Topic: Real Inflation only happens when Central Banks print High Denominated Notes? - page 2. (Read 409 times)

No, printing a higher denominated note is just a recognition that the inflation is out of control, after all we know governments do not like the privacy that cash brings, in fact there were 1000 dollar bills before but they stopped printing them precisely for this reason.

However governments can hide inflation by avoiding this, as many people in developed countries are using electronic money already, something that increased due to the pandemic, also most of the money that was printed went to different markets like the stock market and this one and not towards common products and services reducing the real inflation significantly.

What we are missing out on this is that if you own an asset you are getting richer, whereas if you own fiat or working for fiat then you are getting poorer no matter how much you are making, because you are now poorer compared to your old self even if you are not technically poor. Stock market is not the solution, it's assets, if you own something that is not tied to fiat, and it is something valuable all of its own then you are going to be rich.

It is all the Robert Kiyasaki I have been watching talking right now but he is right, and crypto is not a bad solution neither, just like gold, and house or business or stuff like that which you can own. Getting a loan is a bad thing if you are doing it short term and have no income, buying a house to live in with loan is not easy for example, but getting a loan to earn more instead and getting a waaaay long term, like 25 year term loan that helps you profit? That is the way to become a rich person.

I remember 20 years ago a can coke was like 30-50 cents. Now its over $1 each.

When you say without anyone noticing too much of inflation then that means prices has increased very slowly over time so people didn't notice it like that can of coke example I gave above. This is called slow inflation meaning the fed are meeting its annual 2-3% inflation target correct?

If for example a can of coke went up to $10 each overnight from tomorrow then people will notice inflation straight away right?

So if the fed are meeting its annual inflation target like they have been for decades then what's up with all these inflation hedge services? Is there a need for a inflation hedge when inflation is slow and gradual over decades?

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But how many of those high denominated banknotes are in circulation in those societies there and are they rare?

In the UK the highest denominated note is £50 but its rare to see this banknote. Even retail banks in UK stock less of this high note due to security reasons.

In Zimbabwe you see everyone carrying $100 Trillion Zimbabwe dollar notes.

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Trees are not scarce and is a raw material. Trees can be replanted for more trees yet lumber prices were at all time highs weeks back. Is it because of inflation? Production nowadays is suppose to be cheaper compared to decades ago because technology and Ai and automation nowadays makes production more efficient, Automation requires less manpower so should be cheaper right so prices rising due to inflation not because of production costs?

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The US can lose its world reserve currency status when scary inflation happens however you said the people at the top wont let it happened. So this means they are manipulating inflation data to make it look like there's no high inflation? If they can get away with it by keep doing this manipulation then how can Bitcoin a inflation hedge compete with this high level manipulation?

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In high/hyper inflation countries there's no metal coins there for change after buying something because every price there is highly inflated price anyway that is paid for in notes only and you get change back in notes only not in coins?

So the true benchmark test to see whether a country has high/hyper inflation is walk into a candy store there and buy a penny sweet with a $1 and you get 99cents back in change and if you do get change back in metal coins then that means there's no inflation worries in that country?

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If central banks takes the cashless society CBDC notes then paper money notes bills wont exist anymore, this means 100% of the money supply will be on ledgers/derivatives correct?

If CBDC's can be on their centralized digital blockchain ledgers then can inflation still be possible on this new money system where centralized entities can easily manipulate the data on the centralized blockchain or delete entries from that blockchain or easily reset that centralized blockchain to start fresh again after a financial crash? Similar to like a factory reset of a phone after a system malfunction or crash but lose all data.

Otherwise can data on a centralized blockchain be backed up but then again the backed up data can be edited/manipulated easily.

[moderator's note: consecutive posts merged]

Yes you are right striking off a few zeroes is always better than issuing high-value notes but it's only a temporary solution to get the economy going it cannot be a solution for hyperinflation at all. I think the only successful way we have been able to solve the hyperinflation crisis is by dissolving the national currency altogether and using any stable foreign currency in place of that to alteast ensure equitability among all the citizens because in a hyperinflationary situation those among the top tiers who receive their incomes from the government directly are in a much better situation as they spend it before new money supply has kicked in. Also, black marketing and Hoarding by bureaucrats can be stopped using this method only. Hyperinflation is a very difficult situation to handle and especially for the very intelligent economists of that country because of whom the country is in this situation in the first place.

I guess the main reason for the higher denomination note is to reduce the amount of notes in circulation. So instead of bank giving a customer $10,000 in multiple notes (10,000 pieces of  $1 notes)  for example, the bank simply give the customer a single $10,000 note.   That could actually make the owner of the note to spend it easily compared to having the note in many pieces. There are several factors that can actually contribute to inflation but the major one is printing more money than is required and using the money mainly for consumption.  If you could print alot of money and use it mostly for producing basic goods(good ones) that can easily be replicated especially in agriculture, you could easily reduce inflation if the money is distributed based on merit(true merit... not the kind of merits we see around on the internet,lol)

 I however don't think it's good idea use money printed in this manner for scarce resources,unless the printer is a saint and knows what he/she is doing


In regards to the "Starving kids", blame it on the Fiat system, assuming the country kids are actually "starving" . You may need some time to check out the definition of the word "starving" and see if it fits in the context of that part of your post

If they print a lot of smaller denominations, I think it will still have the same effect as that. I think inflation could be prevented if the spending is being monitored and controlled and the wages are growing in parallel with inflation.

Highly improbable! The inflation is nowhere at the point of 100$ dollars bills would be obsolete and you wound need 10x the value on a bill, this is not something that will happen in the near future.

Another thing is that already we're stepping towards digital money (not bitcoin!), cards and bank transfers for larger sums, and the need for bills with the large denomination is simply not there, the 500 Euro bill was a flop, forgetting about the claims of it used for smuggling and other shady deals there was simply no real-world usage for it, cash purchases are limited in most of the EU and shopkeepers would roll their eyes when seeing one.

Long before a 1000$ bill will be printed probably less than 5% of the population would be still paying with cash, and nobody would really care about them having to carry 50 bills instead of 5, the authorities at that point would be more inclined to shut down cash operation and tax evasion than making life easier for them.

I have always argued that it is better to redenominate the currency rather than printing high denomination banknotes. Because when they print banknotes for 100 trillion or 200 trillion, it makes calculation so difficult. Zimbabwean dollar itself was redenominated three times, before it was discarded altogether. Recently Venezuela, São Tomé and Mauritania are some of the countries that tried redenomination. But in case of Venezuela, the impact lasted for only a few months. If the inflation can't be controlled, then these measures are just useless.

Its a fundamental question of supply and demand.

If gold were as plentiful as the sand of the world's beaches and deserts, the high supply would greatly diminish its value. When fiat is overprinted, the same effect occurs. Exclusiveness is a factor in determining value. A limited edition run of 200 units of gold or silver coin. Would probably be more valuable than a limited run of 20,000 units.  We see these trends with collectibles. The more scarce and rare a collectible is, usually correlates with higher value.

A stable supply of fiat will retain its value. While an overabundance of supply (massive printing volume) can carry the opposite effect.

Higher denomination bills are mainly printed when it becomes inconvenient to haul truckloads of bills to pay for basic items like loaves of bread (as occurred with zimbabwe hyperinflation, pictured below) with current denominations in use.

This actually is inversely proportional! Inflation was itself the reason why Zimbabwe had to print a $10 Trillion Note. A need for higher currency notes arises only when the purchasing power of the country has risen which means the currency has got devalued by a certain proportion. One Argument you can give is that high denominated notes will add quickly to the overall money supply but that isn't really the truth because when printing takes place they have a set target of reaching a particular value and then they decide how will they split the denominations. So Either way what you are saying is absolutely wrong.

You have it backwards. Large denomination bills are the result of inflation.

If prices increase by 10x, then people will want $1000 bills for what they previously used $100 bills for and smaller denominations become useless. So the government must print higher denomination bills.

Also, note that about 10% of the money in the U.S. exists as coins and bills. The rest of the money exists in bank ledgers.

Lol! It's other way around! Higher denominations are printed as a result of inflation. Printing higher denominations is not a reason for inflation. The examples you have given for Zimbabwe, has started printing billion dollar notes only after Hyperinflation kincks in and people were literally carrying a bucket full of money to purchase their daily groceries. So printing a hundred dollar bill or thousand dollar bill is not an indication to inflation, rather it is a direct result.

It may seem very scary looking at it nowadays but in reality, the economical state of the USA isn't that bad yet to be comparing it to Zimbabwe. And even if there already is inflation that is a bit high than what the people on top wants to show, I doubt that it'll get so worse that it'll bring the US to its knees. These people on top won't let that happen since as this happens, the US will lose influence over a lot of things and so will they. Now about its possible effects on bitcoin, your guesses are just as good as mine. Speculaing is the only thing we can do about that and hope our worse fears don't ever happen.

               You have to understand that there many causes for inflation. For instance, it can occur when services or products increase price due to the high costs of production in which the culprits are raw materials being scarce and manpower. And thus makes people willing to pay higher prices for the same products and services. The printing you have mentioned isn't really the cause but instead, one of the results of inflation. And like others mentioned, Zimbabwe is experiencing a severe case of inflation leading to such means. It's effects on bitcoin may rather be good though since this just means more inflow of investments due to fear of heavy inflation.

That's true. It is foolish to blame the banknotes for inflation. If that was the case, then Switzerland should be having one of the highest inflation rates in the world. Ever heard of the CHF 1000 banknotes (equivalent to $1090)? But Switzerland has a near-zero inflation. Their currency is one of the strongest in the world and the exporters there recently had to request the government to devalue the Swiss Franc. Similarly, both Singapore and Brunei have $10,000 banknotes and yet have some of the lowest inflation rates in the world.

High denominated notes are printed after inflation takes affect. I don’t think govt print high denominated notes and after that inflation happens. When people have more money (less value of course), they need high denominated notes for easier carrying. Zimbabwe didn’t have that trillion dollar note before inflation, it was printed after the inflation happens in unusual way.

No. Inflation can even happen without anyone else noticing it too much. In fact, I truly believe we are in that stage right now.. where everything gets more expensive every month but not so expensive it becomes obvious. It's much more of a subtle change that affects overall a lot of people already.

Yeah, sometimes this banknote thing happens.. But not all the time. Hyperinflation can happen at a pace so fast even money printers would not be able to keep up with it. Don't wait for new banknotes to come up in order to notice the bad economical events happening. When they start printing them, it's already gonna be too late.

So you reckon we will see a $500 to a $1000 dollar note soon not far off in the future?

But $500 or $1000 notes/bills or even a $1000000 note is nothing compared to $100 Trillion Zimbabwe dollar note.

Theres a thousand billions in 1 trillion, theres a thousand millions in 1 billion so even a printed $1m US dollar note bill is nothing compared to Zimbabwe currency.

The US $ went off the gold standard in the 70s and the $100 US note bill came into existence over 100 years ago from 1914. If the $100 US note bill can still remain leader and king for over 100 years and still remains the highest denominated bill note for to this day then where is the high inflation

All non-backed fiat currencies will eventually experience some level of hyperinflation because the incentives to keep printing are just too high. Imagine having the ability to create money out of thin air with minimal restriction, oversight and effort. Wouldn't you keep printing? Especially when faced with economic distress as seen with the covid19. In other words we will see bigger bank notes in the near future.

Probably keep in mind that high inflation can just be something double digits like 12%+. Zimbabwe's 500%+ inflation shitshow is just a whole different beast hence why they literally have a 100 trillion dollar bill. I don't think it's realistic for us to expect the United States to reach inflation rates THAT bad. (though I'm not saying it's impossible, just a bit far-fetched)