Sweden's New Banknotes

In the Euro-zone the banknotes of the national currencies were valued at EUR 380 billion at the end of 2000.

Millions Year 2000
379,760 € Euro-Area
134,004 € German Mark
75,064 € Italian Lira
57,234 € Spain Pesetas
46,061 € French Franc
17,436 € Dutch Guilder
13,934 € Austrian Schilling
12,905 € Belgian Franc
8,912 € Greece Drachma
6,187 € Portuese Escudo
4,996 € Irish Pound
2,931 € Finnish Markka
96 € Luxembourgish Franc
Note that Luxembourg was in a currency union with Belgium

By the end of 2001 they were valued at EUR 270 billion as many banknotes were destroyed in anticipation of the changeover. Within 6 months new banknotes of EUR 293 billion were circulating, but some percentage of the national banknotes were never found, or kept as souvenirs. For central banks these would be like loans that were never repaid.

I have never seen an estimate of the windfall from the conversion to the Euro. However, the Riksbank is going to provide us with a detailed accounting. It looks like they will make roughly SEK 2 billion this year with the smaller notes, and presumably closer to SEK 8 billion next year with the larger notes.

The stats for the end of the previous months the value of the soon to be invalid banknotes was:
SEK 9.0 billion (114.9 million banknotes) Dec 2014 (end of month)
SEK 6.6 billion (100.8 million banknotes) Oct 2015
SEK 5.9 billion (92.5 million banknotes) Nov 2015
SEK 5.2 billion (84.4 million banknotes) Dec 2015
SEK 4.6 billion (77.3 million banknotes) Jan 2016
SEK 4.1 billion (71.6 million banknotes) Feb 2016
SEK x.x billion (xx.x million banknotes) Mar 2016
SEK x.x billion (xx.x million banknotes) Apr 2016
SEK x.x billion (xx.x million banknotes) May 2016
SEK x.x billion (xx.x million banknotes) Jun 2016
-All notes not turned in by this date are declared invalid
(They can still be mailed to Riksbank and redeemed with fee)


Then the cycle begins again for 100SEK and 500SEK banknotes
SEK 51.9 billion (159.4 million banknotes) Feb 2016
Invalid month of June 2017

I think there is the possibility that other countries may try and do the same thing. For example Canada may demonetize their non-polymer banknotes. The USA may demonetize their banknotes without the big heads (except for the $1 and $2 banknotes).

The Riksbank has circulated 50.3 million new notes in the last 5 months. I think they will concentrate on pushing out 200:s for the 3 months between end of June and 1 October. That way they can hedge off demand for the new 500:s which start circulating in October.

Five days ago the ECB dropped the central bank interest rate to 0%. The Riksbank has not responded as yet, but they have said they are ready to go lower than -0.5% . Switzerland is at -0.75% . It's sort of a race to see if Riksbank can destroy most of the currency before there is run on cash.

Despite Switzerland's even lower negative interest rate, they remain hip deep in cash. They are circulating 42 million 1000CHF banknotes, 47 million 200CHF banknotes, and 112 million 100CHF banknotes. I suppose Switzerland is different than Sweden as they don't mind if their own citizens remain invested in cash, they are primarily concerned about citizens of other countries having accounts in Swiss francs and trying to drive up the value value of the franc relative to the Euro.

Obviously it is speculative to guess where the Riksbank is headed by mid 2017, but just as WAG, I would guess that they are looking for a mix like this (in millions of notes)
20 kr : 88.2 -> 50.0
50 kr : 21.7 -> 20.0
100 kr : 69.5 -> 50.0
200 kr : 8.2 -> 80.0
500 kr : 89.9 -> 30.0
1000 kr : 3.7 -> 2.0
TOTAL 281.3 -> 232.0
(SEK billion ) ~60 -> ~40

That would be 1% of the SEK 4 trillion GDP of Sweden and should be enough to keep a functioning transaction system for children and old people and small purchases, but not enough so that people can turn their bank accounts into cash on a wide scale.

I assume that quote is referring to a law of some sort.

The estimate is based partly on the denominations that are being replaced. It looks as if tens of millions of banknotes are never going to be turned in. Mostly smaller denominations, but a surprisingly large number of of larger denominations.

REPEAT TABLE FROM EARLIER POST (combined old & new)
20 kr : 88.2 -> 50.0
50 kr : 21.7 -> 20.0
100 kr : 69.5 -> 50.0
200 kr : 8.2 -> 80.0
500 kr : 89.9 -> 30.0
1000 kr : 3.7 -> 2.0
TOTAL 281.3 -> 232.0
(SEK billion ) ~60 -> ~40

Table showing millions of new notes only circulated in five month period and my estimate at goal circulation.
20 kr : 30.4 -> 50.0
50 kr : 10.4 -> 20.0
200 kr : 8.2 -> 80.0
1000 kr : 1.4 -> 2.0


The value of the valid banknotes in circulation was SEK 106 billion at the end of 2007 at it's peak, and over SEK 75 billion at end of 2014. The drop to SEK 60 billion only 14 months later, so I didn't think it totally unreasonable to drop to SEK 40 billion when all of the new notes were circulated.

I put a hard lower limit at 1% GDP because I figured that sooner or later there would be inquiries. Iceland operated at 1% GDP for about 20 years until the banks crashed. So it is a reasonable lower limit to defend at a policy debate.

But to reach 1% I had to severely limit the number of 500SEK banknotes.

I don't know what kind of cash limits there are on the ATMs.I understand 2000SEK per day is common and 15000SEK during a week.

The article that you posted does not change my mind. A big part of the article is a plea for more ways to make cash deposits.

Ultimately though the table is just a WAG for discussion purposes. There is likely to be a backlash if Sweden keeps dropping interest rates and the banks begin to pass on costs to customers. If real estate crashes like it has done in much of the world, people begin to start thinking about simpler routines.

I don't mind being disagreed with, because the standard policy statement of almost all central banks is they circulate banknotes and coins dependent on demand. I realize that I am taking a controversial position, but I think that there is a hidden demand for more cash. Central banks are more manipulative than they let on.

1) Part of my argument is the production and circulation statistics for Norway. Norway seems to be taking a more casual attitude towards cash reduction.

Norway stopped producing the 1000-krone banknote in 2005, so the number of the highest denomination note has been dropping every year, but at a relatively slow rate. However, production of smaller denominations has increased, so that the total value of circulating currency has remained fairly steady over the decade 2006-2015.

http://www.norges-bank.no/pages/681...ics_2015.htm
http://www.norges-bank.no/pages/681...ics_2015.htm

2) Another part of my argument is that England is fundamentally in the same position as Sweden. It is part of the EU, but not the Eurozone, and heavily urbanized so that most people can do electronic transactions with ease. Yet, The Bank of England has increased their stock of notes in Circulation at end-February (value) from 2004- 2015 from £36,016 to £63,789.

The first £50 banknote design was released Mar 20, 1981.
The transition period to the second design was Apr 20, 1994 to Sep 20, 1996.
The transition to the third design was Nov 2, 2011 to Apr 30, 2014.
The first design was never circulated above 1 banknote per capita and was widely distrusted since most people never saw one. The second design became more common reaching a peak of ~2 per capita. The third design and is now circulating at over 4 per capita. So the UK is doing the exact opposite of Sweden.

3) The Bank of Finland before the Euro conversion also had very little cash, but the cash they did have was in their largest denomination banknote. So it means they had mostly electronic transactions, but they liked to keep some store of value in personal safes.

4) Iceland also had cash about 1% of GDP in the early 2000's, but once again it was primarily (over 60%) in their largest value banknote.

But, my personal opinion is not verifiable. No one from the Riksbank will ever say publicly that they are doing anything other than meeting demand. So far there is no noisy public complaints. There is no formal way of measuring "demand". But if I am correct that the Riksbank are trying to radically reduce the number of 500SEK banknotes, that may change.

The turnover rate for new/old banknotes for the 20 kr (38,5% / 61,5%) and the 1000kr (46% / 54%) notes is indeed on the low side considering it's now almost five months in.
The rate for the 50kr (54,4% / 45,6%) is in line with the rate for the new/old ratio of the €5 and €10 Euro notes five months in.

I think there will probably be a big last minute exchange for the 20kr notes. I also think that many of them won't be exchanged as they have been lost, or folks don't bother because of the relative low value.
The low turnover rate for the 1000kr is indeed surprising. I think that many of the old might not been in Sweden. Collectors might also hoard some. But considering the value, yes, it's surprising.

On 31-Dec-2015, 14 years after the end of being Germany's (circulating) currency, 6,07 billion Deutsche Mark in banknotes were still ''in circulation.'' That's ~3,1 billion in Euros. There were also 6,77 billion in coins of the Deutsche Mark still in circulation (3,46 billion Euros). So, statistically, every German still holds 156,6 Deutsche Mark (80 Euros).


Off topic:

@PacoMartin
You seem to be the guy for numbers, figures and statistics. Do you have any idea why the ECB still hasn't published the number of new/old €20 banknotes in circualtion - as they are still doing with new/old €5 and €10 Euronotes?

The new Europa €20 banknote began circulation on 25 November 2015. I did notice that they don't report the individual series for the €20 like they do for the €5 and €10, but I can't imagine why they do this.

10,000 JPY = 755 SEK
126,051,971 Japanese population
9,585,835 Swedish population




The contrast is shocking. Japan fears negative interest rates (although right now the Bank of Japan rate is zero). Sweden doesn't just fear them, their repo rate went negative 18 Feb 2015 and has dropped to -.5% as of this February.

In 6 months of the new currency, Riksbank has circulated 1.652 million new 1000SEK banknotes and 1.944 million are slated to become invalid at the end of this year. Production figures are not released since the Swedish central bank considers that a government secret.

If Japan is printing that many new 10,000JPY bills (1.05 billion + .180 billion), that would hypothetically be proportionately about 93 million new 750 SEK banknotes in Sweden given the smaller population. Of course, there is no 750SEK banknote, but 10,000 JPY = 755 SEK.

Sweden has only 87.8 million 500SEK banknotes in circulation down from 114.4 million at the end of 2014. Presumably no new 500SEK notes of the old series were printed this year, in anticipation of the changeover of the 100SEK and 500SEK banknotes beginning this fall.

Sweden and Japan basically anchor the extreme ends of the spectrum for the world. Sweden has the smallest and Japan has the largest amount of cash as a percentage of GDP.
At the end of 2014 the Japanese were circulating 67 banknotes per capita worth 10,000 JPY = 755 SEK. Swedes were circulating about 10 banknotes per capita worth 500SEK and only a token number of 1000SEK banknotes.

==============================================
Table showing millions of new notes only circulated in six month period and my estimate at goal circulation.
20 kr : 34.05 -> 50.0
50 kr : 12.08 -> 20.0
200 kr : 11.55 -> 80.0
1000 kr : 1.65 -> 2.0

Old notes
20 kr : 54.45
50 kr : 10.14
1000 kr : 1.94
100 kr : 66.10 (not being replaced yet)
500 kr : 87.80 (not being replaced yet)

Old banknotes invalid 30 June 2016 
1,089,000,000 kr in 20 SEK banknotes
  507,000,000 kr in 50 SEK banknotes
1,944,000,000 kr in 1000 SEK banknotes
3,540,000,000 kr Total 
9.700 million population
365 kr per person
9.21 exchange rate SEK/EUR
39.64€ per person

Now some more notes will be turned in this summer, but WAG is 25€ per person.

But this fall the total value of old banknotes is considerably higher

43,901,000,000 kr in 500 SEK banknotes
 6,610,000,000 kr in 100 SEK banknotes

I would not be surprised if the final tally is ~80€ per person that is not turned in and becomes a credit to the Riksbank.

But the big question is how close to "cashless" will the Swedish society approach. Normal economic rules outside of Sweden says that the lower interest rates go, the more likely people are to keep significant store of value in currency (under the proverbial mattress).

As a point of comparison, Denmark is circulating roughly 12,400 DKK per capita in banknotes and coins or over 15,000 SEK. More than double what Sweden is circulating.

Now this is an interesting topic.

In all honesty, I thought that at least the bank of Norway was very open about reducing the amount of cash and going to a 100% digital money system. It's done under a 'it's for your own convenience' and 'using cash is so much hassle and outdated' arguments. Of course, if you ask further, the 'reducing monetary crime also plays a role' argument comes up, with a serious and straight face. Lots of initiatives, like 'svipp' and 'nettbank' are introduced, taking cash out of an ATM is punished with horrendous fees (up to 50 NOK or $7,5 per transaction), most governmental institutions now issue a penalty for cash transactions (even when buying a ticket for the state-controlled train or bus) and lots of 'bank I butikk' (bank in the (grocery) shop) initiatives are slowly taken away. I've mostly seen 'high costs' as the official basis for this.

Also, if you look at the reverse of the new Norwegian bank notes, you'll see that they are already heavily pixelated. ;)

Anyway, it's no more than logical that Sweden and (probably) Denmark follow this route as well. Or perhaps Norway just follows those two (as they've always done). They've always been doing this in extremely close cooperation.

Nevertheless, as long as Singapore and Brunei issue $10.000 notes, there are still convenient ways of storing offline value on a piece of paper...