In the 1980s, Brazil’s inflation was out of control. At one point, inflation hit 80% per month.
This meant that stores often had to change their prices daily.
At that rate, if butter was $1 one day, it would be up to $2 a month later. If the inflation kept going, a year later the butter would be $1,000.
This issue was nothing new for Brazil. In 1950, the government printed money to build a new capital in Brasilia. By the 1980s inflation was a regularly occurring pattern in Brazil.
The way it worked was that a new president would come to power with an economic plan.
He would freeze prices and bank accounts. Then, the people would turn on the president and he would be voted out of office. This pattern would repeat itself.
All this did was cause the people of Brazil to lack trust in their economy.
But in 1992 there was a new finance minister. And he knew nothing about economics. So, he called Edmar Bacha, who was an economist.
Edmar had been studying Brazilian inflation for years.
In college, he and his three friends would discuss ways to prevent inflation, and they came up with a plan.
Their idea was to slow down the creation of money and restore people’s faith in the currency itself.
Edmar said you had to make people believe their money will hold its value.
The economist wanted to create a new currency that was stable and trustworthy. The catch was that the currency wasn’t real. There were no bills or coins.
In other words, Edmar wanted to create fake money.
He called it the Unit of Real Value or UVR. It was a virtual currency.
The way it worked is people would still use the existing currency called cruzeiro. But at stores, everything would be listed in the fake currency, UVRs.
Also, people’s wages would be listed in UVRs as well as taxes. Everything was priced in UVRs.
UVRs were kept stable. They didn’t change. However, what did change is how many cruzeiros each UVR was worth.
For instance, one-day eggs might cost 1 UVR. And 1 UVR would equal 10 cruzeiros.
A month later the eggs would still cost 1 UVR. But that 1 UVR would now equal 20 cruzeiros.
The goal was for people to start thinking about UVRs and not expect prices to always increase.
After a few months, people began to see that prices were stable in UVRs.
Once this occurred, the government declared that the new UVR would become the country’s actual and legitimate currency. It was called the Real.
Everyone was paid in Real and used Real to obtain goods, and this played a huge role in stopping inflation.
Brazil’s economy turned around and the country became a major exporter. Over 20 million people were able to rise out of poverty.
Even though we aren’t in as bad of a situation as Brazil was, our inflation is clearly affecting the economy.
More specifically, inflation is affecting those who are prepared for a disaster.
In fact, here are a few ways those who have prepared for the worst will be impacted by rising inflation.
Gold and Silver:
Inflation causes supply shortages. In particular, there are likely going to be shortages of gold and silver since most people will want to keep precious metals.
If gold and silver are in short supply as inflation continues to go up, prices for these are likely going to keep rising.
If you don’t already have gold and silver don’t wait any longer. This is a critical investment you need to make to protect your wealth during inflation.
The goal is to reduce your exposure to the dollar.
Inflation causes shortages of particular items. We saw this when Covid hit and people started hoarding toilet paper.
So, with inflation rising, this is the time to make sure your stockpile has been replenished from previous use. More supplies will be challenging to find.
Now is the time when warehouse clubs like Costco can be your best friend.
During inflationary times your best bet is to buy things in bulk. You may still pay more for the bulk items but you should have plenty of what you need.
Reduce your finances:
Currently, U.S. inflation is at about 8.5%. The question is, has your income increased by 8.5%? For most people, the answer is no.
If inflation continues you may need to prepare for cutbacks to reduce your expenses.
For instance, this could mean getting rid of your cable bill or not going out to eat for dinner.
Inflation is a man-made disaster.
And preparing for an inflation disaster is much like any other disaster such as a hurricane – you have a little bit of warning and then it will hit hard.
Use these tips to get prepared now, before the inflation gets too much worse.