Friday, October 1, 2010

Politics Everywhere or Markets in Everything? Fake Brazilian Currency Edition

. Friday, October 1, 2010

An interesting Planet Money podcast on Brazil's economic turnaround. How did they reverse decades of economic stagnation, excessive inflation, and severely-underdeveloped markets? Four grad school drinking buddies invented a fake currency. The summary:

For a while, inflation was so high that grocery stores were raising their prices every day. Shoppers would run ahead of the guy changing the price tags, so they could pay the previous day's price.

A series of leaders tried and failed to stop inflation. One guy instituted a price freeze. Another froze peoples' bank accounts. None of it worked.

Then, the government brought in in four economists who had been talking to each other for years about how to fix Brazil's inflation problem. Their solution: Create a currency that doesn't exist. No coins, no bills.


Brazil is now the Western hemisphere's second largest economy (take that, Canada), the world's 8th largest, and is growing at 7% a year.

ht: Modeled Behavior's Twitter.

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Politics Everywhere or Markets in Everything? Fake Brazilian Currency Edition
 
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