The Invention of Money

Discussion in 'Politics, Religion, Social Issues' started by MyDesktopBroke, Jan 10, 2011.

  1. MyDesktopBroke macrumors 6502

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    I was listening to NPR on Saturday and heard a piece about money that kind of gave me a "woooahhh, duuude" stoner moment. Now, I'm not an economist, nor have I ever studied economics, so maybe it's all radio showmanship that drew me in with excellent theater.

    Part of it shows how Brazil printed tons of money that didn't exist to finance a new city, ruined their economy, then tricked everyone into thinking the economy was strong - which made it strong again (kind of like how if people think the stock market will fail, they sell everything - which causes the market to fall?).

    There are people here that are in the know about different economic viewpoints, though. If anyone could give a listen, I'd love to hear what you think about it, and what it means - if anything.

    http://www.thisamericanlife.org/radio-archives/episode/423/the-invention-of-money

    Another disclaimer - this isn't one of those "I think (story that supports my political ideology by discrediting the opposition's) is very interesting" threads. I don't even know what ideology this idea comes down to. I didn't even listen to the third part of the show (about Ben Bernanke). I just want to get some thoughts about this stuff.
     
  2. fivepoint macrumors 65816

    fivepoint

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    #2
  3. MyDesktopBroke, Jan 10, 2011
    Last edited: Jan 10, 2011

    MyDesktopBroke thread starter macrumors 6502

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    I was much more interested in how Brazil fixed the problem in the same way they made it - making more money. They invented the URV and tricked people into thinking the economy was strong, which made it so.

    I guess this won't get much talk because it's not really controversial in any way. I just though it was a great bit of history.
     
  4. fivepoint macrumors 65816

    fivepoint

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    It's an interesting concept but all they really ended up doing is delaying the inevitable. Fiat currencies that aren't backed by hard assets (gold, silver) will always be manipulated and will always end up with massive inflation due to government intrusion. Brazil still has quite high inflation if my memory serves me correctly... over 6% I think. For those that don't know, that means each year you're able to buy 6% less goods for the same money as the year before... which is quite significant. Imagine that over the course of 5 years or more. Even though your salary is the same as it was 5 years ago, you're able to buy far less with it.
     
  5. iJohnHenry macrumors P6

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    Yep, the working man got stiffed when they dropped the Gold Standard. :(
     
  6. Eraserhead macrumors G4

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    Its highly doubtful your salary wouldn't be considerably higher too.
     
  7. iJohnHenry macrumors P6

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    A nice thought, but what about those of us on fixed income??
     
  8. Eraserhead macrumors G4

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    Fair point.
     
  9. iJohnHenry macrumors P6

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    Thank you for not saying "dog food". ;)
     
  10. Sydde macrumors 68020

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    The Brazilian economy seems to be the one least affected by the crash of '08, which may be due to strong regulation of the financial markets. They have a growing middle class, so they must be doing something right (or wrong, depending on your goals). Just search "Brazilian Economy".
     
  11. itcheroni macrumors 6502a

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    I think it has more to do with having a strong commodity based economy rather than one based on made up financial instruments.

    MOPE (Management of Perspective Economics) only works in the short and sometimes medium term. It never works in the long term and never trumps true economic reality in the long term.



    I heard prices were actually getting lower in Brazil. In contrast to the BS economists spew, prices actually go down in a strong economy because everything gets more efficient. This is the difference in perspective on Deflation between the different schools of economic thought.
     
  12. fivepoint macrumors 65816

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    Their growth in the commodity market in the past decade has been astounding. Oil, corn, etc. They have a lot of fundamental market trends working on their behalf. They've done a great job of growing these sectors and are now harvesting (literally) the benefits.
     
  13. itcheroni macrumors 6502a

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    I went to Rio two years ago when the dollar was at a low and I couldn't believe how expensive everything was for a supposedly poor country. It's almost like the U.S. and Brazil have switched places and now we're regressing into a developing nation.
     
  14. 63dot, Jan 11, 2011
    Last edited: Jan 11, 2011

    63dot macrumors 603

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    This all shows that ivory tower theories don't explain people's actions in such a soft science like economics.

    In my econ class in grad school in the 90s, the PhD professor was pretty much correcting a lot of what was considered "standard" practice in macroeconomics. The Fed in the US was supposed to be stable and level-headed and NASDAQ (led by Bernie Madoff) was a trusted institution. He pointed out that economists who were on the inside had little incentive to challenge the big institutions. And yes, every financial guru trusted Arthur Andersen. But what economist would attack the big 8 when they were such good employers of business/econ/accounting/finance students? Flash forward a decade and a half and now we have a different picture.

    You can measure stuff on supply and demand, but other issues like unemployment rate (and trying to count those who gave up looking), and consumer confidence (and trying to weed out those who say they have no money to spend but are really hoarding), are not easy things to measure.

    Brazil seems to be going against economic common sense, but it first has to be established just what that common sense is.


    If what Brazil did, and the so-called "all knowing" Federal Reserve says is not good on Brazil's part, going to try and control the barter system that is now happening in recession hit America? Are cash strapped police departments going to continue their fruitless "war on drugs"? And once considered fringe elements, Green party members and Libertarian Party members are starting to get their say more now that the old two party system/Wall Street/Federal Reserve does not seem to carry all the answers.

    The wild extremes of the GOP catering to the rich and the Democrats spending on social programs without trying to first root out duplicity and waste are starting to fade. Traditional right wing rhetoric of a trickle down or left wing rhetoric of an anti-business/corporate mentality will not help the USA get out of the recession any sooner.

    Let's look at Brazil and what they did right. Let's look at the barter system and see how people can work together. And let's look at economists outside of the mainstream, and political parties outside the two party system in the USA to offer dialogue at the table. And yes, if it takes a Glenn Beck or Michael Moore to have people on the right and left start looking into alternatives, then so be it.

    What we had with Reagan was a president with close ties to Wall Street and the Fed who built up an economy only to see it fall during his VPs term as president. Clinton had a similarly strong ties to Wall Street and the Fed and saw an economy rise only to see it decline in about the same time period Reagan saw his growth decline. What Brazil offers is a different model than the ultimately failed models of Reagan and Clinton, and even if the world learns a little about economic recovery and can apply it for a more long term answer, then that will be a huge discovery for us all. Maybe Brazil is doing something better than what Reagan and/or Clinton did. Maybe Brazil is doing something more unstable. Whatever it is, we have to look at that country and try and learn and take out useful ideas that were invented and throw out the bad ideas of their economic recovery.

    I have a feeling that if their recovery was completely artificial, they couldn't have seen the growth they have in so many sectors. Both Democrats and Republicans will be dissed in the states when and if Brazil's model works (longer than the 4-5 year run of Reagan and Clinton) and the two American parties "didn't think of it first". ;)
     
  15. itcheroni, Jan 16, 2011
    Last edited: Jan 16, 2011

    itcheroni macrumors 6502a

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    I just listened to the episode the OP was talking about. I had originally heard all these pieces separately on various episodes of the Planet Money podcast. What is funny is I wrote an e-mail to Planet Money, something I've never done, asking them about the first piece of Brazil compared to the last piece on the Fed making $1.25 trillion to buy bonds. I commented that it was funny that what the reporter so clearly sees as detrimental to Brazil, printing money, is seen through a different lens when the federal reserve is doing it now- I believe the word "magical" was used. I rack it up to hubris, the same hubris that afflicts all great empires. And most people still don't understand the appeal of owning gold during this time in history. The piece on Brazil mentioned a guy who had nightmares about his money sitting around losing purchasing power. That's what gold is for, storing purchasing power, not getting rich quick. If we wanted to go back to the gold system, gold would need to be pegged at 8k per ounce.
     

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