I recently left the Czech Republic, and I will probably never return to that country. (Not that it’s not worth revisiting, but I have so many other places I want to see and limited time to do it.)
Perhaps you have experienced the same. You carry some local cash at the train station or airport that will be useless at your next stop. Exchange is very low. What should you do with it?
I have seen airports with a bin where extra cash can be stored. They say it will go to charity. Alternatively, you can burn currency notes. What should a utility do? Here’s how I think about this problem:
1. Assume that it costs 5 cents to make a dollar worth of check currency Then burning the currency notes is like donating 95 cents on the dollar to the Czech government. This gives them “seignorage”.
2. If I believe that donating 95 cents to the Czech government will have a greater positive impact than donating $1 to a charity I know nothing about, then I should burn the coins and vice versa.
If this result seems strange, it’s because we’re used to thinking of currency as a net asset. The money burned seems terribly wasted. Currency stocks overall Net wealth, because it provides useful transactional services to society. But burning a currency unit does not significantly reduce that value of the total currency stock, as it will be replaced almost worthless by the Czech government. The only waste involved is the cost of printing a unit of new currency.
If you suspect that the quantity theory of money is lurking somewhere in the background, you’re right. But only a Other things being equal senses. In the long run, increasing the money supply by X% will decrease the purchasing power of each unit of money by the same proportion, other things being equal.
Rest assured. I can’t get used to all these name changes. First Bohemia, then Czechoslovakia, then Czech Republic and now Czechia. When will they be named? (Yes, I know—they don’t all cover exactly the same territory.)
PPS. Because we also spent two weeks in Austria, I have some thoughts on why Vienna is back at the top of the rankings. Most livable city In this world.
I suspect that the breakup of the Austro-Hungarian Empire in 1918 indirectly made Vienna the very beautiful city it is today. By the early 20th century, Vienna had rapidly expanded into a city of about 2 million led by a large empire. Buildings built during the First World War decade had a lot of character—Vienna has “good bones.”
If the empire had survived, Vienna would have expanded greatly during the 20th century, adding a lot of ugly utilitarian architecture, such as a public housing project. But for a small country like Austria, a capital city of 2 million people is large enough, and so is the population as Vienna was about 100 years ago. As Austria grew richer after World War II, the city expanded to fill the old town, much like a boy growing up in his older brother’s clothes. It didn’t have to add as many ugly buildings as Paris and London and avoided some of their congestion.
Modern Vienna is thus far more preserved in amber than any other European capital. In most cases, stagnation is a sign of poverty. But while Austria is a relatively wealthy country, its capital city is not very dynamic. Perhaps it is this combination that explains Vienna’s high ranking.
PPPS. I took this photo in Amsterdam: