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Jan 23, 2021

The Five-Thousand-Lira Note Will Soon Be in Circulation: Harm or Necessity?

Today the Syrian Government introduced a new banknote with a denomination of 5,000 Syrian pounds (SYP, aka Syrian lira)—the largest so far.

My views to on the economic impacts, for their article a few days earlier:

"The Syrian Government is again hinting at the introduction of a 5,000 SYP bill. I told Orient that, contrary to common belief, introducing a new denomination is not inflationary on its own. What matters is the overall stock of money in circulation. Since the government claims that the new bill with a higher denomination will be introduced only to facilitate financial transactions (lighter to carry, easier to count, etc.), you'd expect them to pull smaller SYP denominations out of circulation. However, what people think matters: expecting inflation, even if the expectation is wrong, is enough to actually cause inflation. To what extent? Your guess is as good as mine."

This photo shows the 5,000 SYP banknote; introduced today, it was printed in September 2020.

Why did the Central Bank wait until now to introduce it? I believe they (correctly) thought that people would view it as a direct consequence of the Caesar Act, which would trigger panic—and more inflation.

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