And I Thought Payday Loans Were Bad…

I’ve been reading Ricardo Semler’s book Maverick in fits and starts, and yesterday on the train I settled down to get in a few pages. I think I surprised a few people with a quiet “holy shit!” when I hit this passage (p.240, emphasis added):

A new [Brazilian] president, Fernando Collor de Mello, assumed office and appointed a young economist, ZĂ©lia Cardoso de Mello (no relation to the president), as finance minister. She proceeded to test some new theories, including one that held that there was too much money in ciculation, that it belonged to too few people, and that they were doing too much speculating with it. Because of this, her theory went, not enough money was being invested in industry. This was generating inflation and stagnation.

So, she thought, let’s take some of that money and give it to the government (which doesn’t have enough, right?). On a sunny spring day in 1990 she went on television to declare a bank holiday and seize 80 percent of the cash in the country. The government laid hold of savings accounts, checking accounts, certificates of deposit, company funds, the works. Every Brazilian, no matter what his assets, was left with $800 or 20 percent of his holdings, whichever was less. If someone had, say, $1,000 in a checking account, he now could spend $200. The lady said she’d give the money back, corrected for inflation by an official index, in twelve monthly installments, starting in a year and a half.

Chaos doesn’t being to describe the reaction.

Wikipedia says Brazil had inflation “exceeding 2,700% in the period of 1989 to 1990.”

Hit Me With It

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