5 History Of How Money Loses Its Value

The currency system has become the main standard of a system that has existed in order to help ease the conduct of businesses and exchanges on a scale that is more understandable and equivalent for everyone. However, regardless of how well the system has been developed by mankind, there will always be a flaw that exists due to the nature of a human.

Things can also get out of hand due to certain demeanor of those in power who are lost due to greed which can ultimately cause the fall and loss of value of a particular currency. Here we would like to share with you 5 histories in which the currency has lost its value terribly and left many people in bankruptcy in a short period of time.

ADVERT

1. Japanese Banana Plant in Malaya

After the victorious battle of Japan invading Malaya on 15 February 1942, the Japanese government introduced a new step in replacing the old paper money with the currency that they have created

The new Japanese paper money was named Banana money which is an impact of the illustration of the plant on $10 and was introduced in Malaya, Singapore, North Borneo, and Brunei on 23 February 1942.

In order to increase the use of the new paper money, Japan has introduced several methods like the lottery system as well as making it compulsory for the locals to get a new residence pass under their own management by paying with Banana money.

However, things did not work out as expected causing the Banana money to lose its value since the money can easily be counterfeited as there was no serial number on the money. Not just that but the Japanese government will also print out the money when needed causing the inflation rate to rise and lose its value compared to the real market.

After Japan surrendered, the Banana money lost its value completely and was no longer used.

2. Money Replacement in Venezuela

Venezuela is the latest country to be in the hyperinflation trap as of writing due to the drastic drop in the price of oil. Starting in 2016, the inflation rate of the country has continuously increased until it reaches a staggering 130,060 percent in 2018.

Due to this problem, the Venezuelan government under the rule of Nicolas Maduro has taken drastic measures in August 2018 replacing the whole currency system based on the Bolivar Fuerte with the new currency called Bolivar Soberano.

ADVERT

The difference is that Soberano will be measured with a value of 1 to 1000 compared with Fuerte which uses the value of 100,000 from the start with a transition period introduced in which both the currency will be used at one time.

But the new currency was put under a lower value compared with other main currencies in the world causing the value of the current currency to drop by 96 percent. The people of Venezuela are the ones that are heavily impacted by this drop.

After 2 years, the initiative introduced by Maduro still did not improve and failed to prevent hyperinflation. The normal activities of buying your daily needs still require the person to carry bags full of money.

3. Failures of Zimbabwe Managing Their Currency

The government policy under the rule of Rober Mugabe who introduced many drastic changes to the socio-economic system has rendered the growth of the country's economy since the 1990s.

The situation turns from bad to worst when sanctions were imposed on the country by the United States of America due to the violation of human rights which the Americans claimed had been done by a group of individuals related to the ruler of Zimbabwe. The unofficial restrictions started in 2002.

The effect of the slow growth in the economy, as well as the failure of managing it properly, have caused the value of the Zimbabwe currency to drop. This is to the extent that the government has to print trillions of Z$ just for their daily use.

Zimbabwe stop using its own currency and started using foreign currencies such as the USD and the South African Rand to stabilize its economy which has been badly affected by inflation.

This situation remains as it is until June 2019 when they introduced a new currency called Zimdollar but the value which is believed to be unstable will cause the people's source of income to be reduced dramatically.

This change did not bring any improvement to the inflation rate of the country as the inflation in August 2020 was reported to be 837 percent.

4. How Brazil Faced a Bad Inflation

It all started in the 1950s when the Brazilian government want to succeed in its plans by developing its new capital city known as Brasilia. In order to make that a reality, the government started printing out money to be used for this mega project.

The effects started to be seen after a few decades when the Brazilian economy started to reach 235 percent in 1983. The situation started to stabilize until early 1990 when the inflation rate of Brazil spiked in the first 3 months causing Brazil to fall into hyperinflation.

The price of goods started to increase by folds each week in just a few months and the Brazilian government was forced to implement price control on the products which managed to stabilize the price but after it was removed, the price quickly rises again.

ADVERT

It was only in 1994 by going through tactics of price control as well as the usage of a new currency on 1 July 1994 that the government managed to control the value of the currency which helped save the 20 million people of the country to get back on their knees.

5. The Fall of Germany's Currency

The history of hyperinflation in Germany happened during the rule of the Republic of Weimar in 1921 which has shaped the mentality of the Germans to this day. To obtain the funds to supplement the war during the First World War, the government made loans as a modal for their war.

The country was so confident that they could win the war, and all of the government's debts were able to be settled easily since the victory of controlling most of the world's economy at the time.

In addition, the marked currency to the value of gold was suspended in order to ensure that the value is traded freely causing the value of their currency to drop from 4.2 marks to 7.9 marks for every dollar. Everything was done in private after the German government acted by introducing a closed market policy as well as not declaring the value of their currency.

The policy which was done for the sake of war started to cause an impact in 1921 before reaching its peak in 1923. The daily cost of living for a family before was 60 marks a week which quickly rise to 230 marks in November 1920.

Germany was beaten really bad in the war. Despite all of that the debts must still be paid and France gave the loan and took over the port in return.

Source: