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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

#151

Post by CraigJPerry »

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…

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

I get the simplified qualifier and I see what you’re saying but it’s more accurate to say this is not true, it hasn’t really been substantially true since February 1994.

> What happens next is that they buy and sell government bonds in the open market

Again i feel it’s better to say exactly what happens, not a model or simplification. What happens next is banks move to the new interest rate without any OMO (open market operations) - the announcement effect as it’s called. There’s many reasons for this - not least that it’s futile to fight against the currency issuer.

Citation needed to support my statements above: https://www.newyorkfed.org/medialibrary/media/research/epr/0...

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

#152

Post by int_19h »

Yawrehto wrote: post #80
casenmgreen wrote: post #76

Earlier quoted context omitted.

Yes. I was surprised to find out that Russia had been conducted sabotage operations against UA artillery ammunitions dumps for many years prior to full scale invasion, and the Ukrainians had already lost the majority of their artillery ammunition reserves this way by the time invasion began.

And they conquered Crimea in 2014--partially, if I remember right, to get a port that doesn't freeze over in the winter, something they have wanted for literally hundreds of years.

To be more precise, they already had the port, but were afraid to lose it to the new government of Ukraine.

This is also a big reason why Crimea, by and large, supported annexation - it has very large proportions of the population that are either active or retired Soviet/Russian navy.

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

#153

Post by hatthew »

Why did finland expect that to work when >90% of money was in banks? When the article described cutting money in half, my very first thought was wondering what the banks did -- were the bills there also cut on half or were all accounts artificially divided in half? It didn't cross my mind that all money other than physical cash was completely unaffected.

Now clearly I'm not smarter than the top economists in a country of millions, so what am I missing? Why did they think it would work?

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

#154

Post by int_19h »

Seasandthequote wrote: post #108
Yawrehto wrote: post #81

I wonder what the cleansing element of it in Finland was, given that they voted to join the Axis.

you mean WWII? If so, this is just wrong, no-one in Finland "voted" to join the Axis, she was not technically a part of Axis and didn't want to side with Germany at all. GB and Sweden were first asked but they weren't able to help in the defence from Soviet Union. AFAIK they weren't fighting anywhere but their own territory

Finland had quite a few far right figures in its government at the time who were obsessed with "Greater Finland", for which they needed to occupy and annex East Karelia:

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

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

#155

Post by CraigJPerry »

G3rn0ti wrote: post #150
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. Thi…

>> This is what drove and still drives inflation directly and indirectly

QE is fascinating.

On the one side of QE you have central banks, absolutely baffled by the fact they create all these reserves, we’re talking utterly un-relatable numbers for a human, numbers that belong in the field of astronomy rather than finance. And yet they fail to hit their inflation targets for over a decade.

On the other side you have a bunch of folks shouting loudly this amount of QE will cause ungodly amounts of inflation.

Now they shouted long enough that inflation eventually did show up but it’s not clear that it relates to QE. The onset of inflation correlates more closely with global energy supply shocks than with changes in QE policy or “printing” money in Covid stimulus. However, energy, despite being an input to almost everything we care about, isn’t really considered in the context of inflation by most macroeconomic models. The models are less than helpful in the face of “externalities”.

>> through the effect of our fractional reserve system

We don’t have fractional reserve in the USA, the UK, Aus etc and haven’t had for a number of years at this point.

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

#156

Post by akira2501 »

int_19h wrote: post #149
akira2501 wrote: post #147

Earlier quoted context omitted.

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

There was no "workable peace deal".

What makes you so confident in the absence of something? In particular given that there is a massive amount of reporting that conflicts with your single sentence assertion?

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

#157

Post by int_19h »

carlosjobim wrote: post #123
semprity wrote: post #105

Earlier quoted context omitted.

Indeed makes my skin crawl. How can one reasonably protect himself from such draconian freezing? Asking for reasonably, not bunker full of gold bars.

Bunker full of gold bars. Or foreign currency. Or silver.

The problem with all these is that money is kinda worthless if you're unable to spend it, and regimes that are likely to enact such monetary policies will often regulate the use of gold etc as well. A bunker full of gold bars does you no good if actually trying to spend any of it is a crime in and of itself.

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

#159

Post by misja111 »

semprity wrote: post #105
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…

Indeed makes my skin crawl. How can one reasonably protect himself from such draconian freezing? Asking for reasonably, not bunker full of gold bars.

Bitcoin

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

#160

Post by jeroenhd »

int_19h wrote: post #149
akira2501 wrote: post #147

Earlier quoted context omitted.

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

There was no "workable peace deal".

As unrealistic as it may be, “Russia gives back the stolen land and pays reparations” sounds like a workable deal if Russia itself suffers for long enough. Or maybe Russia will leave Ukraine if we give them all the land and assets owned by the “Ukraine should make a deal with Russia” people, as they're of the opinion that placating an invading army is the best way to peace.
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