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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

#141

Post by Izkata »

lutusp wrote: post #131

> ... snipped their cash in half ... Actually, they snipped their cash in two , not in half . This is one of several afflictions that lurk in modern language, ignored by nearly all. Another is the use of phrases like "similar effect to ..." where "effect similar to ..." is the correct form. Notwithstanding how it grates on one's ear, this second egregious malaprop seems to be the preferred form. Oh, well. Since print…

> Another is the use of phrases like "similar effect to ..." where "effect similar to ..." is the correct form.

They have slightly different meanings. Use the first one when describing the actions that cause the effects, use the second one when describing the effects themselves. Though I suppose "effect similar to" could be used in either case, depending on what came before it.

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

#142

Post by hackernudes »

marcosdumay wrote: post #104
krupan wrote: post #100

If this second thing last paragraph doesn't make your skin crawl then I don't know what will: "Cash, which is awkward to immobilize for policy reasons, will be gone in a decade or two, leaving the public entirely dependent on bank deposits and fintech balances which, thanks to digitization and automation, can be easily controlled by the authorities. To rein in a jump in inflation, central bankers will require commerc…

I'm quite confident that governments aren't that powerful. They can issue money, and manage their currency. But I've never heard about any government actually controlling what currency people use. Not even extremely authoritarian ones.

Can you pay your taxes in another currency?

I think this idea is more about using technology and a digital currency to restrict what can be purchased with a specific digital currency. You said "controlling what currency people use" which I take to mean something different. They are both pretty terrifying and I'm not as optimistic as you.

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

#143

Post by tantalor »

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)

The uniquely invasive aspect is forcing people to spend half their money to buy bonds. That doesn't happen very often.

It reminds me of "trillion dollar coin".

In both cases, the average person loses their buying power.

https://en.wikipedia.org/wiki/Trillion-dollar_coin

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

#145

Post by sailfast »

openrisk wrote: post #77
readyplayernull wrote: post #72

It all comes down to math: https://stephaniekelton.substack.com/p/how-to-cut-2-trillion...

> To ensure that interest expense falls toward zero over time, Congress could instruct the U.S. Treasury to stop issuing anything with duration beyond a 3-mo T-bill. Voilà! It wouldn’t just save $2 trillion, it would save tens of trillions of dollars over time. umm, not sure if her recipe is meant as a joke (I mean the world is rapidly turning into a bad joke anyway so people getting facetious might be a defense mech…

Reducing inflation always results in pain somewhere, pretty much by definition. Wage decreases, job demand reductions, taxes, higher interest rates, etc. Comes down to a decision about where you want to spread the pain and how, and how you weight that against "time to impact".

Unfortunately this compounds misunderstanding of the public because politicians can cause inflation, leave office, then come back to office after saddling the other person with the problem. Fighting inflation rarely results in popularity in the near term.

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

#146

Post by insane_dreamer »

mbar84 wrote: post #134
xadhominemx wrote: post #122

Earlier quoted context omitted.

You are correct. Striking how many HN commentors are so often confident and yet wrong...

Was he really that wrong? Isn't a bond just another debt instrument? It's not obvious to me, that there is any fundamental difference between the operations that both comments describe.

While the effects may be similar, they are fundamentally different mechanisms.

Also, this statement is incorrect:

> Simplified: the central bank decide on an interest rate that they want to see. By itself that decision doesn't do anything.

The Fed does in fact set interest rates and that decision directly impacts rates all down the line to mortgages and local loans. Intervening in the bond market is another tool that the Fed can use.

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

#147

Post by akira2501 »

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.

The embargo caused the spike. Which makes having thrown away a workable peace deal a criminal act.

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

#148

Post by akira2501 »

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)

> quite a fair way to do it

Are your parents retired? Ask them if they think this was fair.

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

#149

Post by int_19h »

akira2501 wrote: post #147
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.

The embargo caused the spike. Which makes having thrown away a workable peace deal a criminal act.

There was no "workable peace deal".

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

#150

Post by G3rn0ti »

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…

> Today, we control inflation with changes in interest rates, not changes in the quantity of money.

That is also not quite correct, I believe. The FED can invest money created out of thin air any time it wants („fiat money“ — „there shall be money“), usually it buys government bonds to help the federal government run its deficit. Sometimes this scheme is called „quantitative easing“ which is a charming euphemism. This is what drove and still drives inflation directly and indirectly (through the effect of our fractional reserve system private banks amplify this about tenfold by lending out 90% of their customers‘ deposits).

The interest rates everybody is obsessed about are just the target rates for the interest earned or paid for for money in the account of private banks at the FED. It is just a secondary adjustment. At least during major crisis.

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