DELETING THE ZEROS, TODAY I WANT TO TALK ABOUT COUNTRIES THAT HAVE UNDERGONE DELETING THE ZEROS OF THEIR NATIONAL CURRENCY. SINCE 1960 GOVERNMENTS OF DEVELOPING COUNTRIES AND TRANSITION ECONOMIES HAVE RE-DENOMINATED THEIR CURRENCIES ON APPROXIMATELY SEVENTY OCCASIONS. RE DENOMINATION GENERALLY INVOLVES THE PROCESS WHEREBY A COUNTRIES CURRENCY IS RE CALIBRATED THROUGH REDUCTION IN THE NUMBER OF ZEROS IN THE CURRENCY WITH A GOAL TO ACHIEVING A SET OF GIVEN ECONOMIC AND FISCAL OBJECTIVES.
WHILE DECISIONS ON DENOMINATION AND DESIGNS OF CURRENCIES SEEM MORE LIKE A TECHNICAL ISSUE RATHER THAN A POLITICAL ONE A GOVERNMENTS CONTROL AND ADMINISTRATION OF ITS CURRENCY AND TRANSACTIONS WITHIN ITS BOUNDARIES IS ONE OF THE HALLMARKS OF THE MODERN NATION-STATE. EVEN THOUGH SUCH MONETARY CONTROL BEGAN IN THE MID-NINETEENTH CENTURY, TODAY, THE MAIN STRUGGLE IS STILL TO MAINTAIN THIS CONTROL PARTICULARLY IN THE FACE OF CIVIL CONFLICT OR ECONOMIC COLLAPSE.
ACCORDINGLY, RESEARCHES CONTEND THAT CURRENCY RE DENOMINATION MAY COME AS PART OF A BROAD PACKAGE OF ECONOMIC AND POLITICAL REFORMS, AS WAS THE CASE IN AFGHANISTAN IN OCTOBER 2002, FOLLOWING THE YEARS OF DECLINE IN THE CURRENCY’S VALUE A NEW AFGHANI WAS INTRODUCED WITH 3 ZEROS REMOVED; OR A MEANS BY WHICH CREDIBILITY OF THE CURRENCY WOULD BE RESTORED, AS WAS THE CASE IN TURKEY, LEADING TO THE REDUCTION IN THE NOMINAL VALUE OF IT’S LIRA BY 6 ZEROS; OR A MEASURE BY WHICH GOVERNMENT ATTEMPT TO REASSERT MONETARY SOVEREIGNTY AND COUNTRY CITIZENS’ LOSE OF CONFIDENCE IN THE NATIONAL CURRENCY AS WAS THE CASE RECENTLY IN ZIMBABWE AND GHANA WHERE 3 AND 4 ZEROS WERE REMOVED FROM THE OLD ZIMBABWEAN DOLLAR; OR WHEN COUNTRIES ARE EXPERIENCING HYPER INFLATIONARY PRESSURES WHICH HAVE THE EFFECT OF MAKING ITS LOCAL CURRENCY UNATTRACTIVE, AS WAS THE CASE BEFORE RE-DENOMINATION IN BRAZIL, ARGENTINA, AND PERU.
YOU CAN READ A MORE IN DEPTH STUDY OF RE-DENOMINATION FROM THE UNIVERSITY OF NORTH CAROLINA
OTHER COUNTRIES WHO RE-DENOMINATED THEIR CURRENCIES AND THIS IS A SHORT LIST THERE ARE OVER 70 TO DATE.
– 18 zeros in 6 operations (1967/70/86/89/93/94) 18 zeros in 6 operations (1967/70/86/89/93/94)
– 13 zeros in 4 operations (1970/83/85/92) 13 zeros in 4 operations (1970/83/85/92)
– 9 zeros in 4 operations (1980/85) 9 zeros in 4 operations (1980/85)
– 9 zeros in 2 operations (1963/87) 9 zeros in 2 operations (1963/87)
– 6 zeros in 2 operations (1985/91) 6 zeros in 2 operations (1985/91)
– 5 zeros in 1 operation (1996) 5 zeros in 1 operation (1996)
– 4 zeros in 1 operation (1995) 4 zeros in 1 operation (1995)
– 3 zeros in 1 operation (1993) 3 zeros in 1 operation (1993)
– 3 zeros in 3 operations (1947/61/98) 3 zeros in 3 operations (1947/61/98)
– 2 zeros in 1 operation (1981) 2 zeros in 1 operation (1981)
WHAT IS THE DIFFERENCE BETWEEN RE-DENOMINATION AND REVALUATION?
Revaluation (Definition): A calculated adjustment to a country’s official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country’s government (i.e. central bank) can alter the official value of the currency.
Re-denomination (Definition): The process whereby a country’s currency is re-calibrated due to significant inflation and currency devaluation. Certain currencies have been re-denominated a number of times over the last century for various reasons.
The process of changing the currency value on a financial security.
Re-denomination has nothing to do with Re-valuation. When a currency is re-denominated the central bank of that country will reissue notes at decided ratios for both speculators and its citizens.
For ex., If you have a 1000 INR note and Reserve Bank of India (RBI) re-denominated at a ratio 1:10 then RBI will take your old 1000 INR note and issue you new 100 INR whose value stays the same.
The net value of old 1000 INR will be same as new 100 INR. The old notes are given certain time period for exchange and then destroyed once they are returned to RBI. Note that, the purchasing power remains the same throughout the transaction except you are getting new notes for old notes.
Differences between Re-denomination & Re-valuation: For re-denomination, All the old notes must be replaced with new notes. This is not needed for a re-valuation.
Re-denomination does not change the net value(Purchasing Power) while Revaluation does that.
Bank should announce in advance for a decision of Re-denomination while banks will never announce in advance for Revaluation.
SO WHEN WE SEE COUNTRIES TALKING ABOUT GETTING READY TO DELETE THE ZEROS THEY ARE TALKING ABOUT RE-DENOMINATING THEIR CURRENCY NOT CHANGING THE VALUE OF THEIR CURRENCY. WE CAN LOOK AT ALL THE EXAMPLES FROM COUNTRIES THAT HAVE RE-DENOMINATED OVER THE YEARS. THEY ALL DELETED ZEROS BUT THE VALUE DID NOT CHANGE.
I RECEIVED MANY EMAILS ASKING ME TO EXPLAIN THE RE-DENOMINATION IN TURKEY SO LET’S HAVE A LOOK
New Turkish Lira
As of 1st of January 2005, six zeroes have been deleted from our currency and YTL (New Turkish Lira) became the new currency unit of Turkey, so we started using the New Turkish Lira and the New Kurus (cent). The Law for YTL #5083 was published in the Official Gazette dated 31 January 2004
The composition of denominations for YTL banknotes are; 1,5,10,20,50,100, and denominations for coins are 1,5,10,25,50 New Cent and 1 YTL. The sub-unit of YTL is YKr (Yeni Kurus) and 1 YTL = 100 YKr.
Many countries that dropped zeros from their currency units opted for adding the adjective “new” before the name of their currency units in order to facilitate the transition and omitted the word “new” after a while. 49 countries so far removed zeros from their currency; Brazil deleted 18 zeros in 6 operations, Argentina 13 zeros in 4 operations, Israel 9 zeros in 4 operations, Poland 4 zeros in 1 operation, Greece 3 zeros in 1 operation. Etc.
The facts that urged transition to a new currency unit stand as proof of the importance of the issue.
The high inflationary process, which started in 1970s, obliged expression of economic values in terms of billions, trillions and even quadrillions. In this process, the cash demand of economy was met by new banknotes in larger denominations that were put into circulation almost every two years since 1981. As a result of this process, Turkey was currently the only country where the highest denominated banknotes (20million TL banknote) were circulated. This fact was not only undermine the reputation of our currency but also adversely affected the currency’s functions as a medium of exchange and store of value. Also, figures with many zeros lead to problems in accounting and statistical records, IT, payment systems and transactions at the cashiers office.
Removing six zeros from the currency coupled with the ongoing efforts to driving inflation down to single digit numbers is a very important step from the point of its effects on the reputation of the currency. Meanwhile, deleting zeros from the currency will eliminate the technical as well as operational problems arising form the use of figures with multiple zeros. Therefore monetary expressions will be simplified and taking records and making transactions will become easier.
With the transition to YTL on 01.01.2005, both TL and YTL stayed in circulation for one year. People were able to use both types of money as they did their shopping. Meanwhile, since both currencies stayed in circulation through 2005, it was a legal obligation to show the prices of goods and services both as TL and YTL on price tags and lists until 2006. Now only YTL is in circulation.
Old banknotes and coins currently in circulation will be withdrawn as of 01.01.2006. However, for 10 years, these TL banknotes will be exchanged by the Branches of the Central Bank. Ziraat (Agriculture) Bank will carry out this task at cities where Central Bank does not have branches.
HERE IS MORE ON TURKEY
Zeroing on too many zeroes
Currency Reform in Turkey and Lessons from Re-Denomination and Euro Changeover
THERE IS MUCH SPECULATION ABOUT UPCOMING RE-DENOMINATION OF OTHER CURRENCIES SUCH AS WITH IRAQ AND INDONESIA AND KOREA. AND IN ALL THE PREVIOUS RE-DENOMINATION CASES SUCH AS PERU AND TURKEY AND BOLIVIA AND AFGHANISTAN AND ISRAEL ETC..ETC… ZEROS WERE REMOVED FROM THE CURRENCY AND NO ONE BECAME MILLIONAIRES. IN ALL THESE COUNTRIES YOU STILL HAD THE SAME VALUE IN USD AFTER THE CONVERSION AS YOU HAD BEFORE. WHEN YOU WENT INTO PERUVIAN BANK TO EXCHANGE 1 MILLION INTIS FOR 1 SOL YOU WALKED IN WITH 1 USD WORTH OF MONEY AND YOU WALKED OUT WITH 1 USD WORTH OF MONEY. IT WAS A FLAT EXCHANGE. THE SAME WILL BE THE CASE FOR ALL FUTURE RE-DENOMINATING COUNTRIES. THERE WILL BE NO FLASH MILLIONAIRES.
LET’S HAVE A QUICK LOOK AT IRAQ TELLING US THEY ARE RE DENOMINATING.
It was scheduled to be the project to delete the three zeroes in 2011 and did not perform
And then postponed to 2013… then postponed to 2015 .. and now the decisions implemented early 2017 plan.
Note that the process of deleting the zeros have occurred in several countries. Delete the three zeroes from the Zimbabwe dollar in 2006 and Romania omitted four zeros from its currency in 2005. Bolivia deleted three zeros from its currency in 2008. Turkey removed six zeros from its currency in 2005. Sudan delete the zeros from its currency in 2007
Central Bank director Mahdi Keywords, said, “The central bank began the first steps of the project through the selection of designs, companies and the country that will be printed currency.” He pointed out that “the new currency entry does not mean the destruction of ancient coins, but will continue to trade for about ten years,” pointing out that “this period will enable the central bank to withdraw the old currency in accordance with the known dynamic in order to preserve liquidity in the market.”
YOU CAN READ THE REST ON YOUR OWN BUT THEY ARE TELLING YOU THEY WILL BE DOING AS THE OTHER COUNTRIES HAVE DONE.
LET’S LOOK AT INDONESIA
New banknotes launched, re denomination will go on
Bank Indonesia (BI) says that it will go ahead with a re denomination plan that will slash three zeroes off the local currency, despite recently issuing new versions of rupiah banknotes.
Re denomination: How not to socialize policy
Indonesia to Re denominate Rupiah in 2014
Dec. 17 – The Indonesian government has announced plans to reduce the number of zeros on the rupiah by three beginning in 2014. The re-denomination will simplify payment processes in a national currency upon which many people already ignore the last three zeroes
INDONESIA HAS STILL NOT RE DENOMINATED THEIR CURRENCY.
ALRIGHT WELL I CAN GO ON AND ON IN EXAMPLES BUT I HOPE YOU ARE GETTING THE POINT AND YOU UNDERSTAND THE PROCESS OF RE DENOMINATING CURRENCY. YOU ALSO NEED TO REMEMBER THAT RE DENOMINATION HAS BEEN TAKING PLACE IN OVER 70 DIFFERENT CURRENCIES TO DATE AND NOT ONE OF THEM HAS EVER TURNED SPECULATORS INTO MILLIONAIRES.
PLEASE BE CAREFUL OUT THERE.
LOVE TO ALL …….MY LADIES