The Fake Currency That Saved Brazil’s Economy

Video written by Amy Muller

[MichelleD]

The way Brazil named their succession of currencies has the same energy as naming your essay drafts "Essay final final ACTUAL FINAL DRAFT v5"

[ごま-rv]

My mom visited my grandpa in Brasil in 91. She found a t shirt for sale she liked at a store, and took note of the price. Later in the day she went back to the store with the money to buy it, and the price had gone up. It was absolutely insane back then.

[joaovitormatos]

I did a full semester on the Real plan in college. Economists all around the world still fight amongst themselves on why or how it worked

[pedroff_]

For anyone wondering, yes, real does mean "real" in Portuguese as well. Just pronounced differently (technically also means "royal")

[Tarek]

Just as a correction: that inflation spiral wasn’t caused by Brasília construction. There were around 2-3 country wide development projects with substantial foreign debt that could be tied to that particular inflation crisis, all of that after building Brasília decades earlier

[BernardoDominguesBotelho]

I was a kid in Brazil back then. I couldn't keep up which currency was valid and which one was dead.
In my building there was a guy who came once a week to sell candy and once he came just as my parents met with friends.
I asked my parents for money and they said no, but their friends all gave me a bunch of coins and I went happily to buy candy.
When I got there the guy told me that most of my coins were worthless because they were from previous currencies.
It was soul crushing to think you're gonna get a lot of candy and returning with just a couple of cheap ones. LOL
That was the experience back then in Brazil. Thankfully, things are a LOT better now. Far from great or even good, but way better.

[elliotmarks]

Watching the video twice so I can get that "Smartest HAI Viewer" sticker on the second go

[Skywalker-Skinwalker]

You forgot to mention FHC is a sociologist, so it makes sense that he would focus his efforts on people's behavior and it's impact on the economy. Also, because of how popular the Plano Real was, FHC was elected president after Itamar Franco, and ruled for 2 terms (1994-2002).

[heitorbernardes]

My grandparents still have their freezer. It might come as apocalyptic for foreigners, but back then... You bought AS MUCH meat as you could on the payday, froze it in a full size freezer; and had a. Refrigerator for the rest of stuff

[nicholasguerreiro]

Fun fact: the footage of children marching at 2:41 is from the 1947 Candy Bar War, when children across Canada protested against the government lifting the price cap for chocolate from 5 cents to 8 cents. Thousands of children across the country participated, with 200 storming BC's parliament buildings (they have a cute video about it on their website), another several hundred storming Manitoba's Legislative Assembly, and hundreds marching regularly on the streets of Toronto. The movement only died down when candy companies spread rumors the kids had been influenced by "communist saboteurs." I've studied the strike for years now and have never seen that footage. Where did HAI get it, I wonder?

[ThiagoMacieira]

One of the important contributors to the end of inflation was "de-indexing". Because the previous currencies were so unstable, all contracts had clauses for readjusting the currency values every so often (up to every month) based on one of the many inflation measurement indices (hence, "indexing"). With Plano Real, all of those got replaced by a value nominal value in URV, so once URV became Real, the automatic updates went away.
As one commentator said, "if you always correct with past inflation, future inflation will never be smaller."

[luizgfranca]

Im brazilian, and would like to clarify that the thing which really solved the inflation crisis wasn't the currency change, but the complete reform made to the monetary system of the country with the change.

The transition to the Real wasn't just a coin change, but a reform to the underlying institutions that manage the economy, with defined roles that hamper politicians efforts to destroy it for short term election results.

[matheusGMN]

for those that don't know, this was what was eventually called inertial inflation: basically, the country was having high inflation because a lot of people expected there to be more inflation, and consequently raised their prices to protect themselves, and in the process, creating more inflation, even if nothing actually happened to justify it, that's the thesis that went to make the URV, because the objective was to make business to quit increasing their prices to protect themselves from a inflation that wasn't happening but was.

Also the whole bank things, there was one president that literally stole everyone's bank accounts in an attempt to stop inflation, his logic was that if there was no money circulating in the economy inflation couldn't grow, and he was kinda right but he did bankrupt a lot of people and many suicides were had and some people up to today haven't gotten their money back

[HonestIySam]

One of my favorite case studies from Econ undergrad. I still reference this when I explain to people the value of money

[thenewdarkmatter]

Brazilian economist here. Pegging the whole inflation to the construction of Brasilia is just wrong. Inflation had Its ups and downs trought the middle of the 20th century, the post dictatorship hyperflation accelarated mostly due to the dictatorship's infrastructure programme's in response to the 70's oil shocks.
Also, the currency change wasn't what made the inflation stop. It was maily the indexation to the dollar, something that was helped by IMF loans to the FHC government

[ELM.]

3:43 "messing with people's bank accounts"
Actually president collor froze all the transactions from the "poupança" (kind of a investment account that everyone put their money there). So there were Actually families that from one day to another couldn't use their money for nothing, basically bankruptcy. A lot of people didn't get their money bank

[ViniciusSC]

Just a important correction, the URVs was PART of the plan, not the whole plan.

The government had new fiscal policies in place to add stability to new currency. The biggest problem that lead to inflation back then, was the loose monetary policy and fiscal deficits that were common.

[rsrocha]

I remember going with my father to the bank, and he withdrew from the cashier a bill for 5000 (or something like that) and I was really impressive because it was a lot of money. Than, a few months later I was using a bill with the same value to buy candy. It was crazy times.

[fabioapd]

The fact that Sam butchered the pronunciation of "Cruzeiro" but also misspelled the word to match his mispronunciation makes everything funnier for us Brazilians. I give him a pass, it is a tough word to pronounce for English speakers hahahahaha

[safebox]

"Inflation is either the process by which you construct a bouncy castle or the process by which prices across the economy go up."
Neither of those were my first thought when you said "inflation"...