When the lowest amount of currency you could possibly buy anything with is so high, why don’t countries
“condense” the value of their currency? For example, [12 eggs in Indonesia costs 25,544.06 Rp (their local currency)](https://www.numbeo.com/cost-of-living/country_price_rankings?itemId=11) why don’t they condense their currency so it only costs 4-5 units of currency? Wouldn’t it make the math easier for people?
In: Economics
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This has been done before (for example by Mexico in 1993). It is not a trivial—it requires issuing new bills and coins, and having a mechanism for trading in the old currency.
It’s called [redenomination](https://en.wikipedia.org/wiki/Redenomination). Sometimes countries do it, but it costs a lot of money. You can’t just condense the units, you have to come up with new ones (eg instead of dollars you now have “new dollars” each worth 1000 “old dollars”) and you need to print a whole lotta new bills etc.
Let’s say your country has printed a zillion notes that say 10,000Units on them. To make this change, they’d have to make a whole bunch of new notes that say 4Units on them and then tell everybody to switch all their notes for one that’s 1/2500^th as much.
Printing cost is huge, security cost for the switch is huge, benefit is ??? . Countries just don’t do it because it costs too much.
what would be the benefit? How would you justify the cost? especially for a country with a population as large as indonesia and where a whole lot of people live on cash only. You have to reprint everything, get everyone to exchange it, have mechanisms for exchanging the old bills. and for what? your 12 eggs aren’t gonna be any cheaper in terms of labor-needed-to-buy-12-eggs
Doing this before you stop the root cause of the problem (inflation) just makes it so you run into this problem again soon enough. And since it’s a costly endeavor to go through, countries don’t want to do this repeatedly.
Turkey did this in recent memory by dropping 1000000 to 1, and yet the lira continued to sink. In a decade or so it wouldn’t be particularly surprising to hear for calls to another go at it.
The word for the kind of “condensing” you’re suggesting is [redenomination](https://en.wikipedia.org/wiki/Redenomination). You’re asking “why doesn’t Indonesia redenominate their currency”.
Fundamentally redenomination doesn’t really solve any of the problems associated with the currency, you just call the problems something else. Like, *why* do things cost so much in the old currency in first place? Because there are more people wanting to buy those things than there are things to go around, causing them to bid up the price, perhaps? Are more things going to spontaneously pop into existence, or are people now just going to bid up the price in a different currency?
You also now need to print a bunch new bills and mint new coins to replace the old ones – which *is not free* – and the thought that all their savings are now worthless because they’re suddenly in the wrong currency tends to make the public, uh, a little panicky.
Because then they would have to reprint a shit ton of new bills and basically create a new currency. They can’t just say everything costs a fraction of what it used to because all the existing cash would suddenly be worth more. That wouldn’t work.
Countries do occasionally do this, as others have said it’s called redenomination. Some countries even do it more than once, though it’s expensive and often leads to distrust in the banking system.
Often the main motivation is not just making the currency easier to use, but flushing out hidden cash reserves in the underground economy. If you announce redenomination and give people 6 months to trade old cash for new, then suddenly people with suitcases of cash stored away need to find a way to exchange it without arousing suspicion. Towards the end of the exchange period the old cash will possibly be trading at a big discount as it’s parceled out to people who can take small stacks to the bank without worry. Possibly a decent amount of the old cash will never be traded in at all, a big bonus for the government and/or central bank.
Countries do occasionally do this, as others have said it’s called redenomination. Some countries even do it more than once, though it’s expensive and often leads to distrust in the banking system.
Often the main motivation is not just making the currency easier to use, but flushing out hidden cash reserves in the underground economy. If you announce redenomination and give people 6 months to trade old cash for new, then suddenly people with suitcases of cash stored away need to find a way to exchange it without arousing suspicion. Towards the end of the exchange period the old cash will possibly be trading at a big discount as it’s parceled out to people who can take small stacks to the bank without worry. Possibly a decent amount of the old cash will never be traded in at all, a big bonus for the government and/or central bank.
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