A subtlety about the name is that "real" in Portuguese has two different meanings with two different etymologies: 'real, genuine' from Latin realis (res + -alis) 'pertaining to a thing', and 'royal' from Latin regalis (rex + -alis) 'pertaining to a king'. Portuguese often loses historical intervocalic consonants (the word for consonant itself is "consoante"!), so the words corresponding to English "real" and "regal" are the same in Portuguese.
My current understanding is that the use of this name for the currency was an intentional pun: there was a Portuguese currency with this name (https://en.wikipedia.org/wiki/Portuguese_real) where it was interpreted, and meant to be interpreted, entirely as royal (it was issued only under the Portuguese monarchy), while the URV explicitly intended people to think of the real, genuine interpretation of the name.
If you're in the Bay Area, El Camino Real is literally 'The Royal Road', i.e. the King's Highway (Spanish went through a similar process as Portuguese).
Also, English 'regal' and 'royal' are both cognate to Spanish/Portuguese 'real', borrowed once from Latin and again from French.
We don't just borrow words; on occasion, English has pursued other languages down alleyways to beat them unconscious and rifle their pockets for new vocabulary.
My favourite example of a word that has entered English is "loot", which derives from the Hindi word "lūṭ", and was bought back by members of the British East India Company during the early years of them doing exactly that to India.
There was a long history of using "réis" as the currency (since the 16th century)... which was only replaced by the cruzeiro in the 1940's, then cruzado for a short time, and then finally the temporary URV and the more permanent real... see how they like to play with the words?
Réis is just an inflection for reais (plural of real, meaning royal in this context, as far as I know) as they explain in this article in Portuguese (which seems to freely exchange reais and réis - e.g. it says the currency was called real in 1833, but the printed notes say réis up to the 1942 ones):
I don't know why they changed the historical name of the currency from réis to reais (some old people still say réis, and contos(s), which a long time ago meant a thousand-thousand réis because a thousand réis was 1 réis of the older Portugues money - hence why you'll hear a lot of older people actually use the term merréis (which is a conjunction of mil (thousand) and réis!) but I guess that was just a play of words, like cruzado and cruzeiro which are also similar?!
I always thought the cruzado and cruzeiro were references to the Southern Cross (Cruzeiro do Sul), but apparently at least the former wasn't intended that way because the cruzado was a currency unit in Portugal before the beginning of the Portuguese colonization of Brazil.
Many medieval are called "shields" (ecú, scudo, ...) bacause they are marked with the noble coat of arms of who issues them. The coat of arms is rendered primarily in shields and shields are ore often featured directly in the coins
Yeah I can see the association with the coat of arms - not like I had a great understanding of the currency naming or anything but went to check since I knew "escudo" had to have been in use after the implementation of the republic (which dethroned the royal house) - and in fact they substituted the "real" by the "escudo". It's a fun take having it named directly as "shield", since the ability to control the money production can be seen as a weapon/defence.
Hot 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)
No 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.
Having 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.
I'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.
They 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.
Because 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.
> 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.
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.
> That fact that it worked. That's what it is special about it.
The fact it worked doesn't make it something more than just yet another inflationary government currency.
> It was the fact that URV allowed to de-index the economy.
I'm not sure what it means to "de-index" the economy.
> It made it possible for people to separate the price from the value of things when they were spending.
The value of things in URV is just another price quoted in a different currency. Not sure what magic they performed to convince everyone that these prices would remain stable but that doesn't mean it's anything other than a new currency.
Look at real now. Look at the dollar. They print trillions of them like it's nothing.
> because now their salaries were nominated in URV
I suppose things like this made it easy for the population to get used to the new currency.
> 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.
Naturally. When this happens, the solution is always to create a new currency. The old one cannot be saved without deflationary monetary policy which no country will ever adopt.
I have no idea what exactly convinced the masses that real was viable. Obviously it was going to inflate just like the rest, just at different rates. To me it sounds like the government just forced it on everyone until they got used to thinking in terms of real prices.
> 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.
Not at an emotional level, no. I do understand it at an intellectual level. Just yet another stupid problem created by governments irresponsibly printing money. Why nations even insist on creating these shitcoins is beyond me. I guess they enjoy the ability to screw up the economy.
> The fact it worked doesn't make it something more than just yet another inflationary government currency.
Calm down, Michael Saylor. Not only we are talking about the 90's here in a country that barely had dial-up internet at the time, you are also confusing monetary policy with economic policy.
> I'm not sure what it means to "de-index" the economy.
Because of inflation, most people would only agree to long term contracts (like salaries, rent, utilities) and investments if the prices were adjusted to a previously defined index. Eg., property owners could have in the contract that the rent would increase monthly by 30%, and that this would be revised every 6 months (or year, or whatever). Because of high inflation, renters would take that without even batting an eye. They would also have their salaries indexed as such, so all prices would increase all the time. Basically, inflationary inertia.
This inertia would also affect government contracts, public sector employees and even your tax returns. The government couldn't simply just say "ok, we are not printing any more money", because they had obligations done in the past.
So, it was with URV where they could say "Make all the contracts with prices denominated in URV and forget the cruzeiro-indexed readjustments". This is what means to "de-index" the economy.
> To me it sounds like the government just forced it on everyone until they got used to thinking in terms of real prices.
Well, yes to an extent. But the alternative was much worse: the government was schizophrenically forcing price controls and putting preset price indexes on some sectors. Price controls brought nothing but empty shelves in the supermarkets (because producers would rather not make something than being forced to make it at a loss) and the indexation was only good for the rich people who could invest.
> Just yet another stupid problem created by governments irresponsibly printing money.
Again, you are confusing monetary and economic policy. Like you said, the US is printing money like crazy; but no sane person worries about them getting into hyperinflation. The Eurozone is the same, Japan's has now almost 10 years of Abenomics and still does not even get close to 2% annual inflation.
Take it from someone who is so into crypto and DeFI that I am actually having problems with my accountant to file my taxes this year: It's very easy to try to reduce all complex problems into one single variable, but "governments are stupid because they print money" is not a smart take.
> It probably won't reach insane numbers such as 1000% but it'll certainly become worse than what it was before.
Worse by what metric? You can not look only at inflation when establishing economic policy. An inflation of 25%/year and full employment and economic growth is certainly better than 3%/year with 10% unemployment and zero growth.
Sure we'd like inflation to be as low as possible, but at the same time this should not come at the expense of everything else.
> Am I not supposed to conclude that government money printing was the root cause of all this hardship?
The problem is not in the "money printing" (monetary policy), but in taking whatever resources the government had and deciding to put them into building a city like Brasilia in the middle of nowhere (economic policy).
It wouldn't matter if JK had the resources already and Brasil was flush with resources, or if he managed to convince people to borrow him the money at low interest rates: Brasilia was and is a bad idea. Just like Brazil's eternal dependency on commodity exports and lack of basic infrastructure investment, or its centralization around SP-Rio for economic development, or not doing reforms to get rid of the über-privileged public sector employees, or politician's constant use of the state-owned companies as a way to distribute power to those that stay aligned with them. Just like so many other million things that happen in Brazil and that leads to this mismanagement.
So, to sum up: this "conclusion" you are getting to is a leap of logic. You can not conclude that all and any money printing will lead to eventual catastrophe and rampant inflation. Catastrophes happen when bad economic policies are in place.
> An inflation of 25%/year and full employment and economic growth is certainly better than 3%/year with 10% unemployment and zero growth.
There's absolutely no reason to hold a currency that depreciates 25% every year. Governments may want people to spend it as soon as possible but the fact is there's any number of things people can do that may or may not align with government interests.
This economic growth is presumably fueled by endless consumption by the masses. So what happens when people invest the money instead? Cryptocurrencies are already mainstream. Plenty of stimulus packages ended up getting injected into the cryptocurrency market.
> The problem is not in the "money printing" (monetary policy), but in taking whatever resources the government had and deciding to put them into building a city like Brasilia in the middle of nowhere (economic policy).
I don't see how this invalidates the idea that money printing was the cause. You're essentially saying that when a government has low amount of resources but still wants to spend money the only way it can do that is by printing money.
Money printing was the means to their end: spending money they didn't have. The inflation was basically a tax on everyone who held the currency at the time. The only problem was inflation increased wildly beyond their control.
> It wouldn't matter if JK had the resources already and Brasil was flush with resources, or if he managed to convince people to borrow him the money at low interest rates
That is a meaningless metric. The numeric value of a currency doesn't matter. What matters is how much buying power people have. What's the point of having a super overvalued currency if people don't have jobs and it makes it harder for you to export to other countries?
> There's absolutely no reason to hold a currency that depreciates 25% every year
First, to have one point with this high inflation does not mean that the monetary policy is meant to keep this inflation rate for an extended period of time. So the "every" qualifier from your sentence is a weasel word.
Second and most important: currencies are not supposed to be held. Currencies are supposed to facilitate trading, investment and consequently economic activity. It's not a matter of "what governments want people to do", it's a matter of function. If a currency is so stable or deflationary, people won't use it to trade. If then, what's the point?
(Aside: this is one of the many reasons that I am slowly selling my position in BTC and turning to Ethereum. BTC is failing as a currency and this "store of value" narrative is bogus. ETH is "digital oil": not meant to be a currency, but a required commodity to run the things on their chain, including transactions with actual currencies)
> Plenty of stimulus packages ended up getting injected into the cryptocurrency market.
Yeah, so? Plenty of stimulus checks also ended up putting food on people's tables, paying their rent, paying-off their debt... you know, things to avoid economic collapse.
> Money printing was the means to their end: spending money they didn't have.
> You're essentially saying that when a government has low amount of resources but still wants to spend money the only way it can do that is by printing money.
No. you are going at this backwards. "Money" is just an instrument to facilitate economic activity. What Governments are supposed to do (and then we can have a separate debate on how much) is to manage the economy. The fact that terrible decisions were made (like building a city in the middle of nowhere) and wasting resources on things that were never needed leads to the consequence of the government having to print money.
> Surely the impact would have been mitigated.
Say you have a rich uncle that likes to gamble. One day he tells you he lost $100k one night at the Casino. Another day he is happy, because he made the money back. Some weeks later he goes on to make $200k. Another week, he loses $300k. Later he makes $200k back. Do you measure the "impact" based on the amount of money that he lost (or gained) relative to his wealth or do you just think that he is too stupid to be gambling like that and might risk losing it all one day?
> Second and most important: currencies are not supposed to be held. Currencies are supposed to facilitate trading, investment and consequently economic activity.
I feel like that's a bit contradictory. Holding currency is a significant part of facilitating real economic activity. People putting money into an emergency fund to be ready when for expected repairs, or saving for a major purchase, are most certainly facilitating trading and consumption, on a longer time scale.
It almost makes sense in a back-of-an-envelope economic model: if you had infinite free credit, then "save up and buy in 3 months" is functionally equivalent to "buy now and pay it off in 3 months".
I meant it in the sense of "you are downplaying the significance of it and its difference to a simple currency change because you never experienced decades of failed attempts at fixing hyperinflation."
I didn't say anything to the effect of "you can not comment on it", so save your whining for something else.
As a thought experiment replace URV with [Unit of Minimum Wage] UMW.
"But everything would be listed in URVs, the fake currency. Their wages would be listed in URVs. Taxes were in URVs. All prices were listed in URVs. And URVs were kept stable -- what changed was how many cruzeiros each URV was worth."
'Everything would be listed in UMWs, the fake currency. Their wages would be listed in UMWs. Taxes were in UMWs. All prices were listed in UMWs. And UMWs were kept stable -- what changed was how many dollars each UMW was worth.'
So if the minimum wage was raised, but correspondingly taxes also went up, that would be (if based on a value tax) somewhat of a tax on the rich.
However anyone who's wages didn't rise with the plan, as the middle class in the US currently experiences, is made correspondingly poorer; while the rich still benefit from being able to raise prices.
How the tax is structured and effectively applied greatly affects that.
Taxes on "use", at least without specific exemptions or targets, are usually regressive. Everyone must buy food. Many need to use the roads to do things (like get to work), so gas taxes are regressive and tax non-property-owners who have little real choice or say about their destinations.
If the rich were taxed properly, the effect would also be to tax the poor though all of the rent-seeking the rich have. If rent-seeking, instead, was broken then the poor might be unshackled and able to build wealth.
** Focus on the buying power ** rather than a minimum wage. Provide the basic needs for all to break the rent-seeking slide towards the monopoly of a few and allow communities to thrive.
No pages in other languages, basically prices were in USD due to inflation, but at some point it was forbidden to say that and to actually use dollars to trade, so people wrote у.е. instead. It even made it into some laws. Google translates it as Conventional Unit, but it doesn't really capture euphemistic nature of it though.
There also was redenomination which chopped three zeroes off, I guess you can call it a new currency.
> In September 1993, the Soviet ruble (code: SUR) was replaced with the Russian ruble (code: RUR) at the rate 1 SUR = 1 RUR. In 1998, preceding the financial crisis, the Russian ruble was redenominated with the new code "RUB" and was exchanged at the rate of 1,000 RUR = 1 RUB.
Ditto for Peru. They had the sol [0] (until 1985), then 1000 of those became the inti [1] (1985-91) and then a million of those became the nuevo (new) sol [2] in 1991. But through the whole time, anyone with the means would be using USD if they wanted to hold cash.
Anyone want to dig into why this worked? What stopped the other currency from inflating? All we’re told is that ‘they made everything cost 1 Bitcoin (or one ulv or some shit), and that unit never changed’. Okay. Why?
We saw this phenomenon in Argentina. It's called "inflationary inertia". Basically, the government prints money creating inflation in the first place, so prices go up. But when you stop printing money, like Argentina did in 2016 and even reduced the money supply by 5%, inflation still goes up because everybody expects it to go up so they get ahead of it to avoid losing money, starting with the businessmen. Once the businessmen rise prices, everybody else in the economy does the same, and workers demand a pay raise to match inflation, etc. creating a vicious cycle so you have inflation regardless of the money you print or don't print.
This technique seems to have stopped that cycle by changing the expectations of the people.
It's more fun to print your way out of hyperinflation though. In theory printing money to support economic sectors that are suffering from shortages would lead to excess production and they would have a hard time getting rid of those products, which gives buyers a negotiating advantage which forces the seller to lower their prices despite hyperinflation.
The reason why the real didn't lose value immediately was because for a very long time you could always exchange it for USD 1:1.
So there was no reason to get rid of (i.e. devalue) it, neither for Brazilians nor external investors.
That was achieved via huge dollar reserves and tight money supply. The government had been accumulating USD to point they had ~4x as much of it in reserves than all reais in the economy (M1) when the real was launched.
Brazilians were used to price things in dollars, and saved dollars whenever they could for obvious reasons. They had been forced to adopt new currencies in the past which immediately lost value as you suggested. When they were forced to adopt this new currency which was provably as valuable as the dollar, people understood that it was safe to stop raising prices.
Of course the dollar reserves wouldn't last forever and a few years later that policy gave way to other measures, but it was a decent starting point.
Ah yes, what a good article; The one time the Brazilian Mises Institute admitted a leftist position in politics was right because it fixed a problem right-wing-economy politicians made it worse over the last decade.
One can genuinely laugh at how far they try to push a pro-huge-corporation view in the article, only to say the opposite two paragraphs later, blessing government regulations for fixing the economy.
Austrians like sound money. Backing your currency by a strong global currency that you can't print goes very much in that direction. It's akin to the US going back to the gold standard. I'm not sure what's "leftist" in that.
> they try to push a pro-huge-corporation view in the article, only to say the opposite two paragraphs later,
I didn't see any "pro-huge-corporation view" in the article. From your username I assume you read the original, not a translation. I might be wrong, and you can prove it by quoting the article if you want to have the last word - I'm not interested in continuing this particular thread.
> The one time the Brazilian Mises Institute admitted a leftist position in politics was right because it fixed a problem right-wing-economy politicians made it worse over the last decade.
I see nothing wrong with that. People should like ideas not politicians or institutions. I feel sorry for people who dislike a good action just because they disagree with the person or institution that created it.
Modern economic literature suggests that managing inflation is about managing public expectations.
If businesses expect there to be price increases in the future (inflation), they'll raise their prices today to offset future losses from general price increases. Basically a self-fulfilling cycle.
So by creating a new economic unit with no inflation and managing to convince people that it has no inflation, the public does not raise their "real" prices, thereby fulfilling the expectation of no inflation.
This is a lot harder in practice, but that's just the general theory :)
Inflation is caused by a decreased demand for money.
When in normal times you go up to the grocer and say "can I have three eggs for this coin?" they go "sure, I like coins, that sounds like a fair deal."
Under inflation they go "I don't want your coins" and if all you have are coins, and you need eggs, all you can say is "okay what about 10 of the coins? 100?" and this is how prices go up.
Once people realises inflation is happening, that in and of itself will feed into a negative feedback loop and cause them to demand money less. When people want to get rid of their money as quickly as possible -- and no other people want to take on large amounts of money, liquidity drops and as always when that happens, prices rise.
By visibly pegging the prices of things in a completely virtual measure of value, people's faith in the virtual measure of value was established, causing demand for things that could be exchanged for a fixed amount of the virtual measure of value.
How can a powerful economic entity set a maximum price? By stubbornly offering to sell seemingly infinite quantities at that price, for example. That way, nobody will have any reason to offer it for sale at a higher price.
Why couldn't they do this with the old currency? It depreciated too fast even for the government, due to the lost confidence in it.
Maybe this is all obvious to you and I've been rambling for no good reason.
I'll cross-post instead of guessing. Another comment here:
> 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. [0]
> 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.
The gimmick here was that there was no actual URV currency. No notes or coins, no bank accounts denominated in it. This prevented developing a free-market exchange rate that undermined the abstract value the state was trying to establish.
I could say "I'm only willing to pay 0.50USD for 1URV". If someone takes me up on it, the fulfillment would have to take place in cruzieros-- the transaction becomes "I'm paying 0.50USD to 15 cruzieros" or whatever. This sort of transaction would have more impact on the cruziero's exchange rate than the URV's.
I could imagine trading some sort of "osudeo-URV" derivative product that was basically a prepaid purchase contract, but its value would be heavily affected by cruziero-related risk.
The legislature sets the unit of account that taxes get paid in. Setting that unit and imposing liabilities in it causes demand for the currency. Then you get a cascade effect.
That's why, in strong taxing nations, the currency border is very sharp. The one in Ireland for example between Sterling and the Euro.
They also then set the relative price of everything by how many of their new currency units they issue in exchange for goods and services.
If I tell you that you will get 20 groats for an hour of labour, you'll immediately know the price of everything in groats because you already have a relative map in your mind of how much things cost per unit of work required - or can quickly construct one from your own experiences.
Every new currency has an infinite exchange rate to start with. It doesn't matter how many USD you have you can't get a new currency because they haven't issued it yet.
If you analyse currency changes with these viewpoint tools you'll see how it works.
I’m guessing the actual government had an issue with the prices of everything it wanted to buy also rising due to no market not trusting it with credit.
If the market stopped dumping the currency and started bidding up the bonds. Then the temporary disruption in high interest rates was enough for the government to get ahead on payments.
Just a guess. Would like more source on what happened.
There was a lot more to the Plano Real than just playing with currency units.
This article doesn't take into account that a lot of austerity plans were implemented during that time. Government expenses were cut and a huge wave of privatization began. This included the Vale do Rio Doce mining company and state run communication companies like Telesp.
There were also lots of local regional state banks. Local government used these banks to lend money to themselves. Privatizing those banks kept governors to print money out of tin air from their own regional banks.
Regional banks cannot “print money”, only the central bank. What happened is that the central bank would lend an “over” amount to counteract the daily inflation (which reached 4% at some point), just compounding the inflation. This would also be done to private banks.
This has very little impact on the story though. It was done due to the crazy inflation, and extinguished when the currency started stabilizing. Eliminating the practice alone would have no effect.
There is no alternate theory. The Real really did save the day. There was a lot of cleaning up afterwards but none would have been possible without it. I suggest double checking your sources and pro-privatization stance with care.
Any bank can create money by lending fractionally reserves. The fact that governors used their regional state run banks to lend to themselves to cover for their bad austerity policies was one of the main reasons for the 80s and 90s brazilian inflation problem.
> I suggest double checking your sources and pro-privatization stance with care.
I don't remember saying that I have a pro-privatization stance. I just wrote that they happened. Your sentence suggest that you are inconvenienced by that therefore you are the one has a "stance" on the matter.
They have a fixed reserve ratio, so they can’t “create money” unless more deposits come in. Can you point me to a source supporting that idea that lending from state banks was a main source of inflation?
> where they extend loans as a multiple of the deposits they already hold
> Commercial banks’ ability to create money is constrained by capital
This “throw random links I found” argument strategy is not very good. I strongly recommend reading the stuff before posting as your “source”.
That paper is exactly what I’m talking about - a revisionism attempt by a right-wing professor trying to frame what happened under a completely different light. It presents an hypothesis with little backing, but yeah, now you can point to the paper itself…
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/ 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.
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.
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.
> 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.
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.
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.
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. :-(
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”?
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?
> 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.
> 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.
You are right and i think Thomas Hobbes would agree with you. The free market cannot exist without the sovereign. The sovereign is the deposit of people's will's, of their natural rights(violence and war). Thus there being a sovereign(state/regulations) does not mean people are not free.
Without the sovereign one goes to full on anarchy which paradoxically leads to the supreme evil: violent death. There is no liberty if you are dead.
>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 most extreme thought experiment of this is anarcho-capitalism. You quickly realize that without a security force it boils down to the law of the jungle. Someone else with a gun has better "security" than you and they can make you bend to their will.
With a privatized security force you still run into the problem that paying them doesn't obligate them to protect you. Military coups are common in nation states, it can only get worse if the only reason someone protects you is money, because they can just take your money. Having soldiers believe in their nation and all it's people is much harder to break. Having no loyalty is a problem. What do you do if your enemy simply hires your security force?
What if everything goes well but you simply run out of money?
Similar events happened in the Roman empire from 235 to 284. Armies declared their own leader the emperor. Most of them only ruled for 2 years until they ran out of money or simply died in battle. A lot of the ruling emperors had to devalue their currency to pay for their military.
There was even a case of someone outright buying the position of emperor in 193. [0]
>Julianus ascended the throne after buying it from the Praetorian Guard, who had assassinated his predecessor Pertinax. A civil war ensued in which three rival generals laid claim to the imperial throne. Septimius Severus, commander of the legions in Pannonia and the nearest of the generals to Rome, marched on the capital, gathering support along the way and routing cohorts of the Praetorian Guard Julianus sent to meet him. Abandoned by the Senate and the Praetorian Guard, Julianus was killed by a soldier in the palace and succeeded by Severus.
>When news of the public anger in Rome spread across the Empire, three influential generals, Pescennius Niger in Syria, Septimius Severus in Pannonia, and Clodius Albinus in Britain, each able to muster three legions, rebelled. They refused to accept Julianus' authority as emperor and instead declared themselves emperor.
Ah, yes, the free market. What really happens is that a replacement government will always fill the gap and you only get to choose between a good or bad government, not between government and no government and the only thing that protects you from bad foreign governments is a good domestic government and the ability to kick out bad domestic leaders via democracy.
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.
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.
I think it's a kind of journalism hack (not to be confused with hack journalism!) because people literally have a psychological impetus to gossip (at least, this is what I learned from Joseph Henrichs and Paul Bloom, who seem to explain gossip as helping communities enforce social norms). So if you have some seemingly juicy gossip about a historical figure, maybe people will feel unaccountably grateful to you or unaccountably eager to share with friends?
https://en.wikipedia.org/wiki/Unidade_real_de_valor
https://en.wikipedia.org/wiki/Plano_Real
A subtlety about the name is that "real" in Portuguese has two different meanings with two different etymologies: 'real, genuine' from Latin realis (res + -alis) 'pertaining to a thing', and 'royal' from Latin regalis (rex + -alis) 'pertaining to a king'. Portuguese often loses historical intervocalic consonants (the word for consonant itself is "consoante"!), so the words corresponding to English "real" and "regal" are the same in Portuguese.
https://en.wiktionary.org/wiki/real#Portuguese
My current understanding is that the use of this name for the currency was an intentional pun: there was a Portuguese currency with this name (https://en.wikipedia.org/wiki/Portuguese_real) where it was interpreted, and meant to be interpreted, entirely as royal (it was issued only under the Portuguese monarchy), while the URV explicitly intended people to think of the real, genuine interpretation of the name.