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Monday, 8 April 2013

Understanding IAS 29 per PricewaterhouseCoopers: Correction 10: People do not accumulate wealth in a stable foreign currency during hyperinflation


Understanding IAS 29 per PricewaterhouseCoopers: Correction 10: People do not accumulate wealth in a stable foreign currency during hyperinflation

Characteristics of hyperinflation

There is no absolute definition of hyperinflation. The characteristics identified in IAS 29 are as follows:

• People accumulate wealth in non-monetary assets or in a stable foreign currency;’

PricewaterhouseCoopers Understanding IAS 29 2006 p3

Correction

Generally people do not accumulate wealth in a stable foreign currency. It is often forbidden and a crime to accumulate wealth in a stable foreign currency in a country with hyperinflation.

If what PricewaterhouseCoopers state above was true, then it would be no problem dealing with hyperinflation in a hyperinflationary country. Often the single biggest problem in a hyperinflationary country is that it is a crime to trade in and to hold especially the US Dollar.

It would be relatively easy to solve the monetary problem of hyperinflation if it were always legal to hold and freely trade in especially the US Dollar in hyperinflationary countries. All people would have to do would be to buy US Dollars every end of the day with excess local currency.

Nicolaas Smith

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