The economic crisis that began after the coronavirus, exacerbated by the war in Ukraine and Israel is expected to deteriorate further due to the local war, negatively affects all of us – but it is important to remember that it is child's play compared to previous crises that were here not so long ago. Exactly 38 years ago, the citizens of Israel woke up to a morning when their money was worth almost nothing more. We asked ChatGPT to talk about the dramatic step taken by the eighth Israeli government, headed by Shimon Peres.
Switching from one currency to another is a rare, but not unique, event. Israel has experienced such a transformation in the transition from the shekel to the new shekel. The transition wasn't just a cosmetic fit; It had a heavy economic significance. In 1985, Israel faced significant economic challenges, due to the collapse of bank stocks and rampant hyperinflation. The existing currency, the shekel, became a victim of economic instability, which required recalibration in order to restore confidence in the entire financial system.
The government decided on a dramatic move: replacing the shekel, the currency that had come into use only 5 years earlier instead of the Israeli pound and had already brought with it a dramatic change when every 10 liras became one shekel. But the transition from the shekel to the new shekel was even more dramatic, erasing three zeros from the value of Israelis' coins – meaning that every 10 old shekels were now worth only one penny.
Switching currency is a complex step, requiring careful planning and communication. In the transition from the old shekel to the new one, despite the urgency, a gradual approach was adapted to ensure the smooth adjustment of the public and businesses: first, the government informed the public of the stages of the transition in detail; Subsequently, the new currency was put into circulation from September 1985; On January 1, 1, after a short period of adjustment, the new shekel became Israel's only official currency. Special exchange booths were set up to allow the public to exchange the currencies during these months. Subsequently, inflation stabilized, and since then the new shekel has maintained a constant range of value relative to many other currencies.
Currency exchange is not common, but several countries have made such changes for a variety of reasons, ranging from economic crises to political changes. The most prominent example of this century is the introduction of the euro in dozens of European countries in order to create a shared economy – but there were also countries that changed currencies for reasons similar to those of Israel. Zimbabwe, for example, has abandoned its currency in favor of foreign currencies – notably the US dollar and the South African rand; And Turkey replaced the lira with a new lira, erasing no less than six zeroes from its value – that is, every million old liras became one new lira.
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