How 4 Drinking Buddies Saved Brazil

“This is a story about how an economist and his buddies tricked the people of Brazil into saving the country from rampant inflation. They had a crazy, unlikely plan, and it worked. Twenty years ago, Brazil’s inflation rate hit 80 percent per month. At that rate,  if eggs cost $1 one day, they’ll cost $2 a month later. If it keeps up for a year, they’ll cost $1,000.

In practice, this meant stores had to change their prices every day. The guy in the grocery store would walk the aisles putting new price stickers on the food. Shoppers would run ahead of him, so they could buy their food at the previous day’s price. The problem went back to the 1950s, when the government printed money to build a new capital in Brasilia.  By the 1980s, the inflation pattern was in place.

It went something like this:

1. New President comes in with a new plan.
2. President freezes prices and/or bank accounts.
3. President fails.
4. President gets voted out or impeached.
5. Repeat.

The plans succeeded at only one thing: Convincing every Brazilian the government was helpless to control inflation.” – Source (more here, including the story in audio)

2 thoughts on “How 4 Drinking Buddies Saved Brazil

  1. I lived through that, stores wouldn’t, couldn’t sell usually in the mornings before the central bank set the rate for the day. It was crazy. Cruzeiros, novo cruzeiros, all that.

  2. I am a big academic nerd…. with that said. I really am glad someone is talking about the inflation history in Brazil. Because I think this history is influencing Brazil. Really I want to know everything about it…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s