308) Managing Currency Transition:

 308) Managing Currency Transition:

 Times keep a changing… and so do currencies:

  Currencies have changed multiple times, sometimes due to decimalization, or due to revaluation, assimilation of a currency into a monetary union and political changes such as a country gaining independence or due to a change of government.   

Change disrupts and is always difficult to accept.  Multiple strategies have been adopted to effectively manage change and ease transition into the new order - ranging from uniformity of design and shape including education!

This blog post gives some illustrations of how countries have managed currency transition, ranging from some of the obvious to unique ideas.

1.  Independence of India and Pakistan (1947):

Let us begin with a major currency transition that was effected closer home. 

 The British had been ruling India for over 200 years, and had an even older currency system that was in vogue from the time of the Mughals. This was an advanced 64-bit currency system with the Rupee equal to 16 annas or 64 paise or 128 pies.   

 British India split into two countries – India and Pakistan when they gained independence in 1947, each country continuing with their independent currencies – The Indian Rupee and the Pakistani Rupee at par with the British Indian Rupee and following a similar Rupee-Anna-Paise structure. 

 To enable an easy transition, the new coins minted by both countries had differing designs illustrating the new born countries emblems/ideologies, but the same size, weight and composition (at least initially) to the last set of British Indian coins and both coins co-circulated for a brief period.

The  set of images shown below reflect these principles of design in transition from the British India Rupee to the Indian and Pakistani Rupee coins:

One Anna Transition – British India (1946), Indian Republic (1950), Government of Pakistan (1950). All coins are Copper-Nickel, with a scalloped shape and uniform dimensions.

 Two Anna Transition – British India (1946), Indian Republic (1950), Government of Pakistan (1948). All coins are Copper-Nickel, with a quadrangular shape and uniform dimensions

Four Anna / Quarter Rupee Transition – British India (1946), Indian Republic (1951), Government of Pakistan (1949).All coins are Copper-Nickel, with a round shape and uniform dimensions

Half Rupee Transition – British India (1946), Indian Republic (1950), Government of Pakistan (1948). All coins are Copper-Nickel, with a round shape and uniform dimensions  

 2. Decimalisation of the Indian Rupee (1957):

Moving on with the Indian Rupee story, the Govt. of India planned to decimalize the currency.  By any standards, this transition was a huge one and over 350million people (population in 1950) had been using the rupee, anna, paisa system over a millennia.   

The key principle employed for effecting this transition was spreading the understanding that the paisa is not 1/64^th of the rupee, but 1/100^th. 

 The new set of decimal coins all carried a legend of ‘Naya paisa’ (Naya is ‘new’ in Hindi) along with a detailed description of the value relative to the rupee.  Thus, 1 naya paisa carried a legend of ‘1/100^th of a Rupee’ (in Hindi), 2 naya paisa (1/50^th of a rupee), 5 naya paisa (1/20^th of a Rupee), 10 naya paisa (1/10^th of a rupee).  

 These coin sub-divisions were brand new and had not been used earlier in the subcontinent. 

 The other denominations of 25 naya paisa (1/4 rupee), 50 naya paisa (1/2 rupee) were equivalent to similar coins of the 4 anna and Half Rupee of the pre-decimal Rupee.  The 25 naya paisa, 50 naya paisa and 1 Rupee coins were similar in shape, composition and size to their preceding coins.  

 The word 'naya' was retained for 5 years and dropped from coins from 1962 onward.

Interestingly, despite such a well planned and executed transition, it is difficult to shake away the old systems... and until a few years back when paise coins were still in circulation, one could not avoid referring to the 50 paise as 'atthani' (8 annas), or the 25 paise as 'chavanni' (4 annas).

The images shown below reflect this transition:

The new 1 naya paisa (1957), 2 naye paise (1957), 5 naye paise (1962), 10 naye paise (1957) coins of the decimal Rupee

Transition From Four Anna (1955) to 25 Naye Paise (1959), From Half Rupee (1956) to 50 Naye paise (1960) and from 1 Rupee pre-decimal (1950) to 1 Rupee decimal (1962) with largely same size, composition and shape

3. Decimalisation of the Great British Pound (1971):

Similar concerns as faced by India must have plagued the British to changeover from a currency system that was established a millennia ago where the penny was 240th of the pound (Pound = 20 shillings; Shilling = 12 pence). 

 In fact, Great Britain was quite late at this - decimalizing only in 1971, while most British countries/prior colonies had decimalized a decade earlier.

Here is what they did after taking all the time – notice the stark similarity with the approach used for introduction of the decimal Indian Rupee:

a)   Used the word 'new' on all the new pence coins.  'New' was dropped from coins after a ten year period in 1981

b)   Used exactly the same size for the 5 pence, 10 pence coins as the pre-decimal 1 shilling and 2 shilling coins that had an exact equivalent in both systems.  Both 5 pence and 1 shilling were 1/20 of the Pound while the 10 pence and 2 shillings where 1/10^th of the pound.  These shilling coins co-circulated with the new currency until 1990.

c)       Introduction of new denominations, viz. 1/2p, 1p and 2p.  The decimal two pence (7.12 g) was double the weight of the decimal penny (3.56 g), which was itself double the weight of the decimal halfpenny (1.78 g). This was so that the three bronze coins could all be stored together in bank bags and then weighed to determine their value. That is the historical reason why the two pence coin appears so outlandishly large for their worth these days.

Transition from One Shilling (1958) to 5 New Pence (1969), both being 1/20^th of the Pound, with same size, composition and shape

Transition from Two Shillings (1956) to 10 New Pence (1968), both being 1/10^th of the Pound, with same size, composition and shape

The new ½ New Penny (1971), 1 New Penny (1971) and 2 New pence (1981) coins of the decimal Great British Pound

4. Decimalisation - Rhodesia (1970), New Zealand (1967):

Rhodesia planned to decimalize in 1970 with the new decimal dollar, which was ½ the pre-decimal pound. 

  Thus, 5 new decimal pence (5p) were equal to 6 pre-decimal pence (6d), both being 1/40^th of their respective currencies.  Interestingly, Rhodesia pre-empted the decimalization and doubly denominated their coins of the pre-decimal pound. 

  Thus, in 1964 itself, coins of Rhodesian pre-decimal pound were introduced for 6 pence, 1, 2 and 2½ shillings, (marked as 6D, 1’-, 2’- and 2’6 respectively) and also bore a denomination in cents (5C, 10C, 20C and 25C, respectively). 

This allowed the old coins to continue as legal tender even after decimalization.

A similar situation was existing for New Zealand where the new decimal dollar was ½ pre-decimal pound.  However, here only one coin in the new currency set was doubly denominated (viz. 10 cents and 1 shilling). 

 In addition to the double denomination principle, the coins with equivalence in both the old and new currency carried similar shape, size and composition.

Coins of the Rhodesian pound doubly denominated – 6 pence (6d), 5 cents (5c) 1964 and 2 Shillings (2/-), 20 cents (20c) 1964

 Transition from the Old New Zealand Pound system to Dollar system – 1 old shilling (1965) and the new 10 cents (1969) doubly denominated as 1 shilling

5. Redenomination - Turkey (2005):

In times of inflation, the same number of monetary units have continually decreasing purchasing power.  

In other words, prices of products and services must be expressed in higher numbers and if these numbers become excessively large, they can impede daily transactions as human psychology does not handle large numbers well. 

Countries have alleviated this problem by redenominating their currencies, i.e. introducing a new unit that replaces the old unit with a fixed ratio. This ratio is typically a positive integral power of 10 like 100, 1000 or 1 million, and the procedure can be referred to as "cutting zeroes".

Turkey redenominated their currency in 2005 introducing the ‘Turkish New Lira’ equal to 1 million (10⁶) old Turkish Lira.  The ‘new’ (‘yeni’) was dropped from the coins in 2009.  Interestingly, it appears that in preparing for the new currency, the last set of coins introduced in the old currency bore a strong resemblance to the future set of coins with an equivalence in value.  There were three coins in this set: 50 Bin Lira (50,000 old lira equivalent to 5 new kurus (0.05 New Lira), 100 Bin Lira (100,000 Lira equivalent to 10 new kurus) and 250 Bin Lira (250,000 Lira = 25 Kurus). 

Transition from the old Turkish Lira to the New Turkish Lira – 50,000 Liras (2002) equal to 5 new Kurus (2005).  Notice the common obverse design

6.   Redenomination –Mexico (1993):

Mexico revalued its currency in 1993 owing to inflation introducing a new currency Nuevo (new) peso equivalent to 1000 old pesos.   In 1996, the word neuvo was removed from the coins.   In Mexico’s case, there was no similarity in design of the new coins with the old set and to further enhance the differentiation, all the neuvo peso coins were introduced as bimetallic – well, being radically different also appears to be a useful transition strategy!

 Transition from the old Mexican peso to the Neuvo Peso – coins with equivalent value in the old and new currency with no design similarity – Coins depicted are: Top row – 50 pesos (1985), 100 pesos (1987), 500 pesos (1985) and 1000 pesos (1988) of the old Mexican peso, Bottom row – 5 centavos (2002), 10 centavos (1994), 50 centavos (2005) and 1 Neuvo peso (1992)

Transition from the old Mexican peso to the Neuvo Peso – The bimetallic Neuvo Peso coins set and the same coins with ‘Neuvo’ removed (after 1996)

Top row – 1 Neuvo Peso (1992), 2 Neuvo Pesos (1992), 5 Neuvo Pesos (1993); Bottom row – 1 Peso (2007), 2 Pesos (2006), 5 Pesos (1998)

7.   Redenomination –Brazil:

Brazil had eight currency re-denominations in the past 100 years.  The cumulated effort of these re-denominations is to the tune of 10¹⁵.  This means that 1 Real of the current currency Brazilian real is equivalent to almost 1,000,000,000,000,000 Brazilian Reis (currency in 1942).

Listed below are the various Brazilian currencies and re-denominations in the past 100 years:

·         Real (Reis) –(1790 -1942)

·         Cruzeiro (1942 - 1967) 1:1000 (i.e. 1 Cruzeiro = 1000 Reis)

·         Cruzeiro novo (1967 - 1986) 1:1000

·         Cruzado (1986-1989) 1:1000

·         Cruzado novo (1989-1990) (1:1000)

·         Cruzeiro (1990 -1993) 1:1

·         Cruzeiro real (1993-1994) 1:1000

·         Real (1994-Current) 1:2750

Notice that between 1986 and 1994 itself there were 4 re-denominations losing over a trillion (1,000,000,000) times in value.  The coin sets introduced during this time changed and lost value very quickly.  The Brazilians must have perfected the art of managing currency transition, and some of the coin series/patterns actually spread across multiple currencies, so much that one would not notice that the coins belong to different currencies altogether.  Obviously, this was done so that coins minted in older currencies could still continue to circulate.

Cruzeiro novo (1967 - 1986) to Cruzado (1986-1989) (1 Cruzado = 1000 Cruzeiro novo)

The last set of coins released for the Cruzeiro novo (100 Cruzeiros, 200 Cruzeiros and 500 Cruzeiros) carried the same obverse as those on the first set of Cruzado coins and were of the same shape, size and composition as equivalent coins of the new Cruzado (10 centavos, 20 centavos and 50 centavos).

100 cruzeiros (1985) and equivalent 10 centavos (1987) of the new Cruzado followed by 20 centavos and 50 centavos of the new currency.  The bottom row shows the common obverse design of coins belonging to both currencies.

Cruzado novo (1989-1990) to Cruzeiro (1990 -1993) 1 Cruzado Novo = 1 Cruzeiro)

In this current transition, as it was done at par, the only impact was replacement of the Cruzado novo coins with cruzeiro coins.  The 1, 5, 10 and 50 centavo coins issued in 1989 for use with the previous currency continued in use after the introduction of the cruzeiro. In 1990, stainless-steel 1, 5, 10 and 50 cruzeiro coins were introduced.  All these coins carried a consistent design theme across the centavo and cruzeiro coins.

The first three coins 5 centavos, 10 centavos and 50 centavos belong to Crusado novo currency, while the next three coins 1 Cruzeiro, 5 Cruzeiros and 10 Cruzeiros are of the new Cruzeiro series.  Notice the beautiful thematic design of working men and womenfolk depicted on all the coins, a tad bit similar to some coins of the socialist era in Eastern Europe.

Cruzeiro (1990 -1993) to Cruzeiro real (1993-1994) (1 Cruzeiro real = 1000 Cruzeiros)

The last set of coins issued for the Cruzeiro in 1992 was denominated in 100, 500, 1000 and 5000 Cruzeiros.  These coins carried a new and beautiful wildlife design theme.  For the new currency, no centavo (sub-unit) coins were issued and the coins of the previous current continued to serve as equivalent 10 centavo, 50 centavo and 1 Cruzeiro real coins.  Coins for the new currency were introduced in denominations of 5, 10, 50 and 100 Cruzeiro Reais continuing with a similar design theme.

The first three coins 100 Cruzeiros, 500 Cruzeiros and 1000 Cruzeiros belong to the Cruzeiro currency, while the next two coins 5 Cruzeiro Real and 10 10 Cruzeiro Real belong to the new Cruzeiro Real series.  The entire thematic series spanning across two currencies has beautiful illustrations of wildlife:

100 Cruzeiros depict the West Indian manatee (local name Peixe Boi) found in the coasts of Brazil and the Amazon Estuary, 500 Cruzeiros depicts the Loggerhead sea turtle, 1000 Cruzeiros show two Acara fish, 5 Cruzeiro Real depict two macaw parrots while the 10 Cruzeiro Real coin depicts an Anteater.

8.   Redenomination –Israel:

Israel also had a few re-denominations as listed below:

·         Israeli Lira -(1948 - 1960)  (sub-unit was pruta, with 1000 Prutah = 1 Lira)

·         Israeli Lira -(1960 - 1980)  (sub-unit was changed to Agora, with 100 Agorot = 1 Lira)

·         Israeli Shekel (1980 - 1985)  (sub-unit New Agora, with 100 New agorot – 1 Shekel), 1 Shekel:10 Lirah (old)

·         Israeli New Shekel (1985 - Current) (sub-unit Agora, with 100 Agorot = 1 New Shekel), 1 New Shekel :1000 Shekel (old)

Israel seems to have found a very unique mechanism to manage currency transition by having continuity of design (image) on equal valued coins (on absolute basis) between old and new currencies.  Thus, coins across multiple currencies carry the same image on the coins where they are equivalent in value.  Thus, the designs on coins of 1 new agora (1/100 New Shekel), 10 Old Sheqalim, and 100 Lirot would be the same.  Similar concept is adopted all coins with new designs introduced for new absolute values introduced with respect to the original lira.

Israel Currency Transition –the above illustration is self-explanatory

Well, Israel’s currency transition definitely seems novel though I am not certain if this really helped in some way, or was it just the mint master’s whim.

(Postscript: Author’s Note: There must be several other currency transitions that have happened and will continue to happen.  I do expect some additions to this post in the future. In case any of the readers would like to share any interesting transition story, please do so via the comments.  Any feedback is welcome and appreciated! )

 Blog Administrator’s Note:  (The above article has been contributed as a Guest Post for this blog by Rahul Kumar, an avid Numismatist based in Hyderabad who has an interest in the historical development of coins across the World. Apart from a detailed study of the subject, Rahul has supplemented his write-up with illustrative images of coins in his collection.

In addition, Rahul has written several detailed articles on the subject of Numismatics. He has earlier contributed a popular post for this blog as a Guest Contributor, titled “The British Empire: A Case of Numismatic Segregation” which makes for a very interesting study/read on this subject for Numismatists and Coin Historians. This post can be accessed through the following link:

http://exclusivecoins.blogspot.in/2015/03/173-british-empire-case-of-numismatic.html

In addition, Rahul has given very interesting inputs in my earlier post put up on this blog in May 2011 titled “Independent India issues: The evolution of the one-rupee coin , the steady building block of the Indian monetary system”, supplementing his inputs with interesting charts. This post can be accessed through the following link:

http://exclusivecoins.blogspot.in/2011/05/11-independent-india-issues-evolution.html