Monetary reforms are not a new idea. In fact, there were quite a lot of such reforms already carried out in the history. So why it should interest us?
Monetary reforms were historically used when national economies reached a state of no return – were highly idebted and there was very little left that governments or central banks could do about it. Bluntly said, it was a last resort before a country would have to declare a bankruptcy.
Historical monetary reforms
According to Wikipedia, there were the following monetary reforms in history so far:
Czechoslovak monetary reforms: 1919, 1945, 1953
German monetary reforms: 1923, 1948, 1990
Austro-Hungarian monetary reforms: 1816, 1892
Austrian monetary reforms: 1924/25, 1938, 1945, 1947
Israeli monetary reforms: 1948, 1980, 1985
Romanian monetary reform in 2005
Bulgarian monetary reform in 1952
Turkish monetary reform in 2005
History tends to repeat itsself
As you can see, most of these reforms took place after major global events of the previous century, which were the two World Wars. Since then, there were no events of such scale, but the current pandemic could become one fo them as well, mainly due to its impact on the global economy.
What is a monetary reform
For example purposes, let us recall the monetary reform carried out in former Czechoslovakia in 1953. Legal theft on its own citizens was marked by President Zápotocký’s memorable statement: “Our currency is firm and there will be no monetary reform, everything is rumors spread by state enemies.” The next day, the radio announced that the reform would take place. Although the money saved was exchanged in various proportions, the average ratio was about 10: 1.
So imagine now, that the government would announce on television today that with immediate effect on all bank accounts, one zero at the end will be deleted (or the decimal point will be shifted to the left) and cash will be exchanged for new notes with the same ratio. At the same time, prices would rise approximately twice (!). Ask your grandfathers or great-grandfathers how it was back then… And you can also ask yourself, what would you do under such circumstances and how much money would that leave you with.
Is gold a solution?
We have not mentioned the abandonement of the Gold standard by the United States. It is a good example of the fact, that not even gold is a good solution. Gold standard was cancelled in several stages. The classic “paying with gold” ended with the World War I, followed by confiscation of physical gold from American citizens.
After all, the war expenses had to be paid for by the states – and gold cannot be printed or its inflation can not be artificially induced. By 1929, Americans had printed so much money that gold covered only 5% of it. On April 5, 1933, in the United States, President Roosevelt ordered the US residents to immediately collect all the gold under a 10,000 USD fine or 10 years in prison if left at home in a vault.
Monetary reform is one of the ways in which states can solve the problem of their mismanagement and indebtedness. There is an even less conspicuous way – to create inflation by printing a lot of new money. But even so, over time, people will notice that the one hundred bank note used to have a different value than it does today.
So if gold is not the solution, what is? Cryptocurrencies, as they are not controlled by any state, are worth at least your consideration. But choose well as there are many frauds and it is considered a high risk investment due to high volatility.