How does a new currency stop inflation?

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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?

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18 Answers

Anonymous 0 Comments

It doesn’t. It’s completely cosmetic, real effects if any come from stopping futile attempts to print yourself out of bankruptcy. Usually, these two things are attempted at the same time. Stopping the printers is the real policy change. New bills are the cosmetic display of that policy change.

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