[pavlov]

Some democracies in the 20th century have tried a form of cash debasement to fight inflation.

The example I’m familiar with is from Finland in 1946, when the most popular and largest circulating bills were required to be physically cut in half and lost 50% of their upfront value.

The Wikipedia article seems to be only in Finnish: https://fi.wikipedia.org/wiki/Setelinvaihto

The idea was that the left half of the bill remained valid cash (although not for long — you needed to exchange it for a new type of bill within a few months). The right half of the bill became effectively a treasury note with three-year maturation: in 1949 you could present it to a bank and get your money back from the government, but no sooner.

The operation was expected to reduce inflation, but apparently it didn’t work out that way. It did provide the Finnish government with about half of the funds loaned that year, but it was very unpopular among voters and never repeated.

[xandrius]

That's just such an interesting idea and approach. It's one of those things you'd never think someone would go from ideation to actual implementation, and yet it happened.

[ptsneves]

Honestly it feels like a good idea in principle. Of course people are not rational economic actors and ignoring it has bad outcomes.

1. This is actually a politician’s job, to explain. If you don’t explain well you get kicked out and your electorate doesn’t buy your ideas. Don’t complain about the people being stupid, they are real and wishing they were different or demeaning the people is totally useless.

2. The idea of fostering savings in a time of inflation is really cool, and an original way getting people to buy in your policy. That it did not work sounds like a great topic for research, including experiments.

[bobthepanda]

Probably the most successful was the Plano Real in Brazil: https://en.wikipedia.org/wiki/Plano_Real?wprov=sfti1

> According to economists, one of the causes of inflation in Brazil was the inertial inflation phenomenon. Prices were adjusted on a daily basis according to changes in price indexes and to the exchange rate of the local currency to the U.S. dollar. Plano Real then created a non-monetary currency, the Unidade Real de Valor ("URV"), whose value was set to approximately 1 US dollar. All prices were quoted in these two currencies, cruzeiro real and URV, but payments had to be made exclusively in cruzeiros reais. Prices quoted in URV did not change over time, while their equivalent in cruzeiros reals increased nominally every day.

[fragmede]

how well did that work in practice?

[bobthepanda]

It did break hyperinflation, and it is the currency still in use today. https://en.wikipedia.org/wiki/Brazilian_real?wprov=sfti1#His...

> Soon after its introduction, the real unexpectedly gained value against the U.S. dollar, due to large capital inflows in late 1994 and 1995. During that period it attained its maximum dollar value ever, about US$1.20=R$1. Between 1996 and 1998 the exchange rate was tightly controlled by the Central Bank of Brazil, so that the real depreciated slowly and smoothly to the dollar, dropping from near US$1=R$1 to about US$1=R$1.2 by the end of 1998.

[thaumasiotes]

> Some democracies in the 20th century have tried a form of cash debasement to fight inflation.

Cash debasement and inflation are the same thing.