Prime Ministers announcement on ban of Rs. 500 and Rs. 1000 currency notes has sent chills down the economy spine and has left everyone wondering what could be coming next.
Demonetization has been a process from thousands of years. It’s not something new, although it is new for millions of Indians who are facing it for the first time. After most of the wars, old currencies were demonetized and new currencies were introduced. Whether it was the war of Independence, Civil wars or World war, currencies of a lot of countries were demonetized and one currency was used to regularize the currency trade and exchange of goods. Hyperinflation is another reason where lot of countries had to demonetize their old currencies and accept a foreign currency to bring the balance in trade. In last 25 years, there have been more than 20 countries which had demonized their currency due to Hyperinflation.
Here are 2 countries besides India which have demonetized their currency recently:
Philippines demonetized their currency recently. Their central bank estimated a total of 422 million pieces of NDS currencies in market. People who are left with the old currencies will have one year from January 1 to December 31, 2016 to convert their old money through the BSP offices or bank. There is no maximum limit to the amount of currency to be exchanged and banks won’t collect any fee on this exchange. The reason is to get rid of counterfeit currencies and bring out the new banknote design to keep up with the latest trend in anti-counterfeiting technology.
There also has been an exemption given to overseas Filipino workers, who could exchange their NDS money beyond 2017 and for that they would have to register online with BSP the amount they have in their possession.
Zimbabwe demonetized its dollar from 15th June 2015 where any bank that would have held between Zero to 175 Quadrillion Zimbabwe dollars got a flat amount of US $5. This was a case of Hyperinflation, where inflation rose to 231 million percent which caused Zimbabwe dollar to collapse in value. Due to such high trade volume of currency, currencies such as US dollar, the south African rand and Euro were used instead of Zimbabwe dollar.
If in case you are thinking about powerful countries like U.S., we would like to tell you that U.S. never demonetize its old bills. There is even a law in U.S. prohibiting demonetization.