Hi Julius,
As inflation goes up the currency becomes weaker as there is more currency floating about.
When you have a high rate of inflation, workers receive a pay rise (which isn't really a pay rise in real terms as it just about keeps in parr with inflation) and receive more money.
The deal I had with the car was in fixed sum payments. When the deal was struck the Real was a relatively stable currency at around R$1 per US$. Then the Real had to be weakened as Brazilian exports were suffering so the government inflated the currency, in otherwords put more currency on the market and made it worth R$2,20 per US$. This more or less for Joe Public came out of the blue. The day it happened the banks wouldn't exchange US currency in Brazil.
So anyway, basically as the deal was in fixed payments I got the car for around half the price as I thought I would have to pay as the currency weakened. Living costs remained in parr with inflation, along with % in banks and wages.
There were other people who bought imported cars with a fixed $ payment and they had to go to court to try and annul the contracts, which for a lot of them they managed to do (for political reasons more than legal ones).
I could explain how when you get a quote from a company for a service, if you delay a month, the cost could be different, but that would take time.
Even some people in the UK couldn't understand how the Real has violent swings in value from day to day these days, being valued more against the $ by over 1% on one day (which in financial terms is a lot) and the next day could be worth 1.6% less. Peter Schiff probably deals with this curency as there is loads of money to be made with these swings in value.
I arrived in Brazil at the back end of hyper inflation. That was an interesting experience, but once you understand it's not that bad really. Inflation is more a perception than a reality.
Anyway, I hope I answered your initial question.
Best regards,
Steve
Quote:
Originally Posted by Julius
"When the value of the Real was halved against the dollar and inflation rose the car became almost for free! "
Can you explain...so your car payments were the same? The loan was fixed and was the same payments? But weren't you making less money because it was halved?
thanks for your help
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