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?
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.
> The real problem is deposits in foreign banks in foreign currencies.
Well, money abroad doesn't contribute to local inflation, does it?
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.
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.
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
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.
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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.
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.
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.