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The two other stabilization plans amounted to renewed attempts at bringing inflation down from very high levels. It was soon clear that without a thorough reform of the public sector, controlling inflation would be impossible. Both plans introduced a price freeze and eliminated indexation, but there were differences between them, and with the Cruzado Plan. Neither was able to address the public-sector disequilibrium effectively. The objective of the Summer Plan, for instance, was mainly to avoid hyperinflation in an election year.In fact, the public-sector disequilibrium became virtually locked in as a result of the 1988 constitution, which created advantages for various segments of society without indicating how these advantages would be paid for. Moreover, it transferred large portions of the tax revenues from the federal government to state and municipal governments, without requiring them to provide additional public services. With less revenue and more responsibility, the federal accounts experienced growing deficits. In addition, several subsidies were locked into the legislation. These factors and the financial burden of the public debt meant growing problems of public finance.The 1980s ended with high and accelerating inflation and a stagnant economy, which never recovered after the demise of the Cruzado Plan. The public debt was enormous, and the government was required to pay very high interest rates to persuade the public to continue to buy government debt instruments
Just an outside-the-box thought, tossed out there for discussion:Why seize the gold early in the crisis, when you can get plenty of folks to turn it over voluntarily?First, you ban further private purchases/sales of gold "only for the duration of the present emergency." Next, you set the conversion rate of "old dollars" to "new dollars" such that people converting cash take a significant haircut in total purchasing power (bank accounts, 401(k) accounts, IRAs and the like take an even-greater haircut), while folks who sell their gold to the government will take a smaller haircut, based on the pre-EMP price of gold. Add to this by announcing at the outset that the gold haircut will increase significantly after a fairly short period of time, and many people will see plenty of incentive to cash in their gold, all the while laughing at those fools who didn't have their money protected by having gold on hand.Finally, debt conversions from old to new dollars slam creditors with a haircut even deeper than those imposed on bank accounts, 401(k) accounts, IRAs and the like.Add all these together, and you have a massive transfer of wealth from the makers to the takers, all based on manipulating the degree of losses sustained in the conversion of old dollars to new.
Started by Flight-ER-Doc
Started by Carolynp