Would the Swiss someday demonitize the 1000 franc note?

16 06 2016

Prof. Jayanth R. Varma's Financial Markets Blog

I wonder whether someday the Swiss would be tempted to simply demonitize the 1000 franc note and earn a windfall gain. After falling for decades, Swiss currency in circulation started rising after the global financial crisis and is now higher than at any time in the last 35 years. Notes in circulation are now well above 10% of GDP and the 1000 franc note accounts for 62% of this or over 6% of GDP. The Swiss central bank publishes a nice set of tables and graphs about all this. Even the US whose currency circulates so widely all over the world (half of all US currency is estimated to circulate outside the US) has a currency to GDP ratio of only about 8% (currency data from the FED and GDP data from the BEA).

As Swiss interest rates remain in highly negative territory (-0.75% at the short end and…

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