I wonder what the cleansing element of it in Finland was, given that they voted to join the Axis.
Setelinleikkaus: When Finns snipped their cash in half to curb inflation
81–90 of 246 posts
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#82> 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…
Ahh…no. The Fed sets the interest rate directly. What you are talking about is yields on treasury bonds, which are manipulated via bond buying to force money into assets by artificially dropping the yield of those bonds, thus creating a more attractive investment in the stocks, assets, etc.
I described Open Market Operations, see https://en.wikipedia.org/wiki/Open_market_operation
> The Fed sets the interest rate directly.
So which interest rate does the Fed set directly, and how does that setting have any effect on the economy?
(I know they have interest on excess reserves. I already accounted for those in my original comment. I know, they are annoying and misguided. I was mostly talking about the system they used before, ie up until about 2008.)
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#83A 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...
IIRC the reasoning was that only criminals have large amounts of valuable notes and by demonetising them they'd hit the criminals where it hurts.
But it turns out that tons of people in rural India had their life savings under mattresses in large denomination bills...
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#84> 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…
For the interested https://en.wikipedia.org/wiki/Interbank_lending_market#Monet... has more on it.
As far as I understand, the central banks intervene in this market by offering to loan or borrow above or below otherwise prevailing market rates. This has the effect of adding money to the system (or removing it). So that's pretty much the same mechanism as what I described.
They use an intermediate proxy like the 'target overnight rate' to help them decide how much money to add or remove to the system: exactly as much as needed to bring the market interest rate in line with their intermediate proxy.
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#85> 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...
Alas, you are right. Compare also https://www.cato.org/working-paper/floored
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#86> 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.
Correct, it's mostly theater , and people nerding out on the numbers. The true measure of inflation is this: For a single day one works (calculated over a lifetime), how many days can one survive without working which will pay off all of one's bills. The lower this figure, higher is the inflation.
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#87Earlier quoted context omitted.
As someone who knew a few people under age 35 who died from Covid, I find this comment offensive.
In my ~2mio pop country, by the end of restrictions, we had (iirc) 5 people in the "below 35" age group what died 'with covid' (not necessarily because of it). For comparison, that's way less than traffic deaths. Even way less than suicide rates in that age group (and we all know how bad the lockdowns were for many peoples' mental health). We also had a 20yo girl die because of vaccine-induced clots. She got vaccinat…
> In my ~2mio pop country, by the end of restrictions, we had (iirc) 5 people in the "below 35" age group what died 'with covid'
By way of contrast, as of 2023-04-28[1], England had 157 deaths per 100k in the "below 30" age group. Which on a population of 57M[2] gives about 89k deaths.
Your ~2mio pop country did exceedingly well if your numbers are correct - scaled to England, you'd have expected about 3000 deaths.
[1] https://www.gov.uk/government/publications/covid-19-reported...
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/populati...
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#88Earlier quoted context omitted.
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.
Correct, it's mostly theater , and people nerding out on the numbers. The true measure of inflation is this: For a single day one works (calculated over a lifetime), how many days can one survive without working which will pay off all of one's bills. The lower this figure, higher is the inflation.
>The true measure of inflation is this: For a single day one works (calculated over a lifetime), how many days can one survive without working which will pay off all of one's bills.
This rapidly falls apart when you try to actually calculate it. Whose income do you use? Is inflation lower for doctors than burger flippers? What do you use as the retirement age? Does inflation go down if the retirement age is raised? What counts as "survive"? Does that mean the price of smartphones don't count toward inflation because you can theoretically survive without them?
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#89Earlier quoted context omitted.
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.…
Please do show this very strong evidence that the effect is any more than the supply chains sorting themselves out. Even some within the CBs are doubting the causality. Japan had the lowest inflation of any major economy post COVID, and yet persisted with essentially a ZIRP. There's a good argument that in our high reserves world, interest is actually inflationary.
>There's a good argument that in our high reserves world, interest is actually inflationary.
How's that working out with Turkey?
Re: Setelinleikkaus: When Finns snipped their cash in half to curb inflation
#90Mentioning 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…
>Do people not know arithmetic anymore?
They never knew it.