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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

#41

Post by Cumpiler69 »

ttyprintk wrote: post #40
Cumpiler69 wrote: post #37

Earlier quoted context omitted.

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.

Of course they'd say that. Did you expect them to just say "yeah, we fucked you over by devaluing the currency causing your wages to be worthless"?. Don't be naive please and look into how much currency was issued during the pandemic and see for yourself.

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

#42

Post by neilwilson »

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…

Interest on reserves is very much still in place[0]. Open Market Operations haven't been a thing since shortly after the 2008 Financial Crisis.

https://www.federalreserve.gov/monetarypolicy/reserve-balanc...

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

#43

Post by dr_dshiv »

guenthert wrote: post #35
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

“By 1975, Americans could again freely own and trade gold.”

Woah.

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

#44

Post by ben_w »

eru wrote: post #30
jsnell wrote: post #21

Earlier quoted context omitted.

The tricky part isn't money on a digital ledger. That's easy enough to handle with e.g. a one-off deposit tax (IIRC used as recently as the Euro crisis). There's no operational problem here, it just needs to be legislated to happen. Executing the operation properly might take a while (it's not something they'd have a process for), but banks must already have in place systems for e.g. freezing assets which could be us…

> The real problem is deposits in foreign banks in foreign currencies. Well, money abroad doesn't contribute to local inflation, does it?

It can do; everyone you export to and import from still has the same money with which to buy and sell, and the same goods have different prices than you'd expect from just exchange rates in different markets.

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

#45

Post by neilwilson »

This is all very interesting historically.

However the rise of repo markets has rendered the money=medium of exchange, bond=store of value belief pretty much redundant. Rehypothecation more so.

Banks are liquidity providers. If they think they can make a turn they'll discount any asset into money for you.

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

#46

Post by sofixa »

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…

Utter nonsense, and I say this as nicely as I can.

Check the price of Russian gas before and after the invasion, and the resulting price of electricity: https://ec.europa.eu/eurostat/statistics-explained/index.php...

Combine with the fact that Russia and Ukraine are some of the biggest exporters of many critical raw materials, like importantly, foodstuffs (wheat, sunflower oil, etc), and steel, aluminium, oil, gas. Hell, there was a crisis in availability of mustard and snails in France due to the invasion of Ukraine (and on the mustard, a series of bad harvests in Canada which further complicated things).

We can even clearly see it in the inflation charts, first there was growth in energy inflation towards the end of 2021 (as things were ramping back up from Covid), then a big spike in 2022 due to Russia's invasion, and then over 2022-2023, related spike in other sectors: https://ec.europa.eu/eurostat/statistics-explained/index.php...

To pretend none of this had no impact whatsoever is wilful ignorance.

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

#47

Post by hgomersall »

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…

We don't control inflation with interest rates; we do some economic theatre with interest rates that some people believe controls inflation in a predictable way.

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

#48

Post by dr_dshiv »

Without getting political, please, does anyone have a good argument for the expected inflationary pressures of the next year or two? Tariffs will make prices go up, investment in infrastructure will make prices go up… but on the other hand, AI & robotics seems to be a deflationary pressure… where does one go for scenario analysis of the next year or two?

This article scared me a bit with the notion of banks implementing “quantitative freezing.”

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

#49

Post by Sharlin »

eru wrote: post #27
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…

Turkey dropped six zeroes off their currency in the 2000s. Technically, you could describe that as cutting 999,9999/1,000,000 of their money supply. (Especially if they had done a funny dance like the Finnish, where you would use some scissors to only keep the tiny top left corner of your old notes, and can exchange that for new ones.) In practice, people saw the Turkish currency reform as merely a cosmetic change, n…

Would've been funny if you had been expected to literally cut out six zeroes from the notes.

In 1963 Finland also ended up shifting markka to the right by two, so that the old markka became the new penni (1/100 markka).

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

#50

Post by K0balt »

nextlevelwizard wrote: post #11
jb1991 wrote: post #9

Earlier quoted context omitted.

As someone who knew a few people under age 35 who died from Covid, I find this comment offensive.

That's the thing, some people have one experience and other the opposite. I kept hearing "everyone knows someone who was affected by Covid", but I for one have none in my family nor have I heard any Covid related losses from any of my colleagues, but obviously there are people who were affected. On other hand I do know a person who died due to depression caused by the isolation of lock down.

Count yourself lucky. I lost 1 parent, 1 good friend and -his entire family- of 3, several close associates that I counted among my friends , and my wife.

Random events do not have random distributions, and the early strains of the virus were much, much more aggressive. I still suffer from neurological effects of my COVID infection from the very beginning of the spread of the virus.

People with cancer in remission for years of even decades experienced a huge spike in breakthrough tumors. Vascular damage provoked a massive uptick in ischemic events such as stroke or heart attack. The effects of COVID reach far, far beyond “dying of COVID”.

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