Argentina's President-elect Javier Milei said on Friday that the closure of the country's central bank, a signature campaign pledge, was a "non-negotiable matter", according to a statement from his office posted on social media platform X.
The goverment spends more than it can, so to pay it’s debts, the goverment print more and more money. This makes each bill to have less and less value generating inflation.
That’s a good explanation about how a government can cause rapid (or even hyper)-inflation, but most of this impact isn’t felt with people handling currency as far as number of bills they have to carry.
A government devaluing its currency usually prints larger denomination notes. As an example:
If a home appliance like a stove costs 100 Argentinian Pesos it might be paid for with ten 10 Peso notes for a total of 100 Pesos.
After a couple of years of rapid inflation the same stove might cost 2000 Argentinian Pesos. While someone buying a stove could technically still use two hundred 10 Peso notes for a total of 2000 Pesos, that’s a lot of currency to carry. Instead government print larger denomination notes. A quick look at the wikipedia page on the Argentinian Peso confirms what I’m talking about. In May of this year, they started printing a 2000 Peso note. So that stove from the example could be paid with a single note, not two hundred.
I would guess usually when these larger notes are being printed the same number of notes in circulation doesn’t need to change that much because the new notes are worth exponentially more than the old notes they would have produced in the same amount of time. In May of 2017 the smallest denomination note was 20 Pesos. However, in May 2023 the smallest denomination note is 100 Pesos.
If that is the case, where is the need to increase the number of notes in circulation, when the value of each note has gone up so much more?
That’s a good explanation about how a government can cause rapid (or even hyper)-inflation, but most of this impact isn’t felt with people handling currency as far as number of bills they have to carry.
A government devaluing its currency usually prints larger denomination notes. As an example:
If a home appliance like a stove costs 100 Argentinian Pesos it might be paid for with ten 10 Peso notes for a total of 100 Pesos.
After a couple of years of rapid inflation the same stove might cost 2000 Argentinian Pesos. While someone buying a stove could technically still use two hundred 10 Peso notes for a total of 2000 Pesos, that’s a lot of currency to carry. Instead government print larger denomination notes. A quick look at the wikipedia page on the Argentinian Peso confirms what I’m talking about. In May of this year, they started printing a 2000 Peso note. So that stove from the example could be paid with a single note, not two hundred.
I would guess usually when these larger notes are being printed the same number of notes in circulation doesn’t need to change that much because the new notes are worth exponentially more than the old notes they would have produced in the same amount of time. In May of 2017 the smallest denomination note was 20 Pesos. However, in May 2023 the smallest denomination note is 100 Pesos.
If that is the case, where is the need to increase the number of notes in circulation, when the value of each note has gone up so much more?