qazwart:
There’s a very interesting story about hyperinflation in Brazil and how they finally got rid of it by creating a fake currency.
Brazil built a new capital Brasilia in the 1950s and financed it with government debt. That started an inflationary spiral that resulted in hyper inflation. In the supermarkets, people use to race the guy who was raising the prices.
One of the problems Brazil faced was the fact that people assumed that inflation was the natural state of things, and that prices would simply keep increasing. Several things were tried to stop the hyper inflation, but they all failed.
In 1994, Brazil made a fake currency called the URV. All prices were in URVs. All bank accounts were in URVs. All taxes were in URV. And, everyone got paid in URVs…
There were no URVs in circulation though. Instead, Brazilians continued to use their old currency, the reis. When you made a payment or got paid, there would be a table that told you how many reis were equal to one URV for that day, and then you got paid in reis. The reis would still drop in value, but people got use to price stability in URVs.
Then, Brazil switched its currency from the reis to the real, and defined one URV as equal to one real. Since Brazilians were use to URVs and were use to price stability, inflation was no longer an issue.
I visited Brazil during the hyperinflation. The cruzeiro was dropping about 10% per week, against the US Dollar. I still remember a lavish dinner I had in a great Sao Paulo restaurant-the bill for 4 people (meals, drinks, desserts) came to 189,000 Brazilain cruzeiros-which was worth $83.54!
Lumpy
January 28, 2011, 11:23pm
22
You probably paid more for the notes as novelties than their actual exchange rate.
