Why can’t hyperinflation be fixed by creating a new currency? or just stop printing?
In: 101
Do you know what hyperinflation is? Don’t just use a term without understanding its meaning.
If hyperinflation can be fixed, it wouldn’t have devolved into hyperinflation in the first place. Hyperinflation is first and foremost GOVERNMENT FAILURE. It is a symptom that a government has no longer got the confidence of the citizens and is pursuing a reckless fiscal and monetary policy. So the problem here is, if anyone was smart enough in government, there wouldn’t be hyperinflation in the first place. And if they’re still in power, and not smart, they won’t be able to fix it anyway since they’re incompetent.
So the first step to fixing hyperinflation is to replace the government. All other steps are secondary in a practical sense. The person who set the house on fire isn’t going to be the person you trust to put out that fire even if you give them fire extinguishers.
Hyperinflation starts because a government is unwilling to make difficult choices. They print money to avoid the unpopular cuts necessary to address their problems.
If the people in charge understood that there’s no such thing as a “free lunch”, they wouldn’t have the massive inflation problem in the first place.
Creating a new currency doesnt solve the problem, your’re just completing the destruction that inflation caused.
destroying your old currency wipes out all savers (old people, responsible citizens).
The currency itself has no inherent value, fiat currencies are backed by the trust in government and economic stability of the country. To fix hyperinflation you need to fix the economy, making a new currency just shifts the problems to a new currency.
It’s kind of like if there was a shady business that was shut down because it was ripping people off, if this person started a new business with a new name it doesn’t mean that they are now trustworthy or have a good product
It *can* be stopped by making a new currency! Brazil did it in the 1990s with the [Plano Real.](https://en.m.wikipedia.org/wiki/Plano_Real)
If you are asking why they don’t do this with the US dollar, lots of reasons. One, it’s kind of an option of last resort, and they don’t feel the current situation is that dire. Two, it would knock a lot of confidence out of the US currency. The dollar is still the most popular currency in the world. To get rid of it would be a little like changing the name Twitter to X. It would confuse everyone and they would probably switch to something else. Three, it would undoubtably be incredibly expensive to make the transition.
As for why not print less money? You can, but the US has bills to pay. So while that would slow inflation, it would come at the cost of tanking the US credit rating, shutting down a lot of government services, and potentially crashing the economy.
So that’s why they tend to use interest rates to fix the situation. It’s a slow solution, but with far less impactful side effects.