The Fake Currency that Saved a Nation

The Fake Currency That Saved a Nation http://www.ﬂickr.com/photos/11118948@N00/173169697/

Marcelo Somers Media Product Manager Sabre Holdings @marcelosomers

why am i here?

that’s actually my cousin...

Fake Money Saved Brazil...

in the late 80s, Brazil had a bit of a problem

the inﬂation rate hit 80%... per month! that means if eggs cost $1, they’ll cost $2 a month later. a year later, they’ll cost $1,000

h fu n... n’t m uc ngw as y sho ppi gro cer • A freezer became your best friend • Prices changed throughout the day • Products would disappear

there were a few perks...

3000 2250 Consumer Price Index 1500 750 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 http://www.indexmundi.com/brazil/inﬂation_rate_(consumer_prices).html

3000 2250 h uh? Consumer Price Index 1500 750 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 http://www.indexmundi.com/brazil/inﬂation_rate_(consumer_prices).html

Attempt #1 - 1986 the cruzado plan - General price freeze - Wage readjustment and freeze - Readjustment and freeze on rents and mortgage payments - A ban on indexation - A freeze on the exchange rate

Attempt #1 - 1986 the cruzado plan - General price freeze Fa i - Wage readjustment and freeze le d - Readjustment and freeze on rents and mortgage payments - A ban on indexation - A freeze on the exchange rate

Attempt #2 - 1987 the bresser plan

Fa i le Attempt #2 - 1987 the bresser plan d

Attempt #3 - 1989 the summer plan

Fa i le the summer plan d Attempt #3 - 1989

Attempt #4 - 1990 the collor de mello plan

Attempt #4 - 1990 the collor de mello plan this one actually sounded pretty good... - Removed restrictions on free enterprise - Increased competition - Privatized public enterprises - Boosted productivity

Attempt #4 - 1990 the collor de mello plan Fa i le d this one actually sounded pretty good... - Removed restrictions on free enterprise - Increased competition - Privatized public enterprises - Boosted productivity

lesson learned... you can’t centrally plan an economy

Ma rke ts! urr ay F ree H http://3.bp.blogspot.com/_x1Xe0kyzOQs/TEZsxx1XYoI/AAAAAAAAAaQ/6qFENwk98FA/s1600/simex3a.jpg

what can a government control?

what can a fiscal policy monetary policy government control?

Quick Economics 101 Reminder... Monetary Policy: the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest to attain a set of objectives oriented towards the growth and stability of the economy. - Open Market Operations - Discount Rate - Reserve Requirements Fiscal Policy: the use of government expenditure and revenue collection to influence the economy.

Plano Real 4 drinking buddies who created a fake currency and saved an economy.

hardly your average drinking buddies... Gustavo Franco - PhD Economics, Harvard Pérsia Arida - MIT Economics Edmar Bacha - First Brazilian to receive a PhD in Economics @ Harvard Pedro Malan - PhD Berkley

‘‘ You have to slow down the creation of money. But, just as important, you have to stabilize people's faith in money itself. People have to be tricked into thinking money will hold its value.” http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil

Unidade Real de Valor (Real Value Unit) rr en cy fa ke cu t he

July 1, 1994

modern-day Brazil

Fernando Henrique Cardoso President, 1995 - 2003 Privatization of enterprises ‘‘ The results indicate that these companies became more efficient after privatization. In particular there was an increase in profitability and operational efficiency. Apparently, the loss of financial support from the state has a major impact on the financial structure of companies, we observed an increase of current liquidity and a reduction in long-term debt. ” http://www.scielo.br/scielo.php?pid=S0034-71402005000200001&script=sci_arttext

embraer modern globality

Luiz Inácio Lula da Silva President, 2003 - 2010 http://en.wikipedia.org/wiki/File:Lula_-_foto_oﬁcial05012007_edit.jpg

Bolsa Familía (family allowance)

Bolsa Familía provides a monthly allowance to families whose children are vaccinated and attend school

Bolsa income below R$140/month: For families with per-capita Familía R$22 ($12) per child attending school (max 3) + R$68 for families with per-capita income below R$68/ month

Poverty 27.7% decline during Lula’s first term

Bolsa Familía n... does it really work? o p inio my

2010 Elections vs Dilma Rousseﬀ José Serra Worker’s Party (PT) Brazilian Social Democracy The Results

Final thoughts on Brazil... • Censorship • Communism/Marxism • De-Privatizing Companies

Final thoughts on Brazil... • Amazing investment growth • Taxation Meter (increase in taxes 3 months ahead)

Can Brazil continue its amazing success?

One more thing...

the forever recession

questions?

thanks! @marcelosomers blog.marcelosomers.com slideshare.net/msomers

The Fake Currency that Saved a Nation

by Marcelo Somers on Nov 02, 2010

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