Brazilian Real Plan
Brazil's Real Plan, introduced on July 1, 1994, ended roughly 30 years of accelerating inflation. Brazil had replaced its currency five times since 1967 (cruzeiro, cruzado, novo cruzado, cruzeiro again, cruzeiro real) and was reaching Argentine-style conditions. The Real Plan used a clever transition mechanism — a 'Unidade Real de Valor' (URV) that was pegged to the dollar and used to reprice contracts for several months before the new real currency was introduced. The URV gave Brazilians time to get comfortable with stable-value accounting before the actual currency swap. Inflation fell from 2,000 percent per year to under 10 percent within two years.
The Real Plan was designed by a team including Fernando Henrique Cardoso, who rode its success to the presidency later in 1994 and served two terms. The key innovation — the URV intermediate unit of account — broke the inflation-expectations spiral without requiring a shock, and has been studied as a model ever since.
06 · Modern Fiat Failures
With gold constraints gone entirely, currency debasement became a recurring feature of emerging-market economics. Argentina replaced its currency five times between 1970 and 1992, each time lopping off zeros and re-starting. Brazil did similar serial redenominations. Yugoslavia, Zimbabwe, and the post-Soviet states produced spectacular hyperinflations. Meanwhile, major central banks learned to hide their monetary expansion in increasingly technical mechanisms — money-supply measures were redefined, reporting requirements were relaxed, and the Federal Reserve stopped publishing M3 entirely in 2006.
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