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> Fiat is slightly different in that the government can guarantee a certain level of demand for it by requiring taxes to be paid in it Until they switch curren

by bko 5y ago

> Fiat is slightly different in that the government can guarantee a certain level of demand for it by requiring taxes to be paid in it Until they switch currencies. For instance Brazil did this > The cruzeiro (Portuguese pronunciation: [kɾuˈzejɾu]) was the currency of Brazil from 1942 to 1986 (two distinct currencies) and again between 1990 and 1993. In August 1993 it was replaced by the short-lived Cruzeiro Real, itself replaced less than a year aftwards by the Real. India also demonitized a certain denomination of their currency > On 8 November 2016, the Government of India announced the demonetisation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series. It also announced the issuance of new ₹500 and ₹2,000 banknotes in exchange for the demonetised banknotes.

gus_massa 5y ago
[Hi from Argentina!] I'm not sure about the details of the transitions in Brazil, but each time there is a change of money here the bank accounts are transformed instantly to the new denomination and the bills and coin coexist for some time, like 3 or 6 months. It's more a cosmetic change, to make the numbers no overflow in the bank system. It also has a psychological effect, because with the change the government pinky promise not to take stupid economic decisions and reduce the inflation.
rswail 5y ago
Declaring certain currency notes to be valueless doesn't change the demand for currency. It reduces supply. But people still need it to pay taxes and the government will only pay for services with it. In most developed nations, the government is responsible for 20%+ of the total GDP, so that's an inbuilt "floor" to the value of its currency. So yes, the government can change the currency and the notes, but they control the supply and demand of whatever they deem to be the currency.
- bko 5y ago
  Right, but it doesn't really help me as someone holding the currency. I can have X dollars in my bank account, government can then declare these dollars are worthless or you have to change it to this new currency at some rate that is set by the state. Neither of these things are good for me and I would hardly call that the government "backing" the currency that I hold.

by bko 5y ago

gus_massa 5y ago

[Hi from Argentina!] I'm not sure about the details of the transitions in Brazil, but each time there is a change of money here the bank accounts are transformed instantly to the new denomination and the bills and coin coexist for some time, like 3 or 6 months. It's more a cosmetic change, to make the numbers no overflow in the bank system. It also has a psychological effect, because with the change the government pinky promise not to take stupid economic decisions and reduce the inflation.

rswail 5y ago

Declaring certain currency notes to be valueless doesn't change the demand for currency. It reduces supply. But people still need it to pay taxes and the government will only pay for services with it. In most developed nations, the government is responsible for 20%+ of the total GDP, so that's an inbuilt "floor" to the value of its currency. So yes, the government can change the currency and the notes, but they control the supply and demand of whatever they deem to be the currency.

bko 5y ago
Right, but it doesn't really help me as someone holding the currency. I can have X dollars in my bank account, government can then declare these dollars are worthless or you have to change it to this new currency at some rate that is set by the state. Neither of these things are good for me and I would hardly call that the government "backing" the currency that I hold.