Becoming unbanked part 2: A matter of survivability

Vini Barbosa

This article is written by a community contributor and does not represent the views of the Nano Foundation.

In part one of ‘Becoming Unbanked’, I outlined what ‘unbanking myself’ is and explained that the search for self-sovereignty is my main reason for trying to achieve it.  

This is the second post in a series being published on the Nano Foundation blog.

As promised, I'm going to teach you some history here, so pull up your chair, prepare a cup of tea, coffee, wine or beer and join me on a quick trip down memory lane.

Hyperinflation in Brazil and a monetary survival lesson

The history of Brazil is marked by prematurely interrupted presidential terms, caused by crises, resignations and political coups – in addition to constant and ongoing corruption, mismanagement of resources and violations of basic individual rights.

The quest for sovereignty here is a matter of survival – and I'm sure the same applies in dozens of other countries.

Rising consumer prices (commonly called price inflation) have also left their mark as a consequence of this chaotic reality.

In the 1940s, there was a 215.6% increase in the official price indexes, even with the artificial freezing of the exchange rate in 1945 that offered a brief period of stabilisation. Unsurprisingly, as a result of these artificial control measures, the 1950s were marked by even greater increases, with 460% “inflation” in the ten-year period. 1964 alone saw a record 90% inflation. 

Inflation Brazil   Vb Research Chart

Some monetary control policies and a reduction in public spending managed to temporarily stabilise the currency's debasement. The government at the time took the plaudits for this, despite knowing that these measures were only a short term fix for a bigger problem, which if left unaddressed, would cause dire future consequences. These consequences came to pass in the 1980s.

From 1981 to 1982 annual “inflation” reached 100%; with the increase being repeated in the following two years, accumulating a 200% increase in prices between 1983 and 1985. The end of 1989 was marked by a hyper-inflation rate of 1,800%, which would get even worse a few years later.

On March 16, 1990, Fernando Collor de Mello became president of Brazil and instituted the “Plano Brasil Novo”, which became known as “Plano Collor”. This, alongside other measures, was responsible for the biggest scar in the country's monetary history.

Under the leadership of economist Zélia Cardoso de Mello in the Ministry of Economy, Finance and Planning, Collor's government decreed the freezing freezing of bank accounts, savings accounts and investments in various financial products of all Brazilians whose balance exceeded NCz$ 50,000 – the currency at the time, known as the “Cruzado Novo”.

To put this number into context, the monthly minimum wage at this time was NCz$ 3.674,06. So every account or investment application containing just over a year’s minimum salary was confiscated. Today, NCz$ 50,000 is equivalent to $0.0036 USD – which shows the currency’s huge loss of value.

Thousands of Brazilians lost their savings overnight and there are many reports of home losses and even deaths caused by a lack of medication or medical treatment, due to money set aside to pay for these services being confiscated.

This once again demonstrated that for the average Brazilian, financial sovereignty was a matter of survival.

Inflation is a recurring problem around the world - not only in Brazil

I talk about Brazil because it is the history I know best and because it is the reality in which I live. I am sure each country has its own economic, political and social scars caused by criminal and fraudulent management of centralised money. These scars should serve as a warning to be heeded, so that we can learn and evolve. However, “stubborn children” insist on not learning and repeating the same mistakes from generation to generation. Take, for example, the inflation of the monetary base of our current currency – the Real (BRL) – since its institution in 1994.

Brl  Circulating Supply (1994 2022)

FUN FACT: The legal tender in Brazil has changed its name 7 times in 52 years. A name change every 7 years (from 1942 to 1994), with the aim of disguising the loss of value of these coins due to inflationary monetary policies – and the new government now plans to do something similar again, 30 years later, with “Sur” (the Mercosur single currency) and “Real Digital” (the CBDC).

Dinheiro Em Circulação (1994 2022) (2)

Inflationary policies that gradually degrade the wealth of the population to the benefit of money issuers (read about the Cantillon Effect) continue to be not only seen as commonplace, but “annual inflation targets” are set, just as private companies set annual targets of sales or income within their planning.

It seems that we learned nothing from hyperinflation in Brazil, or from Operation Bernhard, when Hitler's Nazi Germany decided to use monetary inflation as a weapon of war, injecting thousands of counterfeit pounds sterling into the English economy, with the intention of causing a financial collapse.

Where is the biggest risk?

The dominant opinion regarding my proposal of self-sovereignty and unbanking is that it is “a risky mission”. And I completely agree with that, but isn’t total dependence on a system as fundamentally flawed and vulnerable to malicious actions by the entities that control it almost as risky? If not more risky?

Right now, I don't have the answer to that question but I'm sure that the experience of living the alternative way can help me find it. And it's a risk I'm more willing to take, because I understand the risks inherent in the choice accepted by default by the majority – the fiat system.

It was through trying to reduce the existing risks as much as possible, that I became convinced of nano's potential to deliver the best and most efficient tool of decentralised money. It has a fixed supply, having already been completely distributed for over 6 years – without the possibility of monetary debasement. Additionally, it’s a form of money that cannot be confiscated overnight by a decree arising from the insanity of a temporary leader.

But not only do we need a currency that is not subject to the control of central powers, we also need a currency that can actually be used efficiently by the population – like nano.

In the next article, I’ll talk about some of the changes I’ve already made on my journey to becoming unbanked, including how I’ve started pricing my work in another currency and how I’m accepting XNO efficiently. Keep following my progress here on the Nano blog

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