How did Romania manage to save its currency in the 2000s by just dropping the last couple of zeros? Wouldn’t other countries be able to do the same?

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How did Romania manage to save its currency in the 2000s by just dropping the last couple of zeros? Wouldn’t other countries be able to do the same?

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>Wouldn’t other countries be able to do the same?

Other countries have done the same. Usually with a new name to inspire confidence (or minimise the loss of confidence).

Mostly you want to avoid needing to save your currency, though. Investors tend to avoid investing in countries that make their money worthless on a regular basis.

… unless you’re Greece. They were rather disappointed when they couldn’t just devalue their own currency after joining the euro.

You could, so long as the problems that led to hyperinflation in the first place have been dealt with. If not, you’ve just basically reset the clock.

Dropping zeros does not a currency save. It’s mostly a cosmetic measure that’s been taken by plenty of other countries. Source: am Mexican. Got three zeros dropped back in 1993.

Every country can denominate, but it does basically nothing. If a US dollar costs 1,000,000 of your currency and you make 1,000 per hour, you need 1,000 work hours to buy one dollar. Say you denominate by a factor of 1,000, now you earn 1 unit of your currency per hour, and a dollar costs 1,000 – it still takes you 1,000 hours to earn a dollar. Nothing has changed for you, apart from the amount of zeroes on your bank notes.

Turkey did the same and I must say it was an amazing move by the government because people thought they got richer because prices dropped 6 zeroes, forgetting their salaries also dropped 6 zeroes. It’s been almost 20 years since that happened, people still say 1 million liras instead of 1 liras, so it takes some time for people to adjust I guess.

For your question, dropping zeroes from currency has no particular effect on economy itself, and problem will keep coming back if you don’t fix the problems that causes inflation in the first place.

They didn’t save it, they killed it and brought a replacement ~~goldfish~~ leu. The currency code for the “old” leu is ROL, the “new” one is RON and the exchange rate is [10 000 to 1](https://www.mataf.net/en/currency/converter-ROL-RON?m1=10000.00).

>How did Romania manage to save its currency in the 2000s by just dropping the last couple of zeros?

The premise of the question is incorrect. It was changes in the Romanian economy that stabilized the currency. The removal of four digit in the currency was done to have more manageable numbers, it do not fundamentally change the value of the currency.

If you look at Romanian inflation rates [https://tradingeconomics.com/romania/inflation-cpi](https://tradingeconomics.com/romania/inflation-cpi) they are really high in the early and late 1990s. From 200 you find the dropping to around 2015 where they in fact are negative. The graph do not show any difference at all in 2005 when the new currency was introduced

Relevant:

[How Fake Money Saved Brazil](https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil)

I read this article recently, Brazil managed to stop superinflation by creating a new denomination, but it is not as simple as that.

Currency devaluation, or “cutting off zeros”, is just one part of it.

Take the 1985 Israeli economic stabilization plan as an example, which sought to end massive Inflation in the Shekel, the country’s currency. It involved-

*A significant cut in government expenditures and deficit.

*Reaching an agreement with the then-powerful Histadrut labor union to enact wage controls, thus decoupling rampant wage from price inflation.

*Emergency measures imposing temporary price controls over a broad range of basic products and services.

*A sharp devaluation of the Shekel, followed by a policy of a long-term fixed foreign exchange rate.

*Curbing the Bank of Israel’s ability to print money to cover government deficits.

This, alongside large efforts to privatize a lot of government-owned businesses, managed to finally stabilize the Israeli Shekel after more than a decade of rampant inflation. Cutting the zeros off was just the final cosmetic step in order to make it more manageable for the common citizen.

If you want to sum it up, most of the plan was “stop the government from printing money, and spend less money on stuff”.

The process is called redenomination. Lots of countries have done it. I remember being in Poland as a kid and everything costing millions because of hyperinflation after the fall of the USSR. Carrying around a bill with 6 zeros as a little kid felt so big. They downsized 10,000 to 1. So that million became the 100

https://en.wikipedia.org/wiki/Redenomination

Nothing about the dropping of zeros “saved” the currency – that was only done to keep numbers reasonable and avoid having to reprint currency.