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…
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.