Eli5 Why do some countries measure their currencies in large units?

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For example in Vietnam, lunch can be bought for 50,000 VD and in South Korea, apartments can cost several MILLION Won. Why do some countries use such large denominations?

In: Economics

10 Answers

Anonymous 0 Comments

Usually these very large denominations indicate a period of significant inflation in the past. At some point an economic crisis made it necessary for the government to pump out currency to pay off debts or force investment, permanently devaluing the currency.

If you look back through South Korea’s economic history, you can see multiple inflation spikes in the 60’s, 70’s, and 80’s with rates hitting 30-70% – an already weak currency post-Korean War being further devalued.

Vietnam has a similar but more dramatic story: enormous triple digit inflation rates after the Vietnam War.

Sometimes nations do rebalance the devalued currency to reset the values. A few years ago Venezuela scrapped the Bolivar currency and converted it to Bolivar *Fuerte* currency to knock some zeroes off.

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