Apparently, every time a currency falls victim to hyper inflation, sooner or later the country is gonna introduce a new currency to solve the problem.
But how does that help? If let’s say the us dollar lost 90% of it’s value every day, and you introduced a new currency, one of which is equal to 5 us dollars, wouldn’t that new currency, as it’s value is bound to the dollar, instantly lose 90% of it’s value every day as well?
In: 712
If let’s say the us dollar lost 90% of it’s value every day, and you introduced a new currency, one of which is equal to 5 us dollars, wouldn’t that new currency
Well yes if the USA insists on the new currency being pegged to the old one. But that’s not normally what happens.
On the face of it, it’s supposed to be a new currency independent of the old one. But in actuality, the fact the new currency comes from the same suppliers means that trust in it is largely lost. Creating a new currency also doesn’t address the original reasons for hyperinflation.
Usually post hyper-inflation, the country may choose to adopt the currency of another country with a more stable currency. In effect, they not only lose control of the currency used in their economy, but the provision of the new currency normally comes with terms and conditions in favour of the supplier country.
Latest Answers