4 ms·
> 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]:
by 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 agoThis 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 Pegs don't have a great history; the UK was painfully ejected from the ERM peg (which would be superseded by the Euro) and the 1998 Asian Financial Crisis brought an end to several USD pegs.