The Great Confiscation: A Cautionary Tale

By the author of Household Preparedness Training: Domestic Protocols For Crises And Emergencies 

“The government has just announced freezing all banking deposits and savings above the limit of Cr$ 50.000 for eighteen months. There will be a three-day bank holiday, and further details of the new economic plan will be unveiled soon”.

That was breaking news on radio and TV all over Brazil as people prepared to go to work on the morning of March 16, 1990. 

Exactly 35 years ago, just-elected President Fernando Collor de Mello’s economy and finance secretary implemented the infamous “Collor Plan,” which included the controversial confiscation of people’s savings, among other measures. 

The plan aimed to reduce money supply and address inflation, which at a monthly 80 percent rate was quickly entering hyperinflation territory.

Controversial is an euphemism: that was the day money disappeared in my country. 

At the stroke of a pen, everybody became equally poor, unable to pay for daily necessities. Well, not really, but it was just as dramatic. And there was nothing anyone could do.

(Editor’s note: Possibilities like this are why I recommend keeping some of your savings in precious metals in your physical possession.)

The context

The 1970s and 1980s were a period of worldwide stagflation, a dreadful combination of low or negative growth, high inflation, and widespread unemployment. In LatAm, the 1980s are called “The Lost Decade.”

Brazil had already undergone numerous stabilization plans, including monetary resets, slashed zeroes, price freezings, and more, to combat the constant loss of purchasing power. Nonetheless, the previous government had brought yearly inflation from 200 to 1,500 percent and a supply shortage to boot. 

When President Collor took office, monthly inflation reached 56 percent in January, 73 percent in February, and 84 percent in March.

It’s possible to live with inflation, high inflation even. It sucks, but possible. Hyperinflation, however, is another animal: it quickly destabilizes the whole system, leading to recessions, depressions, unemployment, shortages, widespread disorder, and civil unrest – all impacting the social contract and governability, destroying a nation.

The plan: drain liquidity from the system to force prices down.

Estimates account for the equivalent of $100 billion that was taken from the system overnight, which made up 30% of the GDP at the time. 

Freezing people’s savings limits the amount of money circulating, cooling down inflation by aligning the demand for goods and services with low productivity and a shortened supply. 

That’s the theory, and things can get out of control with economic instability, loss of confidence, and hyperinflation. In short, it’s a gamble. 

The economy is a delicate arrangement highly susceptible to intervention. A lot can go wrong, and usually does, especially in certain moments. And that’s not counting Black Swans. 

I’m not saying anything new here, but read the news and look around because it’s happening again today. 

The aftermath

Only ninety days later, it was clear that the ambitious stabilization plan had failed: inflation was back. However, unlike in previous plans, this time, a recession had also been installed. The GDP dropped a huge 7.8 percent in the second half of 1990.

The plan affected commerce, companies, businesses, and industries. The money confiscated and locked into the Central Bank would be returned after 18 months in 12 monthly installments, with a 6% yearly correction. Of course, that never happened.

Words cannot describe the carnage: there was panic, anxiety, revolt, and suicides. At the time, my father was starting to recover from Black Monday (as the market crash of October 19, 1987 became known), so he didn’t have much to be confiscated. 

It sounds wild to think of that in those terms, especially when so many around were devastated. But you must find positives in everything, or life gets even harder. 

A very negative effect was the loss of confidence in the government. That’s always bad for everyone. Fernando Collor de Melo was the first democratically elected president (i.e., by popular voting) after Brazil ended the 1964-1985 military government. 

Enacting such a radical and punitive plan only to see it go belly up ninety days later was devastating. His government lost public and political support. I was in college at the time and took part in the huge student marches calling for his resignation. 

Finally, he was impeached by Congress in December of 1992 on charges of corruption and other misconduct.

The positives of the 1990 Collor Plan

I’d be remiss to omit the positive aspects of the ill-fated plan. Even though at a high price, it managed to reduce inflation from almost 90% to 10% in the first months, somewhat alleviating the condition of the population during the period. 

Parallel to the confiscation, the government launched an administrative reform, reducing the number of secretaries from 23 to 12, among other measures – an always-welcome measure.

President Collor also opened Brazil to the world, dropping the importing restrictions that had kept the country in the dark ages for decades.

But most importantly, the plan’s failure and consequences created the social, political, and administrative conditions that made the 1994 reform plan possible. 

The “Plano Real” finally succeeded in killing inflation and bringing sanity and order to Brazil’s economy and finances. We transitioned from Third World to Developing Country, and everything was very different after that.

The reason I’m sharing this story is because I look around and see now similar signs everywhere.

I’ve experienced things like these many times throughout my life. These moments stay imprinted in your mind, even after decades. You instinctively notice the trends. 

Except for high unemployment, we’re seeing an eerily similar context in most Western nations today. Growth has been abysmal in most Western and many Eastern countries. Even China’s 5% GDP in 2024 is a fraction of what it was a decade before.

Public and private debt is at an earth-scorching all-time high. It’s a heavy burden on governments, the private sector (production and supply chains), and the population. As a consequence, everything drags. 

Inflation is high and persistent, also thanks to a combination of factors (it’s never just one thing). 

Now, highly indebted governments love inflation because it can reduce the actual value of their debt. However, this is a complex issue with potential downsides, including skyrocketing interest rates that impact public and private debt. 

That’s the situation in many countries, some of them from the G7 group, such as the United Kingdom (101.15% debt-to-GDP ratio), France (110.64%), the US (123.01%), Italy (134.79%), and Japan (a staggering 249.67%). This varies, but anything above 100% is considered concerning, so there you have it. 

The only difference is relatively low unemployment, generally speaking. Employment rates are being kept artificially high in part due to the money printing and public spending of the last few years and the significant changes in technology and social dynamics. 

But that can change, and mass layoffs could be the last straw. The can is being kicked down the road again, but keep an eye out: once unemployment starts rising, it’s time to begin worrying (and double-up preparations).

Can something like a savings confiscation happen again?

That’s the question that matters. Confiscations have happened in different forms in other countries and eras.

In 1953, Czechoslovakia’s government struggled with harsh economic conditions after WW2 and enacted a similar confiscation by massively devaluing the currency by surprise. 

The Nixon reform of 1971 was, in many ways, a confiscation (and it was also supposed to be temporary…). People’s money has been seized in Canada. Russian money has been confiscated off-shore (and more seizures are being considered). There are talks of European countries mulling a confiscation of pensions to boost their military.

The list goes on. The truth is that we’re once again living in volatile times, so is it sensible to rule out crazy things completely, particularly coming from governments? Or is it best to stay open-minded, alert, and prepared? I’m sure you know the answer.

I share my life experiences to inspire others to research the history and dynamics of crises, which are cyclical. What has happened can happen again and probably will, differences aside.

More directly, regulations and laws have changed a lot since the 1990 confiscation, so something like that may not be as swiftly, easily, and surreptitiously enacted by the government today. 

But as things change, they can also change back or again in another way. That’s to say, yes, it can happen. 

Do not think for a moment that your government cannot turn against the people and do crazy stuff like confiscating life savings, pensions, firearms, land, and properties, or even throw people in jail for unthinkable reasons. 

Always expect the worst from governments: they’ll take us to war, send us to prison, and destroy our business, even our name and reputation. What’s a confiscation next to that?

What to look for, and what can you do to prepare

For the average citizen, it’s best to stock up on provisions to prepare for shocks of an economic, monetary, and social nature. However, mid- and long-term crises require adaptation. 

Everybody complains. Losing status and quality of life is painful, but getting rug-pulled without warning by desperate, greedy, and tyrannical governments can be devastating in many different ways. 

So make sure to be among those who can read the signs, prepare, and adapt as quickly as possible. 

Based on experience, here are some measures that have shown to be effective:

Build knowledge. 

• Get educated on past crises’ causes, signs, and consequences, such as the Great Depression, the 1973 Oil Shock, the 1987 market crash, the early 2000s Recession, the 2008 GFC, the 2020 COVID-19 crisis, and the post-pandemic economic downturn.
• That’s how you learn to read the signs and develop a sense of detecting trends, especially if you have never been through anything similar.
• Study history and what people did in similar circumstances to help develop the right mentality. The best for preppers are articles and books by people who’ve been through crises, such as Fernando Ferfal’s Surviving The Economic Collapse.

Diversify.

• Have some cash always at hand: enough for 2 to 3 months to avoid bank runs, bank holidays, payment system crashes, etc.
• Keep something out of the system: something you have custody of or with no counterparty risk (bitcoin, physical gold, etc.). But keep in mind that governments can reach out for that, too, and in many cases, there isn’t much we can do about it.
• Have an account in another jurisdiction: those who had accounts in the US, Canada, or Europe (dollars, Swiss Francs, UK Pounds, etc.) got richer overnight – or at least had money to pay the bills when the government froze their accounts and confiscated their savings in local currency. That’s much easier nowadays.

Be smart.

• Stay alert to signs and red flags. Market crashes and other Black Swans can happen any day, but governments always try to catch the people by surprise. That means things like confiscations, devaluations, defaults, and the like almost always happen on Fridays, for obvious reasons, and are usually followed by bank holidays. 
• Desperate governments will do anything to stay in power and avoid civil unrest. Don’t think for a moment it cannot happen to you because these are the kinds of things that happen everywhere.
• Institutions and checks and balances are undoubtedly more solid in civilized, developed nations such as the US, the UK, or Europe. But all governments can devise schemes to take whatever they want or need from citizens. Rules can be bent or changed, but there are warning signs, so stay alert. 

This can happen anywhere, at any time.

We’d all like to think our own economies are safe from such confiscations and hyperinflation, but the fact is, it’s happened in far too many places to believe that.

Have you ever been affected by a similar event? What was your experience? What are you doing to prevent your vulnerability to confiscations in the future?

Let’s discuss it in the comments section.

About Fabian

Fabian Ommar is a 50-year-old middle-class worker living in São Paulo, Brazil. Far from being the super-tactical or highly trained military survivor type, he is the average joe who since his youth has been involved with self-reliance and outdoor activities and the practical side of balancing life between a big city and rural/wilderness settings. Since the 2008 world economic crisis, he has been training and helping others in his area to become better prepared for the “constant, slow-burning SHTF” of living in a 3rd world country.

Fabian’s ebook, Street Survivalism: A Practical Training Guide To Life In The City , is a practical training method for common city dwellers based on the lifestyle of the homeless (real-life survivors) to be more psychologically, mentally, and physically prepared to deal with the harsh reality of the streets during normal or difficult times. He’s also the author of The Ultimate Survival Gear Handbook.

You can follow Fabian on Instagram @stoicsurvivor