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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

#51

Post by Polygator »

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…

For an international perspective: buying and selling government bonds is far from an universal mechanism for interest rate control (AFAIK when discussing central banks the US is almost always a special case)

For instance the Canadian, UK and European central banks provide systems for interbank short-term loans. It is almost entirely through these systems that they set their target rate.

For Canada the BoC doesn't do any open market operations to reach target interest rate (so almost only repos and reverse repos). Their target rate is in fact called the "target overnight rate" and only concerns overnight lending between Canadian financial institutions.

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

#52

Post by Cumpiler69 »

sofixa wrote: post #46
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…

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. H…

Bruh, 80% of all USD in existence was issued during the pandemic alone. How the hell can you tell me with a straight face that that didn't cause the inflation? I feel like I'm taking crazy pills.

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

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

#53

Post by johngladtj »

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.

The people who caused the problem say they weren't responsible for the problem.

Do you see the issue here?

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

#54

Post by [deleted] »

Cumpiler69 wrote: post #41
ttyprintk wrote: post #40

Earlier quoted context omitted.

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.

[deleted]

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

#55

Post by sofixa »

Cumpiler69 wrote: post #52
sofixa wrote: post #46

Earlier quoted context omitted.

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. H…

Bruh, 80% of all USD in existence was issued during the pandemic alone. How the hell can you tell me with a straight face that that didn't cause the inflation? I feel like I'm taking crazy pills. https://fred.stlouisfed.org/series/M1SL

Bad faith argument again, or at least terrible tunnel vision.

So what? In the EU a lot of that money went into the Recovery fund, which released the funds in multiple steps (only the first one was in 2021), and a lot of it is still remaining in the fund.

How do you explain the massive inflation in the EU then?

And are you seriously that centred on "money printing" that you cannot imagine gas and oil prices raising multiple times, and the disappearance of multiple critical raw material suppliers, had _no impact whatsoever_?

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

#56

Post by pjc50 »

hgomersall wrote: post #47
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.

The evidence is very strong that we do actually control it, because in many countries you can see in the historical data when central bank targeting was introduced that the inflation rate drops fairly rapidly into the target band.

It's not a perfect control system because the cost is "NAIRU": non accelerating rate of unemployment. That is, economic growth and wage growth are constrained to avoid a wage-price spiral. And sometimes you get a shock from outside the system.

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

#57

Post by Zanfa »

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…

It would be stupid to discount the effect that artificially limiting energy exports and using it for blackmail before and during the full-blown Russian invasion is naive. IIRC my nat gas prices went up like 10x compared to the previous year.

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

#58

Post by pjc50 »

dr_dshiv wrote: post #48

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 implement…

> Without getting political

> inflationary pressures of the next year

You can't really separate these two. If central bank targeting is left alone and the policies implemented aren't too disruptive (i.e. not the wild claims of the campaign), then it won't move much. If some of the wilder claims are implemented, all bets are off.

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

#59

Post by Lvl999Noob »

thaumasiotes wrote: post #20
gostsamo wrote: post #3

Earlier quoted context omitted.

The article talks about history of alternatives to the interest rates, mainly controlling the currency supply and how it might be implemented in the future. How you discovered price control as the solution in there is still a mystery to me.

Yes, the solution he advocates is "we freeze your assets, allot you a certain basket of consumer goods, and take what we consider the appropriate price out of your frozen assets". If you'd rather describe that as "communism" than "price controls", feel free. The theme of the whole piece is that, if you don't allow people to pay more for things, then the price of those things won't rise, and that this is some sort of…

The post is not a study or a solution or a suggestion or anything of the sort. The author clarified in the last portion that it is a prediction. Someone predicting the bad consequences of the current direction is not advocating for that direction.

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

#60

Post by pjc50 »

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…

This is one of those measures that hyperinflation countries have to adopt for sanity, re-numbering the money.

The surprising case that worked is the Brazilian "Real": by renaming the currency as well as switching it to semi-controlled exchange rates, inflation was drastically reduced. https://en.wikipedia.org/wiki/Plano_Real

> Combined with all previous currency changes in the country's history, this reform made the new real equal to 2.75 × 1018 (2.75 quintillion) of Brazil's original réis.

(!)

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