Typography

By Harcourt Romanticist [ source ] This post is dedicated to the protesters in Hong Kong. I am awed at how courageous they have been in the face of continuing pressure from China's Communist party. The same regime is complicit in persecuting Uighur Muslims and imprisoning two Canadians , Michael Spavor and Michael Kovrig. There are all sorts of creative forms of non-violent mischief that citizens can use to protest against oppressive governments. This post explores a sub-category of non-violent mischief: monetary mischief . Money stamping One of the most popular forms of monetary protest is to overstamp currency. This involves stamping banknotes or countermarking coins. Coins and banknotes are vital to trade and circulate widely. Which makes them a great way to advertise a cause or complaint. The message automatically propagates itself via hand-to-hand commerce. The monetary authorities will react to the threat by hastily withdrawing marked notes and coins from circulation. When b...

I recently wrote two posts for the Sound Money Project about Swedish monetary innovation. The first is about an effort by the Swedish central bank—the Riksbank—to force retailers to accept cash , and the other is about the e-Krona , a potential Riksbank-issued digital currency. This post covers a third topic. For many years now those of us who are interested in cash, privacy, and payments have had our eye on Swedish banknote demand. The amount of paper kronor in circulation has been declining at a rapid pace. Many commentators are convinced that this is due to the rise of digital payments. Since Sweden is at the vanguard of this trend, it is believed that other nation's will eventually experience similar declines in cash demand too. But I disagree. While digital payments share some of the blame for the obsolescence of paper kronor, the Riksbank is also responsible. The Riksbank betrayed the Swedish cash-using public this decade by embarking on an aggressive note switch.  Had it cho...

Two years ago, Indian PM Narendra Modi suddenly demonetized all of the nation's  ₹ 1000 and  ₹ 500 banknotes. His stated goal was to exact justice on all those holding large amount of dubiously-earned cash. But since these two denominations constituted around 85% of India's currency supply, the demonetization immediately threw the entire nation into chaos. After suffering from a nine-month note shortage, enough new notes were printed to meet India's demand for cash. But in the interim, what had happened to Indians' demand for cash? Did their experience with demonetization lead them to hold less cash than before, or did they simply revert to their pre-demonetization habits and patterns? I wrote an article in September 2017 dealing with these questions. With another year having passed we now have more data—so I'm going to provide quick update. My claim is that a demonetization gap continues to exists. This gap is evidence that the cancellation of  ₹ 1000 and 500s ha...

Production of the European Central Bank's €500 notes is scheduled to come to an end later this year. But a chart of the quantity of €500 banknotes in circulation (see below) reveals something odd. The supply of €500s began to plummet way back in early 2016, long before note production was supposed to be halted. What gives? It was back on May 4, 2016 that the ECB officially announced that it would stop printing and issuing the €500 note, one of the world's most valuable banknotes ranked by purchasing power. The reason it gave was concerns that the €500 "could facilitate illicit activities." You may remember that this was in the midst of ex-banker Peter Sands screed against high denomination notes, echoed by  economist Larry Summers and later amplified by Ken Rogoff's book The Curse of Cash . While the €500 is undoubtedly popular with organized crime, there is some evidence that regular people use €500s, as Larry White points out here . In the recently published ...

Narendra Modi's demonetization scheme, which involved the sudden cancellation of all ₹1000 and ₹500 rupee notes, was designed to hurt those in the underground economy who had stashed away large amounts of cash. But many smaller cash users got caught up in the blast radius. Has Indian behaviour surrounding cash changed? More specifically, what long-term impact has the painful demonetization process had, if any, on the population's preferences for holding cash? Luckily for us, we have a great data set for evaluating this question: the supply of currency in circulation. If the propensity of Indians to hoard notes has changed, we'd expect to see a long-term reduction in currency outstanding relative to trend. Before we take a look at the data, I want to make one point on the economics of paper money. The old phrase "cranking up the printing presses" is a bad one because it implies that central bankers play an active role in deciding the quantity of paper money in the...

Data on the world's biggest monetary event of the 21st century—Narendra Modi's demonetization—continues to trickle in. The Reserve Bank of India's just published its annual report ( pdf ) and I'll just say this straight out—I'm genuinely surprised. Out of the ₹15.44 trillion in paper currency that was demonetized by Modi last November, ₹15.28 trillion, or 98.96%, have been returned. My guess would have been that a much smaller proportion of India's monetary stock made it back to the RBI, maybe 92-95%. For those not familiar with rupee prices, I'll translate the above numbers into US dollar terms. Back on November 9, 2016, $240 billion worth of rupee notes were declared to be invalid. By June 2017, only a small 1.04% sliver of this—$2.5 billion—was still unredeemed, far less than the $15-30 billion many of us though would have been left stranded. (I'll use dollars from here on since it is easier for the international community to understand.) A glance at ...

One of the world's most notorious cases of counterfeiting was the 1925 Portuguese banknote crisis, when Artur Virgilio Alves Reis managed to pass off 200,000 fake five-hundred escudo notes, worth around £56 million in 2016 terms. When the Bank of Portugal discovered the counterfeits in December 1925, it announced an aggressive demonetization of the five-hundred escudo note, giving citizens just twenty days to bring in old notes for redemption. By then, the damage had been done. Reis had managed to increase Portugal's supply of banknotes by 5.9%, spending the equivalent of 0.88% of Portugal's nominal GDP into circulation! (More here .) An aggressive note demonetization in the face of large-scale counterfeiting is a thoroughly justified response as it immediately puts a halt to the problem. In this context, it's worth revisiting the world's most recent attempt to combat counterfeiting with an aggressive demonetization — India PM Narendra Modi's forced recall of th...