Denomination (currency): Wikis

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Banknotes of 5000 denomination in different currencies including Franc, Yen, Lire, and Dollar

Denomination is a proper description of a currency amount, usually for coins or banknotes. Denominations may also be used with other means of payment like gift cards.

Contents

Subunit and super unit

In a currency system, there is usually a main unit (base), and a subunit that is a fraction amount of the main unit. In some countries, there are multiple levels of subunits. In the Ottoman Empire, 1 lira = 100 kuruş = 4000 para = 12000 akçe. Today, only a few places use this practice, notably Chinese speaking regions: mainland China (renminbi), Hong Kong (Hong Kong dollar), and Republic of China (New Taiwan dollar). In addition, Jordanian dinar is divided into 10 dirham, 100 qirsh/piastres, or 1000 fils. Many countries today where Western European languages are spoken have their main units divided into 100 cents or derivatives of the word cent.

Occasionally, a super unit is used as multiples of the main unit. Examples include Korean whan = 5 yang in 1893, Iranian toman 10 rials (used informally today). In the Ottoman Empire, lira and kuruş were super units at some point before becoming the main unit.

Decimal vs. non-decimal

A decimal currency is a currency where the ratio between the main unit and the subunit is an integral power of 10. Non-decimal currencies have the advantage in daily life transactions. For example, 1 South German Gulden = 60 Kreuzer. 60 Kreuzer can be divided into 2, 3, 4, 5, or 6 parts that are still integers, making pricing easy. The underlining difference is that 60 has a higher density of divisors (1260 = 20%) than 100 (9100 = 9%). The main reason why many currencies before modern times were non-decimal is because the main units at that time were often quite large and computers were not invented yet.

Choice of name

It is common to name a unit with a unit of weight, such as pound, lira, and baht. These currencies are usually originally defined as that amount of some precious metal. Another choice of name is some form of derivative of the political entity. Afghan afghani and euro fall into this category. Sometimes the name is simply the name of the metal, of which the coins are made, such as Polish złoty and Vietnamese đồng.

Redenomination

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Inflationary

Due to inflation, the same amount of monetary units have continually decreasing purchasing power. In other words, prices of the same products or services must be expressed in higher numbers. When prices reach a certain point, the high numbers can impede the well being of daily transactions because of the risk and inconvenience of carrying stacks of bills, strain on systems, e.g., automatic teller machines (ATMs), and because human psychology does not handle large numbers well. To address this problem, authorities can alleviate it through the process of redenomination. Redenomination is the process where a new unit replaces the old unit with a certain ratio. If inflation is the reason for redenomination, this ratio is some number larger than 1, usually a positive integral power of 10 like 100, 1000 or 1 million, and the procedure can be referred to as "cutting zeroes".[1] Recent examples include

New unit = x Old unit year
Fourth Zimbabwean dollar (ZWL) = 1 000 000 000 000 ZWR February 2009
Third Zimbabwean dollar (ZWR) = 10 000 000 000 ZWN August 2008
Second Zimbabwean dollar (ZWN) = 1 000 ZWD (first dollar) August 2006
New Mozambican metical = 1 000 old meticais 2006
This table is not exhaustive.

Although the ratio is often a positive integral power of 10, sometimes it can be a × 10n where a is a single digit integer and n is a positive integer. Partial examples include

New unit = x Old unit year
Rentenmark = 1 000 billion Papiermark 1923
Chinese "gold" yuan = 3 million old yuan 1948
Chinese "silver" yuan = 500 million "gold" yuan 1949
New Taiwan dollar = 40,000 old dollars 1949
Azerbaijani new manat = 5000 old manat 2006
This table is not exhaustive.

Occasionally, the ratio is defined in a way such that the new unit is equal to a hard currency. As a result, the ratio may not be based on an integer. Examples include

New unit = x Old unit = Anchor currency year
Brazilian real = 2750 cruzeiros reais = United States dollar 1 July 1994
Yugoslav novi dinar = 10~13 million 1994 dinara = German mark 24 January 1994
This table is not exhaustive.

In the case of hyperinflation, the ratio can go as high as millions or billions, to a point where scientific notation is used for clarity or long and short scales are mentioned to disambiguate what kind of billion/trillion is meant.

In the case of chronic inflation or regular inflation, the authorities have a choice: a large redenomination ratio or a small redenomination ratio. When using a small ratio, more redenomination processes must be carried out in the long run. And each occurrence incurs costs of productivity in the financial, accounting, and computing industry. As a result, small ratio has the disadvantage of more cost associated to the changeover. However, the period of prices with large number can be shortened with a small ratio.

During a redenomination process, the new unit is often the same as the old unit, with the addition of the word "new". The word "new" may or may not be dropped a few years after the change. Sometimes the new unit is a completely new name, or a "recycled" name from previous redenomination or from ancient times.

New unit = x Old unit year Nature of the new unit
Turkish new lira = 1 million old lira 2005 "new" is an official designation and will be dropped in 2009
New Taiwan dollar = 40,000 old dollars 1949 "new" is an official designation and is still used in official documents today
Argentine austral = 1,000 Peso argentino 1985 completely new name
Yugoslav 1993 dinar = 1 million 1992 dinara 1993 no official designation
Brazilian real = 2750 cruzeiros reais 1994 recycled unit of Brazil before 1942
This table is not exhaustive.

Monetary union

When countries form a monetary union, redenomination may be required and the conversion ratio is often not an even number, or even less than 1.

New unit = x Old unit year Monetary union
Danish krone = 0.5 Danish rigsdaler 1873 Scandinavian Monetary Union
Austro-Hungarian krone = 0.5 gulden/forint 1892 Latin Monetary Union
euro = 0.787564 Irish pound 1999/2002 Eurozone
euro = 40.3399 Belgian or Luxembourgian francs 1999/2002 Eurozone
This table is not exhaustive.

Decimalisation

In many countries where a pounds-shillings-pence £sd system (£1 = 20 shillings = 240 pence) was used, the process of decimalisation was carried out. While they were at it, some chose to change the main unit as well. By defining 1 dollar = £0.5 = 100 cents, 1 shilling would conveniently turn into 10 cents. This is also a prime example where the ratio is less than 1.

New unit = x Old unit year
Germany German gold mark = 1/3 Vereinsthaler 1873
United Kingdom (New) Penny = 2.4 Penny 1971
South Africa South African rand = 0.5 South African pound 1961
Australia Australian dollar = 0.5 Australian pound 1966
New Zealand New Zealand dollar = 0.5 New Zealand pound 1967
This table is not exhaustive.

Book keeping

When redenomination occurs, financial data that spans across the change must be presented with proper annotation. Otherwise, the data could give the illusion of astronomical change. For example, the GDP reported by the Central Bank of Nicaragua is properly documented.

List of currency redenominations

This table lists various currency redenominations that have occurred, including currency renaming where the exchange rate is 1:1.

New unit Exchange rate (new:old) Old unit Year Country Cause Note
Chinese "silver" yuan 500000000 "gold" yuan 1949 China inflation
Yugoslav novi dinar 13000000[2] 1994 dinara 1994 Yugoslavia inflation Anchor currency: German mark
Chinese "gold" yuan 3000000 (old) yuan 1948 China inflation
Yugoslav 1993 dinar 1000000 1992 dinara 1993 Yugoslavia inflation no official designation
Turkish new lira 1000000 Turkish lira 2005 Turkey inflation "new" is an official designation and will be dropped in 2009
Hryvnia 100000 Karbovanets (third) 1996 Ukraine inflation
New Taiwan dollar 40000 Taiwan dollars 1949 Taiwan inflation "new" is an official designation and is still used in official documents
Second Renminbi yuan 10000 First Renminbi yuan 1955 China inflation
Peso argentino 10000 Peso ley 1983 Argentina inflation
Peso (convertible) 10000 Austral 1992 Argentina inflation
Polish złoty 10000 Polish złoty 1995 Poland inflation
Leu 10000 Romanian Leu 2005 Romania inflation
New Ghanaian cedi 10000 Cedi 2007 Ghana inflation
Azerbaijani new manat 5000 (old) manat 2006 Azerbaijan inflation
Turkmenistani new manat 5000 (old) manat 2009 Turkmenistan inflation
Real 2,750 Cruzeiro real 1994 Brazil inflation Anchor currency: United States dollar
Cruzeiro (antigo) 1000 Real (old) 1942 Brazil inflation
Cruzeiro (novo) 1000 Cruzeiro (antigo) 1967 Brazil inflation
Austral 1000 Peso argentino 1985 Argentina inflation
Cruzado 1000 Cruzeiro (novo) 1986 Brazil inflation
Cruzado Novo 1000 Cruzado 1989 Brazil inflation
Cruzeiro real 1000 Cruzeiro (third) 1993 Brazil inflation
Russian Rouble 1000 Rouble 1998 Russia inflation
Belarussian Rouble 1000 Rouble 2000 Belarus inflation
New Mozambican metical 1000 (old) meticais 2006 Mozambique inflation
Bolivar Fuerte 1000 (old) Bolivar 2008 Venezuela inflation
Euro 239.640 Slovenian tolar 2006 Slovenia monetary union Eurozone
French Franc 100 Franc 1960 France inflation originally called New Franc
Peso ley 100 Peso moneda nacional 1970 Argentina inflation
Euro 40.3399 Belgian or Luxembourgian francs 2002 Belgium Luxembourg monetary union Eurozone
Euro 30.1260 Slovak koruna 2009 Slovakia monetary union Eurozone
Peso moneda nacional 25 Peso moneda corriente 1881 Argentina inflation
Euro 1.95583 Deutsche Mark 2002 Germany monetary union Eurozone
Cruzeiro (third) 1 Cruzado Novo 1990 Brazil renaming
Karbovanets (third) 1 Soviet ruble 1992 Ukraine
Euro 0.787564 Irish pound 2002 Ireland monetary union Eurozone
Euro 0.585274 Cypriot pound 2008 Cyprus monetary union Eurozone
Austro-Hungarian krone 0.5 gulden/forint 1892 Austria-Hungary monetary union Latin Monetary Union
Euro 0.429300 Maltese lira 2008 Malta monetary union Eurozone
Peso moneda corriente Real 1826 Argentina
Second Zimbabwean dollar 1000 (first) dollar 2006 Zimbabwe inflation
Zimbabwe Third Dollar 10000000000 Zimbabwe Second Dollar 2008 Zimbabwe Hyperinflation
Zimbabwe Fourth Dollar 1000000000000 Zimbabwe Third Dollar 2009 Zimbabwe Hyperinflation

References

See also


Simple English

When dealing with money, denomination is the value of the individual currency.

For example a one dollar bill, a 100 dollar bill, a penny and a quarter are all different denominations of money. A one dollar bill and a one dollar coin are the same denomination as they are the same value.

=Monetary union

= When countries form a monetary union, redenomination may be required and the conversion ratio is often not a nice even number, or even less than 1.

New unit = x Old unit year Monetary union
Austro-Hungarian krone = 0.5 gulden/forint 1892 Latin Monetary Union
euro = 0.787564 Irish pound 1999/2002 Eurozone
euro = 40.3399 Luxembourgish francs 1999/2002 Eurozone
This table is not exhaustive.

Decimalisation

In many countries where an £sd system (£1 = 20 shillings = 240 pence) is used, the process of decimalisation was carried out. While they were at it, some chose to change the main unit as well. By defining 1 dollar = £0.5 = 100 cents, 1 shilling would conveniently turn into 10 cents. This is also a prime example where the ratio is less than 1.

New unit = x Old unit year
South African rand = 0.5 South African pound 1961
Australian dollar = 0.5 Australian pound 1966
New Zealand dollar = 0.5 New Zealand pound 1967
British pound = 0.5 British shilling 1975
This table is not exhaustive.

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