How Certain Central Bankers Became More Friendly

Because Norway’s old 100-krone and 200-krone notes will no longer be legal tender after today, you have to spend or deposit them. In the future, only the central bank will redeem them.

When they issued the new 100- and 200-krone banknotes approximately a year ago, the Norges Bank made sure that we all knew about the new currency. However, the following video is not quite what you would expect from a central bank.

For many smiles, do watch it:

https://www.youtube.com/watch?v=8ZWMHAJZKYI

A Currency Story

To make counterfeiting tougher, Norway wanted more secure banknotes. The project started with a design contest and ended with some of the new notes entering circulation last year.

The design is stunning. Focusing on the sea, it is also meaningful,

These are the themes:

And here is the currency:

The front side

The reverse side

The Issuing schedule:

Our Bottom Line: What Do Central Banks Do?

Please imagine for a moment a country that produced $100 of goods and services. If there were $100 in the money supply to buy what has been made, prices could remain stable. However, if people had $500 to spend, then prices would probably rise as more dollars chased fewer goods and services.

You see where this is going.

There needs to be a correlation between what is available to spend and what is produced. And through this connection, a central bank can facilitate three basic objectives:

1. economic growth
2. stable prices
3. low unemployment

Whenever there is a problem with any of the three objectives, a central bank tries to solve it with monetary policy. They can make more money and credit (lower interest rates) available during a recession. But if the inflation rate is too high, then they can do the opposite by targeting higher interest rates and making less money available.

Of course, as you saw with Norges Bank, central banks do a lot more. They’ve even become more friendly.

My sources and more: Yesterday, I learned about the Norges Bank video from WSJ and then went to FT for more about their new currency. It also reminded me that several years ago, econlife looked at their currency design contest. But if you go to just one link, do look at the Norges Bank website to see more about their currency and their connection to Norway’s massive sovereign wealth fund.