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 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.
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.
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.
> 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.
> 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.
Nowadays debasement and the resulting inflation comes from loans creating cash flow out of thin air. The 20% debasement has turned into the functionally zero percent interest rates. The ritual of bringing coins to the mint for exchange has turned into investments. The feudal lord's turbocharged revenue has turned into the profits of billion dollar corporations.
Is that not exactly the same? The feudal lords took 100 coins, made 120 coins out of them (while both keeping the same value and claiming that they can make more coins because they have different value), which is basically exactly printing money.
It's an interesting hack where the value of a coin and the cost of a coin (the amount of silver in it) were decoupled, and they pretended that the amount of silver in it is what mattered (hence they kept the same total amount of silver) but actually the value of the coin mattered (because they created value out of thin air by giving you 20 extra coins that were each still worth one pound (or whatever) each).
I don't understand why they didn't just mint a bunch of silver coins of the lower content and spent them themselves, effectively buying coins for 20% less than they were worth. Maybe they didn't have enough silver, or didn't want to create two kinds of the same coin with different silver content each.
The USA got rid of silver in its coins in 1964 and I believe copper in its pennies recently.
The modern version of debasement is in the feds balance sheet, they've gotten so efficient there's no need to affect the physical substance.