4 ms·
Brazil hyperinflation case is a great read, both on the instruments that appeared to take advantage of it (and ultimately put more gas on the fire) and also on
by dakial1 5y ago
Brazil hyperinflation case is a great read, both on the instruments that appeared to take advantage of it (and ultimately put more gas on the fire) and also on how Brazil managed to tackle it (it was more a behavior science thing than economics).
https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil https://www.npr.org/sections/money/2010/10/04/130329523/how-...
Interesting things that I remember from that time:
- Hypermarkets made a boom, because people would make big monthly groceries purchases right when they got their salaries, and avoid small frequent purchases (as the money would lose value with time, very quickly)
- Price freezes were very frequent and very ineffective as companies would simply stop producing/selling, generating product shortages everywhere.
- A financial device called Overnight, were you would convert your brazilian currency (had many names) into USD at night and then convert it back to BR on the next day
- Government would try to control USD exchange rates and this simply created a black market that got so widespread that the black market (called "parallel market") had its rates published at newspaper and TV like a normal thing.
- option_greek 5y ago> A financial device called Overnight, were you would convert your brazilian currency (had many names) into USD at night and then convert it back to BR on the next day Who eats the loss from the fluctuations in this case? Any idea how the providers used to hedge against the risk.
- gjvnq 5y agoThe overnight he is talking about is basically an overnight loan banks took in order to balance their books at the end of the day. This reminds me of the repo load system used in the USA but in the overnight system regular people could loan to banks.
- matheusmoreira 5y agoThe value of the old currency approached zero, so we created a new one. This is a pretty standard solution really. This is the fate of all inflationary currencies. What's impressive is how they managed to manipulate the population into believing this time everything would be different. Inflation was not controlled, it continues to this day, only slower. At least we don't have presidents stealing everyone's money anymore. That's the sort of insanity that cryptocurrency was invented to stop.
- bosie 5y agoHow does a cryptocurrency prevent a president from stealing money from the population? Public records of all currency transactions?
- matheusmoreira 5y agoThey depend on the banks to enforce policy. If you get rid of the banks, there's very little they can do. That's what cryptocurrency was supposed to be all about. In practice we ended up with pseudobanks called exchanges running this space. There were people who saw it coming and withdrew their funds before the president ordered accounts frozen. Everyone thought they were insane because interest rates were sky high. They became richer overnight.
- bosie 5y agoSorry, how are banks connected to this and what policy? They are stealing out of a pool of money (taxation), you would still have that pool with cryptocurrency somehow. How do you prevent this from happening?
- matheusmoreira 5y agoIn the 90s, they tried a lot of things in order to control hyperinflation. One of their ideas was to freeze of everyone's bank accounts. They just took away people's money. https://en.wikipedia.org/wiki/Plano_Collor https://en.wikipedia.org/wiki/Plano_Collor If your money is in the bank, it's not really your money.
- forinti 5y agoBrazilian inflation was something different, because it was administered. Prices had regular revisions and salaries had "triggers" and would automatically go up when inflation hit a certain value. So it was guaranteed to just keep going.