we all know the thing where it’s like oh in the 60s x amount of money is equivalent to x amount in today’s time, and how people could earn a dollar for an hourly wage because it was worth more back then. is it possible to have a “reset” on inflation where we go back to spending/earning a dollar, or will it keep permanently increasing to where in the future 10k is chump change?
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They can, its called a rebase or a redenomination. generally a country switches to a new currency that can be exchanged for the old at the specified rate.
This doesnt really solve inflation, just hids it, and is only generally done when there is really bad inflation in a short time.
Yes, kind of.
The closest successful thing I can think of would be something like the decimalisation of the British pound. Where they ended up recalling and recategorizing the amount each of their coins was worth. There was a period where everything was both prices and there was plenty of options for people to exchange their old coinage for new.
Or similarly the introduction of the Euro to all of the member states.
Issue a new currency at a set exchange rate with the old currency that brings the numbers down. So long as you don’t introduce a way to profit off of the exchange, all bondholders of the old currency are paid at the exchange rated value, and the value everyone holds is the same as before it should work.
Yes. Its been done successfully once, by Brazil. See: [https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil](https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil)
It’s possible to issue a new currency, but since inflation will continue afterwards, it’s usually not worth the trouble. It can make sense for a hyperinflated currency, though, where prices become difficult for the average person to understand. For example, Mexico experienced hyperinflation in the late 1970s to early 1990s. After stabilising the economy, they introduced a “new peso” that could be exchanged at a rate of 1000:1. Zimbabwe replaced their dollar several times in the 2000s, but without actually fixing the hyperinflation, so the usefulness didn’t stick (which is why they had to do it again), and they had to end the currency entirely in 2009. (The fourth (and final) Zimbabwean dollar was introduced at a value of 10 septillion first Zimbabwean dollars.)
The other comments addressing redenominating the currency so $10 becomes $1 are correct. There is another method that could be on your mind, which is “what if currency just went down to where it was ‘naturally?’” I’ll address that.
That would be immediately economically disastrous because no one would spend a dollar today if they could know that next week it would be worth more. Which would cause the economy to immediately stop working. So a government could never announce “we are going to take so many dollars out of the system that a penny will buy a pack of gum again.”
But if you think about it for a second, that’s fine. We want price stability. We don’t need packs of gum to be worth exactly a penny or a quarter or a dollar. If we did want that, we would be on the Wrigley Standard which is dumber than the gold standard.
Well, you could reset the value of money, but that doesn’t necessarily stop the inflation. Mild inflation is a good thing and desired, it shows growth in the economy.
Drachma in greece was used for thousands of years i think, and it was not that bad before it was taken out.
Drachma in greece was used for thousands of years i think, and it was not that bad before it was taken out.
It’s possible to have zero cumulative inflation over extended periods of time.
The way to do it is by removing the ability to arbitrarily create additional currency. Having commodities such as silver or gold as currency is a time proven method of doing so.
As you may be able to tell, it’s politically inconvenient to tell governments they can’t just print as much money as they want, hence the current situation.
It’s possible to have zero cumulative inflation over extended periods of time.
The way to do it is by removing the ability to arbitrarily create additional currency. Having commodities such as silver or gold as currency is a time proven method of doing so.
As you may be able to tell, it’s politically inconvenient to tell governments they can’t just print as much money as they want, hence the current situation.
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