How Drinking Buddies Saved Brazil’s Economy

My buddy IB Del.icio.us’d this for me…a good read (and there’s a podcast too). First of all, let me say I’m glad something like this could never happen in our country:

The only reason they enter the picture now — or ever — is because in 1992, there happened to be a new finance minister who knew nothing about economics.

So the gist of the story is that these guys came up with a “fake” currency that wasn’t “real” called the URV and weened the country onto it by instilling confidence in it over the country’s “real” currency. I would say that confidence is the only thing that makes a currency real to begin with. There’s really no intrinsic value in a piece of paper–maybe in the metal coins are made of, but not in paper.

I mean, think about it. The only thing that makes a check someone writes you worth anything is your faith in weather or not that person has the resources to deliver on the promise of value that check offers. No real difference in a piece of paper just because a government signed a check instead of a person.

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