Sweden's New Banknotes

After a 3 month break from reduction, the Riksbank reduced the amount of currency in circulation by 5% in January.
On a per person basis (assuming population 10 million *) 2670SEK (282€) of old banknotes and 2543SEK (268€) of new banknotes as of 1 February 2017 (not counting coins, or invalid and commemorative notes).

They are also issuing only a small fraction of new coins to replace the old coins. Sweden is due to retire 140 coins per person and has minted only 10 coins per person in replacement. Sweden may be considering these new coins as a stop-gap measure and follow South Korea's lead by abolishing coins altogether in a few years.

As I stated earlier there is no published goal by the end of the year, but it certainly seems as if they will end up below 5000SEK per person and 4000SEK seems possible. In any case the sum for all six denominations is roughly a third of the value of 27 €50 banknotes per person circulating in the Euro zone (not even counting larger bills).

With so little cash circulating, and such a drop from ~7500SEK per person circulating at the end of 2014 it seems inevitable that severe upper limits will soon be placed on ATM withdrawals.

* On 20 January 2017 Sweden achieved a historic population of 10 million.

Circulation banknotes per capita in USA (31 Dec 2016) (>$2)
8.8: $5
5.9: $10
27.3: $20
5.1: $50
35.6: $100
82.7: total

Swedish stats as of 28 Feb 2017
Circulation new banknotes per capita in Sweden
5.2: 20 kr
2.0: 50 kr
2.1: 100 kr
3.3: 200 kr
3.0: 500 kr
0.3: 1000 kr
15.8: total

Circulation old banknotes per capita in Sweden (old banknotes invalid end of June)
2.8: 100 kr
3.8: 500 kr

Clearly some fraction of older banknotes will be replaced with new banknotes.

I fail to see why Swedes don't keep a hidden envelope with a few 500kr banknotes in their home just to keep banknotes from vanishing completely.

At some point it will cost the government more to print a currency than it will get economic benefit from it.

Four posts over two months with no reply. Yes, I feel like I'm talking to myself.

I keep wondering if there is going to be a backlash in Sweden and they will be forced to release a whole bunch of 1000kr banknotes. At times I feel like this will remain a Swedish experiment, and at other times I think they are a harbinger of future finance around the world. The proposed digital currency up for discussion next year is especially interesting.

In some ways I am surprised that it was Korea, and not Sweden, that made the first decision to abolish coins.

I feel the same way. I apologize for lacking interest, but I don't have anything to add. Statistics might be interesting but they are definite, and they don't give all too much to discuss. I also just want to point out that I'm by no means an expert, I don't have opinions in a whole bunch of questions, opinions or statements brought up here, I'm simplya curious user and observer of the currency. So I feel I can't express myself in an interested manner and even contribute to the conversation, I'm sorry.

I will take the opportunity to post a bit more of collector news:

D-prefix (2016) 100-kr notes have been confirmed!



For sale on Tradera, I figured new dates would appear there. Currently 140 kr, highest bid. Somewhat low sheet number. (<100'000)Link

Despite looking, I haven't found a single B-prefix 100- or 500-Kr note out there. Only C-prefix. I really hope to get one of these D-prefixes soon!

I think there is a lot of room for discussion.

The statistics just keep one updated on how severe this withdrawal of cash is becoming
0.3: 1000 kr (new banknotes) per capita
3.0: 500 kr (new banknotes) per capita
3.8: 500 kr (old banknotes) per capita

The Riksbank swears that this draw-down is entirely being caused by "market forces" and not by a central authority. I am very skeptical of that statement, and the fact that they keep production quantities a secret (unlike almost every central bank in the world) is interesting. How many 1000kr banknotes were printed?

Frankly I don't think "market forces" could be that much different in Norway or Denmark than Sweden. Yet their cash supply is not being decreased. This comparison is a big part of my skepticism.

Although the decision has not been made, the director of the Riksbank makes it clear that she thinks digital currency is the best way to put "central bank money" back into the hands of people. The big question is should it be like bitcoin, or should there be personal accounts in the central bank. I would think that if there are personal accounts, a big concern of the commercial banks would be the central bank moving in on their territory.

A recent survey in Sweden revealed that almost no Swedes see the need for digital currency. They are perfectly happy using SWISH and their commercial bank accounts. The fact that central bank money has "no credit risk" is apparently not of concern to most Swedes.

Most people naturally assume that the objective of a digital currency is to completely replace the remaining banknotes. The deputy director says that is not the fact, but how much competition can banknotes endure?

A final area of speculation starts with the observation that there are 22.61 ten kroner coins per capita in Sweden. That is not as high as the 36 one dollar banknotes per capita in the USA, but probably a lot of the dollar banknotes have been destroyed in washing machines or other accidents. In any case, the USA manages without any real circulation of the $2 bill. Could Swedes survive without the 20 kroner banknotes? I don't mean to replace it with a coins like Norway or Denmark, but to simply stop making it! The objective of such an exercise is to relieve the central bank of having to order it's most costly banknote. The 20 kroner note is that most common, and the rate at which they are worn out is the highest. It would make paying in cash even more of a nuisance and push cash into more obscurity.

Is the extremely low number of circulating 1000kr banknotes (3.4 million) a sign that the banknote is going to be declared invalid in a few years? I wonder if the Riksbank is sitting on 30-50 million banknotes in case the real estate market crashes. But many analysts believe that Sweden is trying very hard to keep its currency confined to Sweden.

A question that many Americans find of interest is, "Will Sweden use it's nearly all electronic currency to try and control illegal immigration?"

Lastly is this a unique Swedish experiment? Norway and Denmark seem to be keeping their cash supply more or less constant (especially the 1000-kr denomination ). Even as electronic transactions are more dominant, they still have the banknotes to keep in personal safes.

Will the "Euro Area" use Sweden as an example? In 2016 the value of 500Euro banknotes in circulation shrank by 12%, but the overall value of banknotes increased by 4%. When the 500Euro is completely removed will the ECB simply replace them with an equal value of the fairly unpopular 200Euro note?

What about personal money management? While electronic transactions are much easier to review, many people find that cash is a much more emotional transaction. The Bank of England began a campaign to reinvigorate the 5 pound note into society, since they concede that poor people use it as a way to control spending. They produced 440 million of the new polymer notes to replace 320-330 million of the old notes.

Finally, what about the long shot disaster. For instance a type of solar flare, known as a coronal mass ejection (CME), could cause economic damages up to $2 trillion, according to the US National Academy of Sciences.

Consider the greatest CME recorded on Earth: that ended August 1859. The incoming particles shook the Earth's magnetic field, inducing electrical currents that put telegraph systems on the fritz around the world. The same thing could happen to the electrical transformers which could also induce short circuits in anything that uses electrical circuits, such as home appliances, office equipment, water pumping stations, and any vehicle made since about 1920. If the situation last for several months, recovery may be compounded by cash circulation of under 5000 kr per capita. It is possible that many cash registers will not exist in a few years.

I don't know which countries demonetize banknotes. USA and Canada do not demonetize. They simply announce that the denomination will no longer be produced and all notes that are returned to the central bank will be destroyed Canada still has 3/4 million $1000 banknotes in circulation after 16 years.

Sweden didn't actually demonetize it's 1892 1000kr banknotes until 31 December 1987. But since then they have demonetized every series. Britain demonetized all banknotes over 5 pounds after WWII because they were afraid of counterfeits from operation Bernard.

I personally think that demonetizing the 500 Euro banknote is not really necessary. In the year 2000, all of the banknotes of all denominations of the Austrian Schilling, the German Mark, and the Dutch Guilder added up to €165 billion. At end of 2015 when Draghi made his announcement, there was €308 billion in €500 banknotes in circulation. As of Feb 2017 that number is down to €266 billion. I suspect that they will be down to €150 billion by the time Draghi leaves the office.

In any case the €500 notes will mostly vanish when stores won't accept them. But a few tens of millions will stay in circulation for decades. The USA still has about 350 $10,000 banknotes from 1928 and 1934 that are in circulation.
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But I get your point about the 200Euro note. The American $50 banknote has very little circulation as people don't really see the point of that denomination.

But a few years ago many countries began stocking up on Scandinavian currencies as part of their foreign reserves. I wonder if an e-krona is introduced if that will increase the use of the krona as a foreign reserve. It may even become popular outside of the country, simply because it is convenient.

In any case it seems like the Swedish people are truly unconvinced that they need an e-krona. They have federal insurance on their bank accounts, and they seem happy with SWISH. There was one story circulating about a hapless mugger in Stockholm that had his victim SWISH him some money. The transfer was immediately reversed and the idiot was caught within hours. But with e-krona that ending might not be so obvious, as it might be more like pick-pocketing a banknote. Citizens may find they don't want an electronic currency that can't be reversed.

But the following quote is significant.



It is clear that Ms Skingsley is in favor of the e-krona and will push hard for it's acceptance.

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Some of these large denomination banknotes have been around for a long time.

The 1000kr banknote was introduced in the 1890's when it was worth 1000/2480 of a kilogram of pure gold, roughly 150 times what it was worth today.

In 1960 the Bundesbank introduced the 1000DM banknote (worth 500 Euros today).

The CAD$1000 banknote goes back to 1935. The US$1000, $5000, $10,000 banknotes go back to 1928.

Thanks for that link. That explains why all those Marks are being held on by people. They actually have value and are not just keepsakes.

Canadians have 151.9 million $1 bills and 104.5 million $2 bills. The coins were introduced in 1987 and 1996. I can't imagine the banknotes are worth much more than face value with so many available. They still have 3/4 million CAD$1000 banknotes as well.

Production of high value notes in the USA prior to WWII was actually very large ($5.7 billion) relative to the value of banknotes issued at the time. Since they will never be demonetized, the collections of $500 and $1000 notes are still rather extensive.
3,943,708 : $500 (over 284,000 still in circulation)
2,675,016 : $1000 (over 165,000 still in circulation)
71,904 : $5000 (over 350 still in circulation)
64,624 : $10000 (over 340 still in circulation)

Although all of the high value notes were printed in 1928 and 1934, they were distributed by banks up through the end of WWII. Total circulation of banknotes in USA naturally ballooned during the war years.
$4 billion in 1938
$23 billion in 1945

In 1969 as part of the new anti-money laundering laws the Treasury said that they would never print any notes higher than $100 and would destroy any high value notes that came into their possession. But all banknotes back to Continental Dollars are still legal tender.