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Setelinleikkaus: When Finns snipped their cash in half to curb inflation

jpkoning.blogspot.com

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Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#31

Post by eru »

pjc50 wrote: post #19
shigawire wrote: post #12

Earlier quoted context omitted.

I think they are considering the last part of the article to be "price controls". If the government prevents people from buying certain goods by selectivity freezing certain purchases I'm not sure I'd call that a price controls -- more like a prohibition. But I could see how this could be done similarly more like a price control. If the control was this granular, then maybe car purchases could be limited to $30,000 i…

In this context, all European countries including Finland were subject to rationing during the war; the question is about how to phase out both rationing and price controls without having a huge discontinuity at that moment.

Or you can just accept the discontinuity, because sometimes the cures are worse than the disease.

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#33

Post by guenthert »

teractiveodular wrote: post #17

A recent similar example was the Indian move in 2016 to demonetize the ₹500 and ₹1,000 notes with very little notice, which is in retrospect widely viewed to have been a disaster. https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...

There were multiple motives for that move, notably however not among those an attempt to curb inflation.

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#34

Post by dathinab »

> To our modern sensibilities, this is a wildly invasive policy.

is it? not really

cutting the "value" of money in half always had been a important emergency tool countries had and sometimes used

and "moving" half of the value into a found which even pays out some years later is tbh. quite a fair way to do it (instead of just literally halving the money value permanently)

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#35

Post by guenthert »

Carrentt wrote: post #23

Fascinating piece of financial history I hadn't heard about. Imagine your government telling you to literally take scissors to your money, it's like a weird mix between arts & crafts hour and monetary policy. Though I suppose we're already halfway there with our modern central banks, just without the satisfying snip-snip sounds. The Finnish experiment failing because people just deposited their cash in banks first is…

Well, as fascinating as your government telling you to surrender all gold you might hold [1].

https://en.wikipedia.org/wiki/Gold_Reserve_Act

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#36

Post by flanked-evergl »

dathinab wrote: post #34

> To our modern sensibilities, this is a wildly invasive policy. is it? not really cutting the "value" of money in half always had been a important emergency tool countries had and sometimes used and "moving" half of the value into a found which even pays out some years later is tbh. quite a fair way to do it (instead of just literally halving the money value permanently)

Fixing inflation is simple, people keep voting for it to not be fixed, so the inflation remains and gets worse.

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#37

Post by Cumpiler69 »

pjc50 wrote: post #4

Mentioning the war on COVID but not the actual war between Russia and Ukraine that caused a huge spike in European energy prices is a big omission, since that caused a lot of global inflation.

False. Inflation was mainly caused by the central banks(especially the US FED but also the ECB who followed suit) devalued the currency by over-issuing it during the pandemic, not due to the post pandemic high energy prices which are not that high when you adjust for the crazy Inflation the excessive money printing generated.

In short, they barrowed money in your name with you as a guarantor and now you're paying for it, it's that simple.

The war caused by Russia is just a convenient scapegoat that's easier to sell to the financially illiterate population to deflect the blame. Keep in mind most voters don't understand basic economics and how currency supply affects inflation, but they do understand "Russia dropping bombs = bad".

When 80% of the entire world supply of USD (the world reserve currency that the EU also has to use) was printed during the pandemic, how can anyone say that Russia's war caused the inflation? Do people not know arithmetic anymore?

https://fred.stlouisfed.org/series/M1SL

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#38

Post by ttyprintk »

pjc50 wrote: post #4

Mentioning the war on COVID but not the actual war between Russia and Ukraine that caused a huge spike in European energy prices is a big omission, since that caused a lot of global inflation.

Especially since the Finnish experience is the only direct comparison to Ukraine today, where both their army and government are fighting Russia.

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#39

Post by [deleted] »

eru wrote: post #25

> It's not just the size of Operation Gutt that is striking to the modern eye. It's also the oddity of the tool being used. Today, we control inflation with changes in interest rates, not changes in the quantity of money. To soften the effect of the global COVID monetary overhang, for instance, central banks in the U.S., Canada, and Europe began to raise rates in 2022 from around 0% to 4-5% in 2024. It's a bit more i…

[deleted]

Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation

#40

Post by ttyprintk »

Cumpiler69 wrote: post #37
pjc50 wrote: post #4

Mentioning the war on COVID but not the actual war between Russia and Ukraine that caused a huge spike in European energy prices is a big omission, since that caused a lot of global inflation.

False. Inflation was mainly caused by the central banks(especially the US FED but also the ECB who followed suit) devalued the currency by over-issuing it during the pandemic, not due to the post pandemic high energy prices which are not that high when you adjust for the crazy Inflation the excessive money printing generated. In short, they barrowed money in your name with you as a guarantor and now you're paying for…

The European Central Bank said it’s due to energy.
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