When Currencies Change – Examples Through The Years

Posted by Allison on 6 April 2009, 14:52

Put your hand into your pocket and take out any coins or notes you have in there.  They look nice and familiar don't they?  You are used to seeing them and dealing with them on a daily basis and it's probably quite hard for you to imagine ever using anything else.

But while most currencies do tend to last for some years – from mere decades into centuries in many cases – no currency lasts forever, and no currency in use today has been around since the time when man first thought to make some coins to use as a form of exchange instead of other objects such as whale's teeth, arrowheads and shells.

The most recent and most famous example of a huge change in currency occurred when then Euro made its entrance in the form of coins and banknotes back in 2002, and swept aside no less than eleven currencies literally overnight.  One of the casualties was the German mark, whose history stretches back to 1871 if you go through all its various changes and incarnations, while the most recent version was introduced four years after the Second World War ended.

Even more profound was the demise of the Greek drachma, whose history goes back far more deeply into the past – it is generally believed it made its first appearance some time during the 5th century.  This is a classic demonstration of how new currencies can have no mercy on old ones – and perhaps why Britain is still clinging onto its beloved pound, even though it isn't anywhere near as old as the drachma.

In reality currencies can change for a number of reasons.  The Euro came into being because there was a long held desire by some to unify the whole of Europe with a single currency.  While this dream hasn't quite been achieved yet, it certainly has had a profound effect.

But inflation can also sweep aside currencies just as effectively – and far more quickly than simply having the desire to bring together more than one country under the same monetary umbrella.  Latin American countries are a classic example, as they have been fighting the effects of inflation for decades and their currencies have been ditched and reborn more than once as a result.

But it is not just a case of 'out with the old and in with the new.'  It is sometimes forgotten that a new currency can take a lot of time to get used to by the people who are using a familiar set of notes and coins one day, and are then faced with a whole different set to get to grips with the next day.  We all know how complicated exchange rates can be when we go on holiday; you can spend ages staring at a menu and trying to work out whether a particular dish is a good deal or extremely expensive!

Replacing one currency with another is rarely a case of replacing it on a like for like basis.  Let's say for example that Britain decided to join the Euro tomorrow (not very likely but for the purpose of this example it gives us a nice theory to pursue.)

You go into a shop today and buy a fresh whole chicken for £5.  You know that it's a pretty good deal and you go home and cook it for your family for dinner.  Now, at the stroke of midnight the Great British pound as we know it becomes obsolete and useless.  The Euro comes into force instead.

So tomorrow you go back out and decide to get another chicken, since the first one was so good.  Only now when you look at the price, you see it is marked up as 6.30 Euros.

Now is that still a good deal?  Does it equate to the deal you got yesterday?  Or are you being charged more or less for the same chicken?

In our example the amount (at the time of writing) is actually the same, so you aren't being cheated out of any cash.  But because the pound and the Euro aren't being swapped like for like, you will be unsure of the actual value of what you're buying – and this effect of changing currencies can continue for years.

Of course in ancient times some currencies bit the dust because they were simply too heavy or awkward to carry around.  Arrowheads have been used as money in centuries gone by, and other similar objects too; it didn't seem to occur to anyone that carrying sharp objects around might be considered dangerous.  It's small wonder then that these forms of currency were eventually replaced by other currencies.  Perhaps this is why no modern coins have any sharp edges or corners?

There is one other main effect that defunct currencies have on the world.  This is the fact that as soon as a currency goes out of circulation, it becomes of interest to coin collectors everywhere.  While the older and the rarer a coin or banknote is, the more value it will tend to have, this does not mean that relatively new casualties of the ongoing world of money are not of interest.  In fact now would be the best time to tuck those coins away, since they may be harder to find in the future.

You would think that when a currency is taken out of circulation and replaced with a new one there would still be a huge amount of the old currency lying around.  While there is a lot, many people will want to exchange it all for the new currency while they still can, which makes the amount of defunct coins and banknotes still around much reduced.

Ancient currencies of all kinds had their own lifespan and gave way to more modern currencies over time.  But that doesn't mean the currencies we know today will be around forever – and you only need to look at the Euro to see the truth in that.