There is no question that most cryptocurrencies are at best ‘experiments’ and at worst Ponzi schemes. But, we must remember that many fiat currencies are not necessarily better. For example, in the last 14 months, a cryptocurrency birthed by a humorous meme, Dogecoin, appears to have outperformed many national currencies by means of its ability to preserve value.

This article will review the relative values of many national currencies from the 20th century up to the present. Emphasis will be placed on currencies that have failed as stores of value for the purpose of commerce.

One of the ways to measure the performance of the national currency is to measure the inflation rate over a time.

In this big beautiful table which I wasn’t able to move to medium and post as a .png picture, the average annualized inflation is the measurement of how much purchasing power national currency lost over the year, and the “high” is the maximum inflation over a single month.

During periods of hyperinflation, some money became so cheap that it was effectively useless. A shopping bag full of banknotes was needed to run a simple errand. As a result, central banks printed new money with fewer zeros. Highlighting the command and control nature of fiat currencies, ten thousand could become ten with a simple edit.

Russian Ruble 1995

Russian Ruble 1998.

These edits are known as ‘redenomination’.

Some historical examples

Chinese Renminbi

Brave Chinese workers in 1955 are looking forward to the communist future

Little did they know, the Great Leap Forward three years later led to a famine in 1959 where 15–40 million people starved to death. That said, the Chinese currency has been relatively stable since the late 1990s as it was pegged to the USD for much of that time.

Indian Rupee

Indian Rupee 2001. Mahatma Gandhi looks so optimistic

1966 Economic crisis — Lack of monsoon and the 1965 war with Pakistan caused major production crisis and foreign currency reserves were very low. The government of India, in a desperate attempt to import goods, rapidly increased the amount of currency in circulation, a move that would devalue the Rupee by over 40% against the US Dollar.

1991 Economic crisis — Due to the fall of Soviet Union which was the major export region for India, the foreign exchange reserves depleted rapidly. This was coupled with the Gulf crisis (Kuwait and Iraq war) that supplied the majority of the crude oil to India. These factors led to a huge current account deficit for India. In response to this crisis, the Government of India devalued the Rupee against major currencies.

2016 — The Indian government, in order to reduce the usage of paper money, works with the central bank to demonetize bills of various large denominations, giving the citizens of India mere hours to turn in their worthless bills.

Indonesian Rupiah

Frans Kaisiepo looks at you with disapproval

The Indonesian rupiah has been subject to high inflation for most of its existence since it became internationally recognized in 1950. Various attempts have been made to maintain the value of the currency, but all were abandoned.

This currency is not very stable, just some examples:

After the 1959 devaluation, inflation, which had been running at 25% per annum 1953–1959, grew exponentially, with rates over 100% in 1962, 1963, and 1964, and 600% in 1965. Despite the official Rp 45 to US$1 rate, two further export certificate trading systems, of March 1962 — May 1963, and then from April 1964 onwards, showed premiums of 2,678% July 1962 (an effective rate of Rp 1,205), 5,100% August 1965 (Rp 2,295) and 11,100% in November 1965 (Rp 4,995).

Russian Ruble

Soviet Rubble (1937). Grandpa Lenin looks on you as someone who needs a communist revolution

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. Debauched currency would also repeatedly destroy the resolve of the Russian people during the Soviet era. Just a few dates when all your hard earnings get stolen through the fault of governments.

1919 — After WW1 had ended and following the revolution, the Soviets started to print the Sovznak currency to fund the civil war which became worthless after the civil war in 1924

1947 — Poof, all your money became 10 times cheaper.

1992 — Following the collapse of the USSR, the inflation rate jumps to 2333% annualized inflation in December 1992

1998 — Russia defaults on its debt. Click links to read more about the 1998 Russian financial crisis.

Brazilian Real

Head of República doesn’t look at you at all

The modern real (Portuguese plural reais or English plural reals) was introduced on 1 July 1994. The new currency replaced the short-lived cruzeiro real (CR$). The reform included the demonetization of the cruzeiro real and required a massive banknote replacement.

At its introduction, the real was defined to be equal to 1 Unidade real de valor (URV, “real value unit”) a non-circulating currency unit. At the same time, the URV was defined to be worth 2750 cruzeiros reais, which was the average exchange rate of the U.S. dollar to the cruzeiro real on that day. As a consequence, the real was worth exactly one U.S. dollar as it was introduced. Combined with all previous currency changes in the country’s history, this reform made the new real equal to 2.75 × 1018 (2.75 quintillions) of Brazil’s original “réis”. LOL, it’s 275,000,000,000,000,000,000%; this would even give BitConnect a run for its money.

Turkish Lira

Mustafa Kemal Atatürk let you feel like a millionaire by owning this banknote

1966–1 U.S. dollar = 9 Turkish lira

1980–1 U.S. dollar = 90 Turkish lira

1988–1 U.S. dollar = 1,300 Turkish lira

1995–1 U.S. dollar = 45,000 Turkish lira

2001–1 U.S. dollar = 1,650,000 Turkish lira

In 2005 the Turkish government made a reform by introducing a new Lira at a rate of 1 “second” Turkish lira (ISO 4217 code “TRY”) = 1,000,000 “first” Turkish lira (ISO 4217 code “TRL”).

Honorable Mention: Zimbabwe

Epworth’s balancing rocks are a symbol of eternal stability.

Under the wise stewardship of one of the most educated presidents in history, Robert Mugabe, Zimbabwe experienced one of the worst hyperinflations the world has ever seen. These one hundred trillion dollar notes are now worth something to collectors who fancy themselves trillionaires.

Conclusion

In every case study, we have examined above, we are reminded that in the long-run, the value of fiat currency is zero by default. The twentieth-century failures of currency have greatly superseded the ancient era of Roman coin-debasement — in the modern era governments and central banks have seemingly perfected the art of what many in our crypto economy would call shitcoins. While many cryptocurrencies will undoubtedly soon join the populous graveyard of failed experiments, time will tell whether the future of money will have the faces of dead presidents or a very funny Shiba Inu breed of Dog that some pronounce Doge.

Bottom line

For the actual comparison of crypto and fiat currencies, we should choose a specific time frame. Is it shorter periods of hyperinflation or the rates of inflation over longer periods of time? It’s not really fair to compare 3 years of horrible inflation in China during the great leap forward and dogecoin over its lifetime. Nevertheless, the goal of this article is to highlight the problem of national currencies that are used by most of the world’s population. The problem, which people from the Commonwealth are often not familiar.

Those who chose to ignore history, are doomed to repeat it. — George Santayana

Authors: Alex Lebed, David Genest

Special thanks: Aviv Milner, James Key, Darshan Honale, Scott McKenzie

Update

This article was originally written in the summer of 2018, since then, we have had to make an unfortunate addition the case studies of fiat currencies. Our deepest sympathies to the people of Turkey.