Talk:Unidade real de valor
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[edit] How is this different from dollarization?
Interesting article. I'm a little unclear, however, how this differs from dollarization, at least in a functional sense. If the URV is equal and fixed to the value of a dollar, isn't this effectively the same as adopting the dollar as the operating currency? (I'm also unclear what happened after, did the new real remain fixed to the dollar? And for how long?). Apologies if I've misunderstood something here.--Gregalton 18:58, 23 July 2007 (UTC)
- This was a "temporary", but "figurative" dollarization. The URV was not legal tender, and served as a comparison to the Cruzeiro Real, so it couldn't really be called dollarization. It's as if they showed a price in Reais next to a price in dollars. When the Real was introduced, its value was derived from the URV (and therefore sans inertial inflation), but after that its exchange rate was not fixed, but a managed float regime which remained relatively stable (today it's at a $1.84, when a few years ago it reached something like $3.30).--Dali-Llama 19:26, 23 July 2007 (UTC)
- Thanks, this is helpful. So it was essentially just introducing new, better reais? And the URV was simply to be a currency that could be trusted (due to a long period of fixing), thereby breaking at least some of the inflation expectations of the population.--Gregalton 02:28, 24 July 2007 (UTC)
- More or less. URV was a temporary reference of the real value of the currency. It was created because the legal tender eroded too fast with inflation, with prices changing every day. People were so "used" to increasing prices that they did it even without doing cost assesment. As a consequence, prices soared at an exponential rate which was not, per se, related to the deterioration of international reserves. Monetary inflation was a consequence of this "psychological" process. URV tried to break with this, and was successfuyl.jggouvea 02:32, 24 July 2007 (UTC)
- Understood - that's what I meant by inflation expectations. In other cases/places, this same process has been carried out by replacing 'old' (bad) currency with 'new' (better) currency, often unsuccessfully. In cases where successful, often with carefully thought out ways to convince the public that the same risks are not inherent, like gold-backing or other features. (New, improved money - with purchasing power!) But the URV's mechanism seems well thought out. Appreciate the help in understanding how this worked and relates to other places/cases.--Gregalton 03:13, 24 July 2007 (UTC)
- More or less. URV was a temporary reference of the real value of the currency. It was created because the legal tender eroded too fast with inflation, with prices changing every day. People were so "used" to increasing prices that they did it even without doing cost assesment. As a consequence, prices soared at an exponential rate which was not, per se, related to the deterioration of international reserves. Monetary inflation was a consequence of this "psychological" process. URV tried to break with this, and was successfuyl.jggouvea 02:32, 24 July 2007 (UTC)
- Thanks, this is helpful. So it was essentially just introducing new, better reais? And the URV was simply to be a currency that could be trusted (due to a long period of fixing), thereby breaking at least some of the inflation expectations of the population.--Gregalton 02:28, 24 July 2007 (UTC)
