5 Failed Currencies And Why They Crashed

[610Alpha]

http://financialedge.investopedia.com/financial-edge/1210/5-Failed-Currencies-And-Why-They-Crashed-.aspx

[Lowdown3]

Awesome! Thanks for posting this!

[Klayton]

100,000,000,000 one day, down to 1 the next day. WOW what a reality check!!

[billm75]

Real good article, and maybe I'm showing my ignorance here, but....

If, your currency is the dollar. And you've had to create a new denomination of a 500 billion dollar bill due to inflation, and all of a sudden you issue a NEW dollar that is now worth 500 billion of your OLD dollars, how does that actually change anything?

I'm trying to understand here, and I'm making up dates and denominations:

1990 - the $1 note is worth $1
1992 - the $1 note is worth $0.01
1994 - the $5billion note is worth $1
1996 - the NEW $1 is worth $5billion of the old money.

That seems like a big effin' run around to me. If the money is only worth what someone else says it's worth, why bother changing and how can inflation change it's value? If $1 is worth $1 to me, but only 50 cents to you, I won't deal with you. I'll deal with someone who agress my $1 is worth at least $1.

I just don't get it.

[Klayton]

@billm75: inflation is best understood as how YOUR currency trades in the world.

If the US (actually the FED, not a government agency) keeps monetizing our debt (prints extra money to pay our bills), the value of our dollar drops internationally.

Then what happens is the domestic front, a loaf of bread was 69cents suddenly becomes $1. Because of the "value" of our dollar. If they do this enough, soon you will be paying $100 for a loaf of bread. So to "reset" the currency, a government announces months in advance that ALL money dated so-and-so date, MUST be turned into the bank before a deadline date. At which, the bank simpy reduces your balance on the tirgger date. So your savings goes from 1,000,000.00 dollars to 1,000.00 dollars and the new currency of course has to have a different appearance (although some countries actually only used the year date onthe currency-this failed greatly due to the fact vendors would sometimes NOT check the date, and an OLD paper currency (worthless) was used to pay a debt.

The latest one I remember was the Mexican Pesos. If I remember right it went from 1000 pesos to 1 peso. Big change for many people for a long time...