Gandhiji’s second monkey: The ‘see no evil’ principle of most financial literacy programs

June 13, 2018

Another nice piece by Dhirendra Kumar.

He says so called financial literate people are more likely to fall for financial traps:

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High time we televise/record Parliamentary hearings of RBI officials…

June 13, 2018

Just learnt about this from media that RBI Governor appeared before the Parliamentary Standing Committee of Finance. On checking the website of the Committee, just saw this notification.  The RBI Governor has again raised concerns over not having enough powers to regulate public sector banks. I mean it is amazing we are hearing this issue after all these years of RBI regulation.

Anyways, what is also irksome is that we hardly get to hear and read what the RBI Governor (and other RBI officials) says in these meetings. Much of its closed doors. It is fairly a standard practice in other central banks where first public is notified of any such meeting in advance and then the testimony/speech is put on the website. In some cases it is televised as well for people to see.

It is high time that Government/RBI also put up minutes of such meetings and the key statements on the website. Given RBI’s role in the political economy of the country, this is the least expected.



Hayek’s Two Epistemologies: Economics and Sciences in General

June 13, 2018

Nicolas Cachanosky of Metropolitan State University of Denver and Gabriel J. Zanotti of Universidad Austral in this paper try and deconstruct Hayek’s core ideas:

Hayek’s work on epistemology shows a consistent evolution from his early work on economics to his later thought on science in general. Hayek identifies economics as a type of complex phenomena with two important characteristics. Its object of study, human beings, have purposeful behavior, and the information required for the market to be in a situation of stable coordination cannot exist absent a market process in the first place. This results in the question of how is it possible that there is market coordination when the required information is not given to, and cannot be given to, anyone in particular.

Science in general, however, deal with complex phenomena. But, their complexity can be of a different kind. The complexity can be in the output of a phenomena, or on its input or building blocks. Hayek argues that economics has looked for methodological implications in science dealing with a different type of complexity. The result of this is not less than the application of unfit tools to answer the economic problem. A telling implication is the number of decades that economic theory has evolved without paying due attention to the entrepreneur, no less than the driving force behind the market tendency to equilibrium.

Hayek’s work is still driving contemporary research programs and influencing debates and schools of thought. Hayek’s insights offer a different view of the economic phenomena to the one found in formal mainstream economics. This offers both, difficulties in applying Hayek theories to formal theory, but also larger gains from trying to do so.

It is such a pity that we have reduced most economics discourse to Keynes vs Hayek and so on. There is a lot to figure and understand from people who have thought deeply about the subject.

21st century cash: Central banking, technological innovation and digital currencies

June 12, 2018

Of all the stuff one has read on digital currencies, this speech by Fabio Panetta is one of the best. As the Deputy Governor of the Bank of Italy, he provides a lot of clarity on the several issues regarding digital currencies.

First he discusses what digital currency mean in terms of the two functions of money: means of payment and store of value. He says the unit of account does not mean much here as a dollar in Physical notes or a dollar in digital form mean the same thing.

  • Means of Payment: He says central bank digital currency will be beneficial for people without a bank account. In terms of payments CBDC will at best just provide competition to already existing private payment systems. It will also reduce cost of cash but then costs of computing will rise.
  • Store of Value: Currently there are costs to storing physical money which will disappear with CBDC. However, there could be issues as CBDC could compete with  bank deposits leading to so called runs on banks as mentioned by other central banks. Thugh, he does not see this as a problem as banks provide much wider services and people will not easily transfer their deposits.

One needs to balance the risk and benefits:

The risks and benefits of CBDCs are two sides of the same (digital) coin, related to the role of money as a means of payment and a store of value. Recourse to a CBDC as a means of payment may well have benefits, but their precise nature is uncertain and they may still be too small to justify the introduction of a
digital currency. Moreover, the issuance of a CBDC may become less positive on balance if we take into account the potential effects on the demand for commercial bank deposits. The risks and benefits would be  affected by the characteristics of the CBDC, but in any event the risks would not disappear altogether.

The business case for introducing CBDCs remains at best unclear. However, like all issues related to technological innovation, the costs, benefits and risks of digital currencies are likely to change rapidly in the future. This suggests that central banks should continue to examine the potential effects of digital
currencies. Indeed, many of them are currently engaged in research and technical experimentation with a CBDC. The Riksbank, Bank of England, and Bank of Canada, to name a few, are actively analyzing the issue. Some have gone even further, such as the Central Bank of Uruguay, which has launched a pilot
project.14 At Banca d’Italia, we are also studying how a CBDC would impact our financial system and monetary policy, and we are working within the Eurosystem on trials using DLT, which might prove useful for a digital currency. Researchers are also actively reflecting on CBDCs. Today’s conference is a notable example.

Then he discusses some open issues like anonymity aspect of currencies:

Probably the most important issue is whether the digital currency should be traceable or whether it should be designed to guarantee, to the extent possible, anonymity. Cash has always been an incredible instrument: it allows for third-party anonymity in transactions and leaves no trace. While this implies that it is an effective means of payment for illicit activities such as money laundering, the financing of terrorism or tax evasion, it also ensures privacy for its users.

The possibility of tracing our digital transactions may have important economic and ethical implications. Imagine for a moment that payments data suggested that spending on alcohol and the probability of defaulting on a loan are positively correlated. Based on such evidence, a bank might decide to reject a loan demand by an applicant with high expenditure on alcohol, even though the correlation does not reflect any ex-ante causal relationship between these two variables but could be simply due, for example, to an ex-post common psychological factor.16 Though it may be over simplified, this example emphasizes that we need to address carefully the privacy issues that may stem from digitization, and in particular from the introduction of a CBDC. Today these risks are still
limited, as in most countries retail transactions are concluded mainly with cash, and the record of our electronic payments represents an imprecise screening device. This is changing rapidly, however.

Just who should decide on the degree of anonymity associated with the use of a CBDC? Clearly, this is more than just a technical issue, and as such, the choice does not belong to central banks alone but also to the political sphere. We need to think carefully, right now, about how to make the introduction of a CBDC fully compatible with the rights of individuals and about how to square the increasing availability of information on the private lives of each one of us in relation to our political views, state of health, or sexual orientation, with the protection of our personal freedom and with the rules that govern the functioning of a modern liberal democracy.

Hmm. This is an important public policy question.

Lots more in the speech.

Gift receiving at the central bank: Bringing transparency and tightening the rules…

June 12, 2018

Croaking Cassandra Blog posts on this issue of giving gifts to the central bank. One remembers how during Diwali most of the financial firms competed to give the classiest of gifts to the central bank officials. The idea was to be counted and get to know the regulator and if possible be in the favored books. The practice was stopped some years ago and not sure what the status is of today.

It seems in New Zealand, the central bank has released a list of gifts received since July 2016. The gifts vary from a computer mouse to a jar of pickle to movie tickets and what not.

The blogger says that this should not be acceptable at all even for courtesy sake:

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India has entered a regime of “permanent surpluses” in most crops and facing a great depression…

June 12, 2018

Reading Harish Damodaran is a must to get some idea on Indian agriculture.

In this piece, he writes on how there is a surplus in most crops in India. The policymakers continue to think we live in age of shortage leading to familiar responses of quotas and restrictions. What we need is a change in thinking as we are possibly facing a great depression in Indian agriculture:

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Swiss reject the Sovereign Money initiative..

June 11, 2018

It would have been a big surprise if Swiss voted in favor of the much criticised Sovereign Money initiative (alternate view here). In the referendum held yday, they rejected it.

SNB which criticized the initiative fairly openly has heaved a sigh of relief and issue a press note: 

The Swiss National Bank (SNB) has acknowledged the outcome of the popular vote on the sovereign money initiative. The SNB has a constitutional and statutory mandate to pursue a monetary policy serving the interests of the country as a whole. It is charged with ensuring price stability while taking due account of economic developments. The adoption of the sovereign money initiative would have made it considerably more difficult for the SNB to fulfil this mandate. With conditions now remaining unchanged, the SNB will be able to maintain its monetary policy focus on ensuring price stability, which makes an important contribution to our country’s prosperity.


Europe: An economic powerhouse in the future?

June 11, 2018

Amidst all the gloom and doom in Europe, there are some optimists as well.

In this speech, Denmark Central Bank Governor Lars Rhode, shares his more positive  outlook:

Today, I would like to highlight four observations:

First, Europe is better than its reputation. Economic performance keeps abreast with other advanced economies. The rumours of its demise are simply exaggerated.

Second, all major advanced economies will have to adjust to lower potential growth. It’s a fact, as headwind from slowing productivity growth and ageing
kicks in. Europe is no exception. 

Third, free global competition is the main driver of innovation. Europe suffers from an R&D gap relative to global hotspots. But innovation
is not a zero-sum game: Prosperous neighbours do not make Europeans worse off. In fact, productive rivalry stimulates new ideas.

Finally, Europe needs a fully developed Single Market for financial services. The Single Market has been an engine of growth for decades but is still
incomplete. The Banking Union is an important step towards allowing consumers and businesses to reap the benefits from cross-border competition. It will also
be the case for Denmark – if we join. 

He says there are three Europes:

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What it takes to be a human clock under Ramzan?

June 11, 2018

Interesting piece in Quint:

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What makes a central banker a hawk or a dove? What moulds those who change their tune?

June 11, 2018

Interesting paper by Michael Bordo and Istrefi Klodiana:

Narrative records in US newspapers reveal that about 70 percent of Federal Open Market Committee (FOMC) members who served during the last 55 years are perceived to have had persistent policy preferences over time, as either inflation-fighting hawks or growth-promoting doves. The rest are perceived as swingers, switching between types, or remained an unknown quantity to markets. What makes a member a hawk or a dove? What moulds those who change their tune? Michael Bordo and Klodiana Istrefi highlight ideology by education and early life economic experiences of members of the FOMC from 1960s to 2015. This research is based on an original dataset.

…We find that the odds of being a hawk are higher when a member is born during a period of high inflation, graduated from a university linked to the Chicago school of economics (‘freshwater’), and was appointed by a Republican president or by the board of a regional Federal Reserve Bank with established institutional philosophies. A dove is most likely born during a period of high unemployment, like the Great Depression, graduated in a university with strong Keynesian beliefs (‘saltwater’), and was appointed by a Democrat president. Swingers share several background characteristics of the doves, but not always.

In addition we show that, hawks dissent predominantly for tighter policy, doves for looser policy and swingers dissent on both sides. The odds of dissenting for a tighter policy are higher when a member graduated from a university linked to the Chicago school of economics (‘freshwater’). In turn, we observe that FOMC members born during the Great Depression have dissented more on the side of easer policy than FOMC members born before or post Great Depression.


If the first victim of war is truth, then the second is central bank independence…

June 7, 2018

I read this statement earlier from Bank of Malaysia where its incumbent central bank governor-Muhammad bin Ibrahim- has offered to resign. He was appointed for a 5 year term and after the new government coming to power has resigned under some kind of pressure. One is seeing this in several places where if a new government is elected there is some kind of pressure on the incumbent/serving central bank governors. There is a feeling that the new government will like to appoint its “own person” to the helm.

Then I came across this interesting speech by Mr Agustín Carstens, General Manager of the BIS, at the Sveriges Riksbank’s 350th anniversary conference. Given the occasion of the anniversary of the oldest central bank, he covers broad trends (stable ideas) and cycles (changeable) in central bank evolution. One major cycle he highlights is central bank independence:

Despite recent events, central bank independence varies, at least in the choice of means to agreed ends. If the first victim of war is truth, then the second is central bank independence. Variations in independence arise not only from legal but also behavioural sources, such as the timing of the appointment of the central bank head in the political cycle. Most but not all BIS members enjoy substantial independence to pursue agreed goals.

It would be interesting to see which central bank governors were fired or independence lost during wars. However, in today’s times one could say central bank independence is under attack even when new political cycle starts with election of a new government.

Apart from this, the speech has several interesting pointers  on central bank history:

Let me start with four trends in central banking. The bar for reversing any of them looks high.

  1. One trend is from metallic convertibility (as either goal or constraint) to fiat money. Historically, fiat money was at best a temporary war expedient and at worst a breach of trust. Today, institutional credibility grounds price expectations, not gold. The Riksbank deserves credit for having “pioneered non-convertible paper money”.4
  2. Also taking a long perspective, a second trend is from private to public governance of central banks. No one laments the 1947 nationalisation of the Bank of England.5 After its private, for-profit predecessor failed, the Riksbank started as a public institution in 1668.
  3. A third trend is towards the centralisation of the payment system at the national (or regional, as with the euro area) level. A state monopoly of the large payment system “became the international standard by the mid-twentieth century”.6 Only such infrastructure offers finality, so that a payment discharges the debt irrevocably. Today, Fedwire, TARGET2 and the BoJ wire dominate the turnover league.7 The Riksbank’s RIX system settles transactions amounting to Swedish GDP every week.8
  4. A fourth trend is for the central bank to lend in the last resort to relieve financial stress. Whether first done in the 18th or 19th century,9 once this practice begins, it tends to continue. In the Great Financial Crisis, central banks innovated in last-resort lending to non-banks. Internationally, the Riksbank, a pioneer in foreign currency last-resort lending,10 joined a broad effort in 2008 to relieve a global dollar shortage that shrank Swedish banks’ cross-currency funding.11

These trends to a public, centralised payment system backed by last-resort lending leave me sceptical that new technology will displace central bank money. First, like the Riksbank’s ill fated predecessor, private moneys founder on self-serving over-issuance. Second, once market participants have enjoyed finality of payments, they will not abandon it. Third, cryptocurrency creators’ effort to separate money from a trusted institution burdens it with congestion. More use increases the size of the blockchain but decreases efficiency. By contrast, incumbent central bank money enjoys a virtuous circle from network externalities: the more use a money, the greater my incentive to use it. In sum, central bank money enjoys a scalable network: the more the merrier. Blockchain creates congestion: the more the sorrier.

To be sure, central banks will champion new technology, as they have with digital payments. But this would be an evolution of the present publicly run, centralised and digital system.


Useful speech which serves as a short reading on central banking history.

Profile of Donald Davidson: Sherlock of Trade

June 7, 2018

IMF’s Finance and Development profiles Donald Davidson and his etrrific research on impact of railroads from a historic lens:

Trading gold for salt is clearly a thing of the past. But studying the market for salt in 19th century India and the effects on trade of building a railroad led the prize-winning economist Dave Donaldson to important new findings that are relevant today.

“Whether it be by the construction of a railroad a hundred years ago or by opening up to trade with the global economy, I’m fundamentally a big believer in the gains from trade,” says Donaldson, a professor at the Massachusetts Institute of Technology (MIT) in Cambridge, Massachusetts. “Trading between pairs of people, whether it’s between two people who happen to live in the same household, the same village, the same country, or the same planet, is the basic source of economic development. It’s the reason that we no longer live like cavemen.”

How he got into studying economics? He moved from Physics to Economics:

Donaldson did not set out to become an economist or to study trade. Raised in Toronto, he initially focused on physics, completing a master’s degree at the University of Oxford. He was following in the footsteps of his British scientist parents—a father with a degree in physics and a mother who taught chemistry.

While he was still studying physics at Oxford in 1999, the anti-globalization movement came into prominence. Demonstrators hit the streets outside the World Trade Organization’s conference in Seattle and the IMF headquarters in Washington to protest the increasing unification of the world economic order that they maintained was leaving too many people behind.

Donaldson’s then-girlfriend—now wife—was studying economics at the time. The couple talked a lot about the economic issues behind the discontent. Donaldson says he supposes he “fell prey—prior to learning the basic logic of formal economics—to the trap of thinking that international things like trade, development, and FDI [foreign direct investment] might have a strong zero-sum-game feature to them whereby rich countries might get rich at the expense of their interactions with lower-income countries.” It inspired him to pursue a PhD at the London School of Economics (LSE).

“I got hooked on the idea that economics was the physics of the social sciences, or physics for public policy,” Donaldson says, “using theory and evidence to come up with answers to those policy questions that were being raised by the anti-globalization movement—and I wanted to learn how to do that.”

How the study on impact of railways in India shaped:

He spent two years digging into the archives of the British government’s India Office, poring over salt reports and ledgers from 124 districts dating back as far as 1861. He was trying to determine the extent to which India’s colonial railway system might have raised real incomes by reducing trade costs. After collecting data on trade flows among 45 regions in India and more than a hundred thousand observations, Donaldson was able to put a value on the role of trade.

“That number turned out to be about 16 percent of GDP,” Donaldson says from his book-lined office at MIT. The study made the case that the benefit of the railways was indeed the result of increased trade.

He published his findings originally in a 2010 working paper, then in the American Economic Review in 2018 under the title “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure.” His extensive use of data made the work stand out and led to his winning the John Bates Clark Medal last year.

“Donaldson’s work on railroads brought a whole new approach to 19th century history, particularly in India,” says Nobel laureate Angus Deaton.

The “Railroads of the Raj” study was not driven by a particular interest in railways but by the desire to better understand the true value of large transportation infrastructure projects, Donaldson says. More World Bank lending in 2007, for example, went toward transportation infrastructure than to education, health, and social services combined, he says, without a rigorous empirical understanding of just how much transportation infrastructure projects actually reduce the costs of trade, and how those cost reductions affect welfare.

In the India study, Donaldson learned of one of the world’s truly unusual trade barriers. To enforce a tax on salt in the early 19th century, the colonial British authorities built a thorny, 12-foot-high thicket stretching 2,300 miles down the middle of India. The Salt Hedge blocked hundreds of millions of people in India’s interior from getting tax-free salt from the seacoasts as the British administration’s appetite for tax revenue grew. The wildly unpopular salt tax eventually spurred Mahatma Gandhi’s campaign against British rule. In the end, it was found that the Salt Hedge was too much of an impediment to trade and was abandoned.

“I read about all this history and found it fascinating but quickly realized that salt had a completely auxiliary benefit for me,” Donaldson says. “They collected a lot of data about salt.” Because salt production was confined to a very small region and everyone needed it, Donaldson says, it was the perfect product for measuring the impact on trade of the railroad system that was built during the same period.

Donaldson found that the railroads brought significant welfare gains to India because they reduced the cost of trading and enabled India’s diverse districts to enjoy unprecedented gains from trade.


Size of currency notes around the world

June 7, 2018

The editions of IMF’s Finance and Development Magazine usually carries a feature on paper money in some or the other country titled: Currency Notes.

In the June 2018 edition, Tadeusz Galeza and James Chan discuss various note sizes around the world:

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Tweets of infamy

June 7, 2018

Iam Buruma writes on one of the most important issue facing us:

Donald Trump’s behavior is often as coarse, offensive, and weird as that of Roseanne Barr, the American comic whose TV show was canceled last month after she posted a racist broadside on Twitter. But, unlike Barr’s unfiltered thoughts, Trump’s can change the fate of the world.


There may be a link between the rise of the Internet and widespread public distrust of elites and experts, but it is not exactly clear what that link may be. It would be facile to blame disillusion with elites on new technology. Clearly, however, communication via tweets and web-based commentary has strengthened the idea that expertise is redundant. We see this now in the political sphere.

Until recently, politicians made most important decisions behind closed doors, surrounded by teams of expert advisers. Citizens would hear about these decisions, if they were lucky, through newspaper reports, press conferences, or television broadcasts. This system is not ideal. Less secrecy might have saved many a politician from making terrible blunders.

But now some of the most important decisions in the world’s mightiest democracy are based on the ignorant whims and unfiltered prejudices of a tweeting president, who is as coarse as “Roseanne Barr” and as weird as Roseanne Barr. The only major difference is that her tweets are those of a comic between jobs, whereas his can change the fate of the world.

Are Emerging Markets the Canary in the Financial Coal Mine?

June 7, 2018

Kenneth Rogoff says again we are hearing the same thing as we heard during Great Moderation: Don’t worry, we are safe.

We were wrong then and we are wrong now:

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RBI should use clarity in explaining its policy…

June 6, 2018

In its much anticipated policy, RBI raised the Repo rate by 25 bps to 6.25%. There will be usual and lots of talk on this decision.

Apart from the boring policy statement, the Statement on Development and Regulatory Policies is usually a more interesting read.

The first change in the recent Statement on Development and Regulatory Policies, reads like this:

1. Increase in Liquidity Coverage Ratio (LCR) carve-out from Statutory Liquidity Ratio (SLR)

As per the existing roadmap, scheduled commercial banks have to reach the minimum Liquidity Coverage Ratio (LCR) of 100 per cent by January 1, 2019. Presently, the assets allowed as Level 1 High Quality Liquid Assets (HQLAs) for the purpose of computing LCR of banks include, inter alia, Government securities in excess of the minimum SLR requirement and, within the mandatory SLR requirement, Government securities to the extent allowed by the Reserve Bank under Marginal Standing Facility (MSF) [presently 2 per cent of the bank’s NDTL] and under Facility to Avail Liquidity for Liqduidity Coverage Ratio
(FALLCR) [presently 9 per cent of the bank’s NDTL]. For the purpose of computing LCR, it has been decided that, in addition to the above-mentioned assets, banks will be permitted to reckon as Level 1 HQLAs Government securities held by them upto another 2 per cent of their NDTL under FALLCR within the mandatory SLR requirement. Hence, the total carveout from SLR available to banks would be 13 per cent of their NDTL. The other prescriptions in respect of LCR remain unchanged. 

What? I mean how can one understand this bit?!

I just blogged about this interesting research on the need for more clarity in central bank communications. Mint edit today also mentions the need to be clear in whatever you say.

We have recently seen case of New Zealand going to the extent of using cartoons to explain its decisions. One also sees other central banks making some efforts to improve communications.

However, RBI has clearly lagged behind on this front. Dr Subbarao was perhaps the only Governor in recent years who took this transparency and clarity seriously.

Even then RBI’s notifications and press releases are usually difficult to figure even for regulars. There is this hodgepodge of acronyms, law, economics and regulation in most of these circulars.

We see the same thing in the recent Regulatory Statement. Just several things put together making it difficult for the reader. It should clearly explain what this new measure will change in the current scheme of things.

The clarity in writing is one area where RBI needs a lot of improvement and is vitally important as well.

The Swiss Money Referendum: We should take it seriously as SNB and banks are opposing it..

June 6, 2018

I had blogged about the Swiss money referendum and how their central bank SNB is opposed to the idea. Under this proposal, money can only be created by SNB with banks merely acting as narrow banks. No wonder even banks are opposed to the idea.

V. Anantha Nageshwaran says this opposition is actually a reason to take the proposal seriously:

The Swiss National Bank and commercial banks are opposing the referendum proposal. That is a good reason to take the proposal seriously.

In the last two decades, commercial banks, facilitated in no small measure by central banks, have generated more wealth for the rich through credit creation. Thus, they have to shoulder a significant share of the blame for the rise of income and wealth inequality globally and for the consequent rise of “beggar-thy-neighbour” policies. A referendum that spotlights these issues should be welcomed and the proposal could be no worse than the status quo, if it succeeds.


Those wonderful and forgotten Chinese economists that shaped Chinese economy

June 6, 2018

Another wonderful column from Cafe Economics written by Niranjan. Amidst several newspaper articles which tell you about falling growth/rising inflation/crisis etc., there are these occasional pieces which makes you want to read more and more on economics. Cafe Economics comes up with such pieces fairly regularly.

In this pieces he writes about wonderful Chinese economists which shaped reforms in China:

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Pathalagadi movement and when tribals of Jharkhand open their own bank!

June 5, 2018

Mumbai Paused sent me this story which is quite interesting.

First, rhere is this tribal movement in Jharkhand called Pathalagadi:

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Why do 12 billion Deutsche Marks still exist and remain relevant?

June 5, 2018

Fascinating article. I did not know that old D-Marks are still present in Germany.

Nearly 28 years after the complete demise of the East German mark and 16 years after the introduction of the euro, these people are patiently waiting to hand in some of the billions of old deutschmarks still in circulation.

Today German marks are travel souvenirs, bits of history forgotten at the back of a drawer or still stashed in safety deposit boxes. Most assuredly, marks are not an old-fashioned alternative to cryptocurrencies. Yet with so much of the cash still out there, many more Germans are holding onto the old currency than will probably ever own bitcoin, the most famous digital asset.

Breaking the numbers down, on December 31, 2001, the last day before the introduction of the euro, there were 162.3 billion marks in circulation according to the Bundesbank. By now over 92 percent of that hard currency has been handed back to the bank, but at the end of April, a booty of 12.6 billion marks is still out there stuffed in socks, hidden between the cushions or buried in the garden.

10 mark note (Public Domain)

The exchange rate for marks has remained unchanged since it was established in 2001

These marks are not worthless and — if issued after June 20, 1948 — can be exchanged in unlimited amounts for euros at one of the 35 branch offices of the Bundesbank indefinitely.  And unlike most currencies, the official exchange rate of 1 euro for 1.95583 marks has remained unchanged since it was established in 2001.

The open door policy of the bank and the lack of exchange rate fluctuation take the pressure off. No need to do today what can be put off until tomorrow! Elmar, a retiree from the Neukölln neighborhood of Berlin, found a 500 mark note stuck between the pages of a book well over a year ago and finally made his way to bank. Slowly but surely German magpies are making their way to the exchange windows.

Apparently,few other Euroised countries allow indefinite conversions:

Each country that now uses the euro has different rules and timelines about exchanging their former national banknotes and coins. It’s a complicated patchwork. Some central banks no longer accept coins, but still take notes, among them Belgium, Luxembourg, Slovakia and Slovenia. For those in Spain, Portugal and the Netherlands time is running out.

Read more: Bundesbank reports decline in counterfeit bills

Still other countries no long accept their former currencies in any form: France, Finland, Greece, Italy, Malta and Cyprus. Any drachma or francs found behind the bookcase can be pasted into an album or tossed.

Among the eurozone countries, only a small group including Germany, Austria, Ireland, Latvia, Lithuania and Estonia has no time limit for exchanging their old currencies.

To many Germans the mark was much more than paper or pieces of round metal. Its strength was a sign of the country’s economic rise. It is no exaggeration to say that the transition to the euro was a traumatic time. But time heals all wounds and no one in line at the Bundesbank admitted to calculating back into marks to get a better idea of what something costs. To finally clear the accounting ledgers, the Bundesbank needs to now convince everyone to turn in those remaining marks.


What all banknotes mean to certain people.

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