#321: How To Kill A Currency

As the world considers the possible death of the euro, it's worth considering a famous historical example. Ok, it's not that famous. But it's still worth looking at: The break-up of the Austro-Hungarian currency union in 1918.Just as the countries of Europe today share the euro, the Austrian empire and the Kingdom of Hungary had created a shared currency: the Austro-Hungarian crown.After World War I, the region broke up. All of a sudden there were lots of countries wanting to switch to their own currencies.At the beginning, they used a simple system: Countries simply stamped existing Austro-Hungarian currency with particular markings to turn it into new, domestic currency. Some countries used ornate samps; Romania's stamp was just a cross.This quickly led to chaos. Everyone wanted to get their money stamped in the country they thought would have the strongest currency. Countries sealed their borders, but it was no use."You had boxcar loads of currency" moving across borders, says Michael Spencer, an economist who has written about this period.It turns out, killing a currency is hard to do.* Note: Today's podcast is a rerun. It first ran in November, 2011.