[HN Gopher] Setelinleikkaus: When Finns snipped their cash in ha...
___________________________________________________________________
Setelinleikkaus: When Finns snipped their cash in half to curb
inflation
Author : Michelangelo11
Score : 182 points
Date : 2024-11-26 08:52 UTC (14 hours ago)
(HTM) web link (jpkoning.blogspot.com)
(TXT) w3m dump (jpkoning.blogspot.com)
| thaumasiotes wrote:
| Somehow this author has come to the conclusion that price
| controls are the "solution" to inflation.
|
| This is a fundamental misunderstanding of why inflation is viewed
| as bad.
| gostsamo wrote:
| 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.
| shigawire wrote:
| I think they are considering the last part of the article to
| be "price controls". If the government prevents people from
| buying certain goods by selectivity freezing certain
| purchases I'm not sure I'd call that a price controls -- more
| like a prohibition.
|
| But I could see how this could be done similarly more like a
| price control. If the control was this granular, then maybe
| car purchases could be limited to $30,000 instead of blocked
| fully. This is effectively a price control.
|
| Also - the author notes in the comments the post is a
| prognostication, not endorsement.
|
| That said, much like the original Finnish plan, I have no
| idea how you'd implement this without massive loopholes. I'd
| imagine even if there were merits to the policy it would fail
| on account of the difficulty in implementation.
|
| I wonder if it is more reasonable if there was equally a
| carrot to go with the stick - something analogous to the bond
| portion of the Finish approach.
| pjc50 wrote:
| In this context, all European countries including Finland
| were subject to rationing during the war; the question is
| about how to phase out both rationing and price controls
| without having a huge discontinuity at that moment.
| eru wrote:
| Or you can just accept the discontinuity, because
| sometimes the cures are worse than the disease.
| thaumasiotes wrote:
| 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 policy victory.
| It's a very stupid viewpoint; seeing prices fail to rise
| because you redenominated the currency means nothing. Seeing
| prices fail to rise because you prohibit that, on the other
| hand, doesn't mean nothing - instead, it means your economy
| is collapsing.
| Lvl999Noob wrote:
| 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.
| gostsamo wrote:
| price control would be if they forbid some goods to be paid
| beyond certain price where the goal is to regulate the
| distribution of those goods. Currency supply control is a
| general policy targeted at the total of goods one can pay
| for in order to maintain the overall economic activity.
| This is the difference between heating certain rooms in the
| house and causing global warming.
| pjc50 wrote:
| 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.
| gregman1 wrote:
| Extreme hike in energy prices was about four months before the
| war began. It's when EU decided to abandon long term gas
| contracts and turned to spot prices (~11.2021). The war started
| in 02.2022.
| eru wrote:
| Well, the full scale portion of the war started in February
| 2022.
|
| But you are right otherwise.
| casenmgreen wrote:
| 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.
| Yawrehto wrote:
| 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.
| ceejayoz wrote:
| They already had
| https://en.wikipedia.org/wiki/Port_of_Novorossiysk for
| that.
| int_19h wrote:
| 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.
| ArnoVW wrote:
| From your perspective the war started in 2022.
|
| In reality that phase of the war started before. Russia did
| not improvise this war. They started disrupting the supply in
| 2021 to ensure that Europe would not fill their strategic
| reserves / winter storage during the summer, thus insuring
| maximum leverage when they needed it. This is well documented
| [1]
|
| Note that this is just talking about this phase of the war.
| Hostilities started in 2014 when parts of Ukraine "suddenly
| self-liberated" themselves. Helped by mysterious soldiers in
| professional but unmarked uniforms.
|
| [1] https://www.banque-france.fr/en/publications-and-
| statistics/...
| nostrebored wrote:
| Nobody has sabotaged European energy security more than
| European governments. The divestment from nuclear and
| reliance on LNG was an obvious disaster in the making.
| Taiwan has made a similar blunder and will pay the price at
| the next whiff of geopolitical instability.
| poincaredisk wrote:
| You've just read how Russia literally sabotaged European
| energy security and you compared this to... some European
| countries taking a suboptimal decision?
|
| And Europe is not a single country. My country still
| happily digs out and burns tons of coal (annoying our
| neighbors in the process). I hope you're proud of us.
| nostrebored wrote:
| It's not suboptimal, it's a geopolitical disaster that
| people in 50 years will look back on and ask "how did
| this happen?"
| Cumpiler69 wrote:
| 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, it's that simple.
|
| The war caused by Russia is just a convenient scapegoat that's
| easier to sell to the financially illiterate population to
| deflect the blame. Keep in mind most voters don't understand
| basic economics and how currency supply affects inflation, but
| they do understand "Russia dropping bombs = bad".
|
| When 80% of the entire world supply of USD (the world reserve
| currency that the EU also has to use) was printed during the
| pandemic, how can anyone say that Russia's war caused the
| inflation? Do people not know arithmetic anymore?
|
| https://fred.stlouisfed.org/series/M1SL
| ttyprintk wrote:
| The European Central Bank said it's due to energy.
| Cumpiler69 wrote:
| 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.
| johngladtj wrote:
| The people who caused the problem say they weren't
| responsible for the problem.
|
| Do you see the issue here?
| ceejayoz wrote:
| That goes both directions, though. Central banks are
| prone to understating their responsibility for bad
| things; the gold bugs and crypto hodl folks are prone to
| overstating it.
|
| The answer likely lies somewhere in the middle. The US's
| relatively soft landing post-pandemic seems to
| demonstrate _some_ use of monetary policy in this fashion
| works.
| sofixa wrote:
| 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.
| Cumpiler69 wrote:
| 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
| sofixa wrote:
| 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_?
| weberer wrote:
| >Bad faith argument again
|
| Stop saying this whenever somebody disagrees with you.
| That's not what that term means at all.
| sofixa wrote:
| I'm not saying this because they're disagreeing with me.
| Inflation is probably one of the most talked about topics
| of the past few years, I find it impossible that people
| haven't heard about the multi-layered complexity of it,
| and thus anyone blaming it purely on "money printing" has
| to be acting in bad faith.
| theultdev wrote:
| It's not really complex, GP is correct.
|
| High energy prices cause high transportation and
| manufacturing costs which causes everything else to rise.
|
| But the main cause of inflation is printing of money,
| especially when you introduce such a large amount in such
| a short time.
|
| People used to know that, they either pretend it's not
| true now or they're ignorant.
|
| And yes the "bad faith" parrot line is really annoying
| and doesn't contribute to the conversation. It's what
| people say when they don't have a rebuttal.
| sofixa wrote:
| > It's what people say when they don't have a rebuttal
|
| Only I have a rebuttal, and came with receipts from
| Eurostat. So what exactly are you trying to argue?
|
| > But the main cause of inflation is printing of money,
| especially when you introduce such a large amount in such
| a short time.
|
| The original premise (which is still in bad faith,
| however much you dislike that part) was that money
| printing was the _main_ cause. And this is fundamentally
| and provably wrong (check my comment upthread, Eurostat
| inflation per sector with the timeline). Inflation was
| kickstarted by energy inflation which coincides with the
| Russian invasion.
|
| Did money printing contribute? Of course. Did Russia's
| invasion of Ukraine and all the issues it brought in
| energy prices and food prices? Of course. Did the Houthis
| contribute with their attacks disturbing supply chains?
| Probably. Did Covid contribute with all the supply chain
| issues it caused? Of course.
|
| Trying to pin it solely or mostly on one single reason,
| especially when it is a global phenomenon that many
| countries suffered from regardless of their exact
| specifics (e.g. Sweden's monetary policy was not the same
| as the EUs nor Canada's, yet they all suffered from
| serious inflation) is arguing in bad faith. It's so
| trivially provably wrong, it's not even funny
| entertaining people who are wrong.
| _hl_ wrote:
| Read the notes in the link you posted. I don't think it
| says what you think it says.
|
| In May 2020, the definition of M1 (monetary supply in
| "cash") was changed to include savings deposits. They
| changed this not due to some conspiracy, but because
| savings accounts were deregulated to remove withdrawal
| limits, effectively rendering them cash-equivalent, and
| thus necessary to include in M1 metrics.
|
| I.e. the 80% spike has nothing to do with money being
| printed.
| Zanfa wrote:
| 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.
| riffraff wrote:
| Do you think that since M1 is down 13% since peak we should
| be seeing deflation right now, or does M1 growth only impact
| inflation one way?
| _heimdall wrote:
| While I would also lean towards blaming the US Fed, how can
| you be so confident in precisely what caused inflation?
|
| One of my big issues with economics as a "science" is that
| they try to boil down massively complex systems into a
| handful of numbers. When it comes to global economics and
| geopolitics the system is even more complex. How would we
| ever be able to say any particular time of inflation was
| causes by exclusively, or primarily, any one factor?
|
| At best looking at historic data and seeing graphs that move
| together show correlation, they will never show causation.
| 1986 wrote:
| Money supply increased significantly in 2020 for sure but
| that's NOT what you're seeing in the M1 graph. M1 was revised
| to include savings accounts at the same time and this is the
| major source of the discontinuity:
|
| https://fredblog.stlouisfed.org/2021/05/savings-are-now-
| more...
|
| M2 captures the pandemic influx better and is significantly
| less dramatic: https://fred.stlouisfed.org/series/WM2NS
| dennis_jeeves2 wrote:
| >Do people not know arithmetic anymore?
|
| They never knew it.
| ttyprintk wrote:
| Especially since the Finnish experience is the only direct
| comparison to Ukraine today, where both their army and
| government are fighting Russia.
| akira2501 wrote:
| The embargo caused the spike. Which makes having thrown away a
| workable peace deal a criminal act.
| int_19h wrote:
| There was no "workable peace deal".
| akira2501 wrote:
| 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?
| int_19h wrote:
| I'm Russian, and I've been following the mess in Ukraine
| very closely since 2014.
|
| The key word in my single sentence is "workable". All
| Russian peace deals so far essentially amount to 1) they
| get all the territory they claim, and 2) they pinky
| promise to not invade Ukraine again, but 3) Ukraine is
| forbidden from taking actions - such as joining NATO -
| that would actually guarantee that such an invasion
| wouldn't re-occur.
|
| Knowing Russian politics and discourse inside the country
| around imperial ambitions in general and Ukraine in
| particular, I'm firmly convinced that any peace deal that
| would be signed on these terms will last only as long as
| it'll take for Russia to build up enough to resume
| hostilities with a much stronger upper hand. Most
| Ukrainians seem to be of the same opinion.
| jeroenhd wrote:
| 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.
| akira2501 wrote:
| > if Russia itself suffers for long enough.
|
| Do you want Russia, a geopolitical entity, to somehow
| measurably suffer, or do you want an end to pointless
| bloodshed? Are you willing to put your own life to this
| lofty goal?
|
| > placating an invading army is the best way to peace.
|
| If you're not capable of repelling the invasion
| effectively, then yes, this is absolutely true. How could
| it not be? There's no reason that you can't have peace
| today and sue for justice tomorrow.
| mock-possum wrote:
| The convenience of cutting paper money in half is a really
| anachronistic element of this tale - I've got a fair amount of
| money saved up, and approximately none of it exists as paper, so
| much as it exists 'on paper' - that is, as figures marked in a
| bank's digital ledger, somewhere in a server farm.
|
| How would an effort like this be handled today?
|
| ... a new crypto currency?
| nextlevelwizard wrote:
| as the article states, it didn't really work back then either
| as the bank accounts were not touched.
|
| > This stock of notes only comprised 8% of the total Finnish
| money supply
| jsnell wrote:
| 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 used to
| buy time.
|
| Bonds can just have a haircut on their nominal value, which is
| pretty much standard operation procedure during a financial
| bailout.
|
| The real problem is deposits in foreign banks in foreign
| currencies. In the modern world by the time a country would be
| looking into this kind of a measure, a lot of the capital will
| have already fled. In this case the blocker is jurisdiction /
| sovereignty, not any kind of technical limitation.
| eru wrote:
| > The real problem is deposits in foreign banks in foreign
| currencies.
|
| Well, money abroad doesn't contribute to local inflation,
| does it?
| ben_w wrote:
| 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.
| jsnell wrote:
| I took the question to be on the logistics of executing
| this kind of operation with digital ledgers, not on
| when/whether those operations make sense.
|
| Confiscating foreign assets would do little[0] to reduce
| inflation. But it's the same for local assets. Obviously
| just chopping off a zero from every note and bank balance
| doesn't actually reduce inflation, unless accompanied by
| some other structural changes.
|
| [0] I say "little" rather than nothing, since it could have
| the effect of repatriating the money -> increasing the
| exchange rate -> making imports cheaper. But I can't
| imagine the effect being strong.
| _heimdall wrote:
| That is basically one of the conspiracy theories I have heard
| related to central bank digital currencies.
|
| As the tale goes, eventually major banks will run into another
| financial crisis (possibly intentionally if you _really_ like
| conspiracy theories). The government will say they have no
| choice but to step in, and their solution will be to open the
| federal reserve to the public as a government-run bank. All
| funds lost in the crisis would be covered under an extended
| FDIC program and the money would be waiting for you in your new
| Fed bank account, denominated in the newly created CBDC.
|
| ---
|
| In no way am I vouching for the theory, just sharing it as it
| is very relates to you question of how it could be handled.
| kmeisthax wrote:
| The weirdest problem I see with this conspiracy theory is
| that I don't see the actual conspiracy?
|
| Like, USD is a fiat currency, it's backed by taxes. The only
| difference between a paper dollar in your hand, a dollar in a
| traditional bank account, and a dollar on the hypothetical
| FedCoin blockchain is how easy it is to spend, what
| gatekeepers are involved, and what anti-fraud/anti-theft
| tools you can avail yourself of. Moving from a traditional
| bank account to a CBDC doesn't make it any easier for the
| government to seize your funds - they already can do that
| just fine with basically anything.
| _heimdall wrote:
| I believe the conspiracy portion of that theory is that the
| financial crisis would be triggered, or allowed,
| intentionally to create the excuse for a CBDC and fed bank.
|
| I don't see it as likely, just _a_ theory I 've seen
| floated.
| teractiveodular wrote:
| A 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...
| guenthert wrote:
| There were multiple motives for that move, notably however
| _not_ among those an attempt to curb inflation.
| theshrike79 wrote:
| 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...
| astockwell wrote:
| I imagine Finland's would be similarly branded a disaster if
| the present-day internet/social media megaphones had existed..
|
| History books on 1945 aggressive monetary policy change: "The
| public didn't like it"
|
| History books on 2025 aggressive monetary policy change: "The
| public went frigging bananas, doxxed their leaders, coordinated
| widespread disobediance on the scale of GME, etc"
|
| (Granted I live in the US, and that's putting it mildly how the
| US would react)
| yieldcrv wrote:
| The article references it in a short sentence
| Carrentt wrote:
| 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 a classic example of Goodhart's Law
| in action. Or as I like to call it, "If you tell people you're
| going to cut their money in half, they'll find a way to keep it
| whole."
|
| What's really interesting is Belgium's more successful approach,
| they went full scorched earth on 2/3 of their money supply and
| somehow managed to pull off an economic miracle. Makes our
| current inflation-fighting tools look rather tame in comparison.
| "Sorry, best we can do is nudge interest rates up a quarter point
| at a time.
| eru wrote:
| 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, not an actually reduction in the money supply.
|
| See
| https://en.wikipedia.org/wiki/Revaluation_of_the_Turkish_lir...
| Sharlin wrote:
| 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).
| pjc50 wrote:
| 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 x 1018 (2.75 quintillion) of Brazil's original reis.
|
| (!)
| pydry wrote:
| Renaming didnt drastically reduce inflation. If it were
| that easy everybody would do it. It just allowed the
| government to reduce inflationary expectations while they
| did the legwork of throttling spending, etc.
|
| If they hadnt done the legwork to reduce inflationary
| pressures this parlor trick would not have worked.
|
| And, arguably, if they hadnt done it at all, inflation
| would still have gone down simply by reducing the
| inflationary pressures.
| PrismCrystal wrote:
| Romania dropped several zeros in 2005, so 1,000,000 became
| 100. As someone who was around at that time, I still tend to
| think of prices in the old system, which makes me look
| ridiculous to younger people and even most of my same-age
| peers.
|
| Albania dropped a single zero way back in the mid-20th
| century, and yet even generations born long after that still
| think of prices in the old system. The first time I went to
| Albania, I was paranoid and made a scene in shops, thinking
| every shopkeeper was trying to rip me, a foreigner, off by
| quoting a price an order of magnitude higher. My face was red
| when someone finally explained how the country works.
| Workaccount2 wrote:
| >In practice, people saw the Turkish currency reform as
| merely a cosmetic change, not an actually reduction in the
| money supply.
|
| Because it is just cosmetic. Governments chronically think
| they can directly legislate more value into existence. They
| fail to understand that currency is just an intermediary for
| trading labor.
| marcosdumay wrote:
| Brazil has cut 3 zeroes from the currency many times.
|
| It's actually no big deal if you change the currency name.
| Cutting the zeroes isn't supposed to have any impact except
| on making prices easier to write, so you only need to avoid
| confusion.
| guenthert wrote:
| Well, as fascinating as your government telling you to
| surrender all gold you might hold [1].
|
| https://en.wikipedia.org/wiki/Gold_Reserve_Act
| dr_dshiv wrote:
| "By 1975, Americans could again freely own and trade gold."
|
| Woah.
| morkalork wrote:
| How about your puppet government colluding with the soviet
| union to print a new currency in secret and surprising
| everyone with a currency reform over night:
|
| https://english.radio.cz/when-savings-were-lost-and-
| dreams-s...
| jmyeet wrote:
| So it's not quite the same thing but the US government has
| historically performed a sovereign devaluation of its currency.
|
| I am of course talking about FDR (Executive Order 6102). This
| made it illegal to own gold. You had to hand it in and get paid
| at ~$20/oz. After doing this, the US dollar (nominally on the
| gold standard at the time) was revised to ~$35/oz.
| j4nitor wrote:
| Torille!
| https://www.urbandictionary.com/define.php?term=Torille%21
| eru wrote:
| > 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 interesting than 'the central bank sets interest
| rates'.
|
| Simplified: the central bank decide on an interest rate that they
| want to see. By itself that decision doesn't do anything.
|
| What happens next is that they buy and sell government bonds in
| the open market. The interest rate can be seen as the inverse of
| the price of bonds.
|
| If the central bank wants to see a lower interest rate, they buy
| bonds with freshly printed money to drive up their prices, ie
| drive down the interest rate.
|
| If the central banks wants to increase the prevailing interest
| rate, they sell government bonds from their inventory and
| essentially destroy they money they receive in return.
|
| So even when the language of modern central banking talks about
| interest rates, they still change the quantity of money to
| implement that.
|
| (This is all simplified, especially with the interest on excess
| reserves that was popular with the Fed for a while. And there's
| also repos and reverse repos etc.)
| neilwilson wrote:
| 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...
| eru wrote:
| Alas, you are right. Compare also
| https://www.cato.org/working-paper/floored
| wbl wrote:
| The OMC desk is still there trading. How is that not "a
| thing?"
| hgomersall wrote:
| 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.
| pjc50 wrote:
| 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.
| hgomersall wrote:
| 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.
| pjc50 wrote:
| UK historical investigation: https://www.elibrary.imf.org
| /display/book/9781557758897/ch07... - written in 2000,
| but you can see on this graph
| https://www.macrotrends.net/global-
| metrics/countries/gbr/uni... how flat it is from 1992 to
| 2020. That's a very good record for any piece of policy.
| Inflation control works for controlling business cycle
| inflation. However, it's not perfect and the COVID+war
| shock resulted in unavoidable inflation.
|
| It's a ""plant"" in the
| https://en.wikipedia.org/wiki/Control_theory sense.
|
| (my original comment: "you can see in the historical data
| when central bank targeting was introduced that the
| inflation rate drops fairly rapidly into the target
| band".
|
| The US graph is similar
| https://www.macrotrends.net/global-
| metrics/countries/usa/uni... - although the adoption of
| inflation targeting wasn't fully formalized, it was
| definitely used in setting interest rates from the 90s.
| hgomersall wrote:
| Now show the UK plot for the 2010s. Also, show the one
| for Japan. It's easy to cherry pick data to show whatever
| you want. It doesn't constitute strong data for a casual
| and reliable link between interest rates and inflation.
| fernmyth wrote:
| Plot the days when your air conditioner is on with the
| temperature of your room. It will have many concrete
| examples and a long-term correlation showing that
| actually, the air conditioner is associated with the
| temperature going _up_.
|
| All feedback/control systems are like that.
| hgomersall wrote:
| Your argument would have more weight if the inflation
| predictions were accurate. Here's the prediction report
| for the BoE in Aug 2014: https://www.bankofengland.co.uk/
| -/media/boe/files/inflation-...
|
| (It's worth noting that even with the assumption of the
| models used being useful, the spread on those inflation
| rates is wild).
|
| Here's what actually happened: https://www.ons.gov.uk/eco
| nomy/inflationandpriceindices/time...
|
| It very rapidly hit the bottom end of the prediction
| range before jumping up again pretty high. All that time
| interest rates were held constant and low.
|
| Given they claim feedback lags of two years or so, one
| wonders what the point of all this is... (one cannot run
| a control loop with control lags substantially longer
| than the time constant of the system; that's basically
| the recipe for an unstable control system, assuming of
| course the control system is doing anything).
|
| There's an argument that it's inflation expectations that
| matter, but there are dissenters within the temple that
| disagree: https://www.federalreserve.gov/econres/feds/fil
| es/2021062pap...
| pjc50 wrote:
| The second link https://www.macrotrends.net/global-
| metrics/countries/gbr/uni... is from 1960 to 2023.
| gruez wrote:
| >There's a good argument that in our high reserves world,
| interest is actually inflationary.
|
| How's that working out with Turkey?
| nostrebored wrote:
| It will probably work out just fine as they become a key
| player in European LNG.
|
| Turkey couldn't have serviced their debt with rising
| interest rates and continued government spending on
| expansion.
|
| Being inflation averse makes sense when you can't
| reasonably make use of funds. It's not clear how much of
| that is actually related to the business cycle and how
| much is related to MMT, regardless of what adherents
| would have you believe.
| FuriouslyAdrift wrote:
| This is the result of demographic crash and stagnation
| more than anything else...
| hgomersall wrote:
| You mean interest rates don't necessarily control
| inflation?
| wbl wrote:
| How is that working for Argentina or Turkey?
| dennis_jeeves2 wrote:
| 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.
| gruez wrote:
| >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?
| eru wrote:
| Huh? What does this have to do with inflation at all?
| dllthomas wrote:
| Unless I miss something, it's very much not a standard
| measure of inflation. That said, leaning on that "at
| all": If wages are stickier than expenses, then the gap
| between wages and expenses will represent recent
| inflation to some degree.
| Polygator wrote:
| 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.
| eru wrote:
| For the interested https://en.wikipedia.org/wiki/Interbank_le
| nding_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.
| IAmGraydon wrote:
| 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.
| eru wrote:
| 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.)
| IAmGraydon wrote:
| The Fed directly sets the Overnight Rate, also known as the
| Federal Funds Rate. It's the rate at which banks can borrow
| from one another overnight to satisfy reserve requirements.
| This rate indirectly affects the interest rate of all other
| lending instruments because the higher cost of overnight
| bank to bank lending is passed on to the customers in the
| form of higher loan rates, credit card rates, mortgage
| rates, etc.
|
| The Open Market Operations you described (completely
| different from the Overnight Rate) are a form of stimulus.
| Because money always seeks higher risk-adjusted returns,
| the Fed will buy treasuries, which drives down their yield.
| This makes them an unattractive investment, so the money
| goes where it can get a better risk-adjusted return. That's
| usually in the market. So by adjusting treasury note
| yields, they can stimulate the economy. Furthermore, those
| treasury bonds are bought with printed money, so this is
| effectively a way to inject massive amounts (trillions of
| dollars) of printed money directly into the economy. It's
| pretty crazy when you think about the power that these
| policies have.
| TeaBrain wrote:
| They were entirely wrong about mechanism of setting the
| interest rate through the discount and fed funds rate, but
| this description also isn't comprehensive. The feds buying of
| treasury bonds isn't just to push them down, but is also a
| mechanism for increasing the monetary supply through the
| expansion of the fed's balance sheet. This mechanism for
| increasing the monetary supply is also why the linked article
| doesn't appear to be accurate either, as they don't seem to
| understand that the fed does have the ability to manipulate
| the monetary supply through its balance sheet.
| insane_dreamer wrote:
| That's just one mechanism, but not the primary way in which the
| Fed controls interest rates.
|
| The Fed is a large provider of short-term loans ("fed funds")
| to cover interbank exchanges.
|
| It also is the lender of last resort and lends to banks
| directly ("discount rate").
|
| By changing these rates, the FED can influence the rates the
| banks charge each other for loans, and down the line to
| consumers.
| xadhominemx wrote:
| You are correct. Striking how many HN commentors are so often
| confident and yet wrong...
| mbar84 wrote:
| 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.
| insane_dreamer wrote:
| 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.
| rf15 wrote:
| You are wrong. Striking how many HN commentators are so
| often confident and yet wrong in their assumption that
| everything is about the US.
| yamazakiwi wrote:
| It's easy to see why many commentators on a US company's
| forum would make said assumptions.
| hansvm wrote:
| > Central banks work this way
|
| >> Here's a biggish counter-example, setting fiscal
| policy for 25% of the world's economic output
|
| >>> Right! How could the other poster have possibly
| missed that?
|
| >>>> There are other central banks. Ignorant Americans...
| jmyeet wrote:
| > Simplified: the central bank decide on an interest rate that
| they want to see.
|
| This is incorrect.
|
| Using the US central bank example, the Fed has a target for
| inflation. It uses interest rates to try and hit that target.
| If inflation is higher than 3% the Fed will raise rates to cool
| the economy.
|
| The Fed sets interest rates directly because lending money to
| the Fed is viewed as "risk-free" (as the US government has
| never defaulted on a debt). So if the Fed offers a risk-free
| 4%, banks will need to offer more because they are not risk-
| free. So banks no longer really lend savings out for loans.
| They borrow money and lend it out at a higher rate (eg
| mortgage-backed securities).
|
| So when you could get a mortgage at 2.5%, it was because the
| Fed was offering 0%. When the Fed offers 5%, mortgage rates
| will go up to 7-8%.
|
| There is another mechanism that the government could use to
| control inflation: fiscal policy, specifically taxation. A
| criticism of monetary policy to control inflation is that it's
| indiscriminate. People will go out of business and lose their
| houses. Taxes only target profits.
|
| So in 2021-2022, we should've just passed a windfall profits
| tax of 80%. That would've cooled off inflation real quick and
| given the governments funds to distribute to those most
| adversely affected. But that will _never_ happen because the
| corporations and wealthy who own both parties will never stand
| for wealth redistribution to the poor.
|
| They will however demand wealth be transferred from the
| government to the rich.
| rpmisms wrote:
| The false equivalence of a profits tax and redistributing
| wealth to the poor is quite funny.
| G3rn0ti wrote:
| > 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.
| CraigJPerry wrote:
| >> 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.
| G3rn0ti wrote:
| > The onset of inflation correlates more closely with
| global energy supply shocks than with changes in QE policy
| or "printing" money in Covid stimulus.
|
| Hmmm. [1]
|
| > USA, the UK, Aus etc and haven't had for a number of
| years at this point
|
| Indeed, the US abolished the 10% reserve requirement in
| 2020. Crazy. I hope you guys also save in inflation hedges.
|
| [1] https://fred.stlouisfed.org/series/M2SL
| abracadaniel wrote:
| We're also currently in a period of Quantitative Tightening
| as we slowly undo the QE done during covid, which should
| have a deflationary effect. But who knows over what time
| period and with what magnitude.
| CraigJPerry wrote:
| > 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...
| jpkoning wrote:
| "What happens next is that they buy and sell government bonds
| in the open market."
|
| This describes how central banks operated in the U.S. before
| 2008 and in Canada before the 1990s. The Federal Reserve and
| the Bank of Canada both set a target for the overnight interest
| rate, and then they hit that target by doing open market
| purchases (or sales) of bonds, effectively adding funds to (or
| draining funds away from) the overnight lending market. By
| changing the quantity of funds, they influenced the interest
| rate.
|
| What changed is that both central banks introduced interest
| payments on balances that banks hold at the central bank.
| Previously, these balances earned 0%. With this new tool, they
| could directly set the overnight interest rate by adjusting the
| rate paid on these reserves, eliminating the need for regular
| open market operations.
| lbotos wrote:
| You make it sounds like they aren't doing regular open market
| operations, but as I understand it... they still do?
|
| https://www.newyorkfed.org/markets/domestic-market-
| operation...
| flanked-evergl wrote:
| I live in Norway, most people I know in private life that are of
| working age do not actually work, and for the most part they have
| better lives than I do, and I do work. The amount of people on
| sick leave have absolutely skyrocketed. 60% of welfare benefits
| in Norway go to immigrants and the population in cities grows
| faster than new homes are built.
|
| The causes and solutions of inflation are not complex. People
| just don't want it fixed.
| JackYoustra wrote:
| Seems like most people work? Who do you hang out around?
|
| https://data.worldbank.org/indicator/SL.TLF.CACT.NE.ZS?locat...
| labster wrote:
| I wonder if anyone left his uncut so he could show it off later?
| It would certainly be more attractive to numismatics later on.
| dathinab wrote:
| > 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)
| flanked-evergl wrote:
| Fixing inflation is simple, people keep voting for it to not be
| fixed, so the inflation remains and gets worse.
| BJones12 wrote:
| Yes it is. It's the biggest wage theft in history.
| tantalor wrote:
| 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
| akira2501 wrote:
| > quite a fair way to do it
|
| Are your parents retired? Ask them if they think this was fair.
| neilwilson wrote:
| 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.
| dr_dshiv wrote:
| 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."
| pjc50 wrote:
| > 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.
| marcosdumay wrote:
| Ok, you mean on the US...
|
| Keep in mind that the US government (like almost the entire
| world) has control of inflation, and through more means than
| you will think of.
|
| Anyway, all of those are real factors, but inflation is a
| monetary phenomenon. Those two don't need to have any kind of
| correlation.
|
| Personally, I have not follow US news closely enough to
| understand what Trump wants to do with monetary policy.
| dfxm12 wrote:
| In addition to tariffs, expelling millions of people out of the
| country will have inflationary effects as well, in many
| different ways [0].
|
| 0 - https://www.nytimes.com/2024/11/13/business/economy/trump-
| im...
| nabla9 wrote:
| >Today, we control inflation with changes in interest rates, not
| changes in the quantity of money.
|
| That's not full truth. In the last 20 yeas central banks do their
| big and sudden moves using "Open Market Operations". They buy or
| sell money like assets in market and effectively increase or
| limit the quantity of money.
| atq2119 wrote:
| Open market operations are the mechanism by which the interest
| rate is controlled.
|
| Basically, the central bank sets an interest rate target and
| then performs open market operations until the interest rate
| matches the target.
|
| That obviously affects the quantity, but the point is that the
| target is the interest rate. The quantity just ends up being
| whatever happens to be necessary to hit the interest rate.
| nabla9 wrote:
| The target is inflation in both.
|
| When you reduce the volume of assets available, or the price
| renting the asset, you increase it's value. In this case the
| asset is money.
|
| Market interest rate is a signal how effective the action is
| long before inflation statistics is available.
| readyplayernull wrote:
| It all comes down to math:
|
| https://stephaniekelton.substack.com/p/how-to-cut-2-trillion...
| openrisk wrote:
| > 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. Voila! 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 mechanism) but eliminating
| risk-free money for anything beyond 3 months seems like very...
| short-termist? No idea what kind of volatility that would do to
| the broader financial / economic system (including e.g.
| mortgage finance) but somehow it doesn't sound good.
| sailfast wrote:
| 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.
| Yawrehto wrote:
| I wonder what the cleansing element of it in Finland was, given
| that they voted to join the Axis.
| Seasandthequote wrote:
| 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
| noinsight wrote:
| Finland did cross the old borders in parts, but we
| specifically didn't participate in the Siege of Leningrad and
| refused all German demands for assistance.
| int_19h wrote:
| 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.
| ..
| AcerbicZero wrote:
| Axis>Comintern
| misja111 wrote:
| I guess it refers to collaborators with the Russians?
| enra wrote:
| Soviets attacked Finland, and brought it in to the war. Finland
| didn't want to become a part of Soviet Union (btw no-one did
| willingly) and Axis was fighting against Soviet Union.
|
| Enemy of your enemy is my friend.
| krupan wrote:
| 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
| commercial banks and companies like PayPal to impose temporary
| quantitative freezing on their clients' accounts, but unlike
| Finland's 1945 blockade, the authorities will be able to rapidly
| and precisely define the criteria, say by allowing for spending
| on necessities -- food, electricity, and gas-- while embargoing
| purchases of luxury cars and real estate"
| marcosdumay wrote:
| 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.
| hackernudes wrote:
| 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.
| semprity wrote:
| Indeed makes my skin crawl. How can one reasonably protect
| himself from such draconian freezing? Asking for reasonably,
| not bunker full of gold bars.
| carlosjobim wrote:
| Bunker full of gold bars. Or foreign currency. Or silver.
| int_19h wrote:
| 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.
| troyvit wrote:
| I agree, and when I see foreign currency as an option I
| think of two possibilities. First, moving to the country
| that hosts that currency. Second, waiting for the US
| currency to slide into obscurity and switching to
| whatever takes over as the global currency.
|
| Both are tough choices that rely on either too much time
| or too much space.
| misja111 wrote:
| Bitcoin
| mandibles wrote:
| The quiet part is that you will not be able to spend on those
| necessities when your politics no longer align with the regime.
|
| Total control over money is a guaranteed path to
| totalitarianism.
| lutusp wrote:
| > ... 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 is today either dead or dying, largely
| replaced by chatbot-generated prose, this kind of complaint might
| be likened to critical assessment of a cave drawing.
| poincaredisk wrote:
| This is a standard English idiom:
| https://dictionary.cambridge.org/thesaurus/cut-in-half. You may
| not like it, or think it's illogical, but that doesn't make it
| incorrect.
| Izkata wrote:
| > 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.
| hatthew wrote:
| 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?
| yieldcrv wrote:
| a bunch of failed monetary experiments that the author gives
| charitable explanations for
| a3w wrote:
| Same link, but with enabled TLS:
| https://jpkoning.blogspot.com/2024/11/setelinleikkaus-when-f...
| aucisson_masque wrote:
| Interesting read but the theory about cash going away in 10 years
|
| > Cash, which is awkward to immobilize for policy reasons, will
| be gone in a decade or two
|
| Is a risky one. The are many culture where cash is the way to
| pay, you use credit card for internet but everything else is
| cash. I'm thinking of North Africa, which we have many of these
| people in Europe. There are also the old people, of course they
| will be gone in 10 to 20 years but then then I'm not sure it
| would be ok with the general population. Removing cash would have
| to bring advantage to be accepted.
| dijit wrote:
| Yet, in Sweden, I have legitimately forgotten how money looks.
|
| I haven't handled cash in about 7 years (I'm not even
| embellishing).
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