state banks that allowed them to basically print money by lending to themselves. There was also a huge wave of privatization and government expense cuts.
- kqr 5y agoHaving their own state banks and printing money to lend to themselves is how virtually every sovereign currency works today, so I don't find that particular aspect very convincing as the cause of inflation.
- ulzeraj 5y agoI've didn't meant a federal bank but a regional bank. It is like California having their own state controlled bank called "Development Bank of California" where they lend themselves as much dollars as they want regardless of the FED policy.