Coinage in High Inflation Countries

Inflation is a much-talked about topic, particularly as currencies battle against environmental disasters, energy crises, conflicts, and the aftereffects of the COVID pandemic, to name a few culprits. Therefore, it seemed timely that the topic of high inflation and coins was covered at last year’s Coin Conference, held in Lisbon, Portugal.

This article summarises the presentation from FMA Secure’s Francisco Mandiola – which provided a detailed overview of the link between inflation and seigniorage, in addition to several countries impacted by the coin-inflation cycle. 

How does inflation impact currencies?

Broadly speaking, inflation is an increase in prices whereby the face value of money purchases less than before. It reduces the value and desirability of currency, results in more expensive goods (higher import costs), and there may be investment resistance as exchange rate risk levels rise. In high inflation countries, currency denominations lose perceived value and as a result, people may hedge risk by holding other, more stable currencies. In the worst case scenario, demand for existing currencies may drop drastically or disappear completely.