Sveriges Riksbank 350 Year Journey

Question 1

What is the highest and lowest the interest rate has been through Swedish history

Answer 1

Highest 500% and lowest below zero, to defend price stability

Question 2

Why does deflation prevent investment

Answer 2

Because people wait for prices to fall instead of investing

Question 3

How did people react to the hyperinflation during the 16th century

Answer 3

First they did not know which let the rulers get away with huge expenditures but after a while when inflation reached 800 percent merchants started adopting the HRE currency insted

Question 4

How does inflation affect loans

Answer 4

If you take out a loan before a period if high inflation it becomes very easy to pay back

Question 5

What characterized the monetary policy of the Swedish royals

Answer 5

High inflation to support wars

Question 6

What characterized the Swedish monetary policy under the hats

Answer 6

Excessive lending to industrialists easily payed back with inflation

Question 7

What characterized the Swedish monetary policy under the caps

Answer 7

Deflation, bankrupting the speculating industry but making imports cheaper

Question 8

What was seen as the foundation of the value of money during the time if liberation

Answer 8

Precious metals

Question 9

What was the strangulation system

Answer 9

A system where the riksbank terminated loans when they weee short on silver

Question 10

When did the Swedish fed implement an interest rate

Answer 10

1890

Question 11

Why did Sweden abandon the gold standard

Answer 11

Because the first world war necessitated more spending than there was gold in the coffers

Question 12

What was the profiteer economy

Answer 12

When it was a valid business strategy to wait for prices to be high and sell as late as possible to maximize profit

Question 13

When did the Swedish riksbank adopt its policy of price stability

Answer 13

1932 to navigate a world without the gold standard

Question 14

What was the bret and woods system

Answer 14

World currency was pegged to dollar that in turn was pegged to gold to ensure stability

Question 15

Why did the bret and woods system collapse

Answer 15

Because the US abused the dollars position to fund the Vietnam war and abandoned the gold standard leading to a dollar glut

Question 16

What characterized the 1970s and 1980 in the Swedish economy

Answer 16

High inflation to stay internally export competitive

Question 17

Why did the riksbank raise the interest to 500% in the 1990s

Answer 17

To pervent people from loaning to speculate on currency changes

Question 18

What are the negative affects of having a low repo rate on markets

Answer 18

Cheap lending leads to inflation in asset prices often bought by debt like housing

Question 19

How does globalization affect inflation

Answer 19

It decreases it as greater competition from countries with cheaper labor become accessible, more cheap wares are available

Question 20

What made inflation low in the twenty tens

Answer 20

Globalization and higher savings rate

Question 21

How did Wallenberg improve banking

Answer 21

He gave the offer of limited liquidity for greater interest rate, thus he was able to use deposits more affectively for lending. Firs one to primarily use deposits for lending

Question 22

How did the riksbank become a proper central bank

Answer 22

1897 rhe riksbank abandoned traditional commercial lending to gain a monopoly on giving banknotes and accept the mission to peruse stability

Question 23

What was the Kruger krash

Answer 23

Ingvar Kruger faked his solvency and gained massive loans from many central banks and when he could no longer loan cheep he became bankrupt and the banks gained worthless assets triggering a financial crisis

Question 24

What was the eurodalar market

Answer 24

A gray financial market of eurobanks that served developing countries when regulation was to high in the west

Question 25

Why did the us, uk and Sweden deregulate during the 80s

Answer 25

To regain control over the Eurodollar market

Question 26

How did deregulation affect the banks

Answer 26

As regulation no longer constrained insurance, savings and commercial banks to work within their field and thus a lot of mergers and acquisitions ensued. Poorer risk assessment also followed the deregulation

Question 27

How does globalization affect Swedish banks

Answer 27

Problems can spread more easily and the central bank has less control

Question 28

How did the riksbank loose independence from the government

Answer 28

When Sweeden became a parliamentary democracy parties gained equal representation in the riksbanks central council

Question 29

What was the prevailing idea about fiscal and monetary policy in the 1930s

Answer 29

That they should be coordinated resulting in Dag Hammarsköld being appointed both finance minister and chief of the central council of the central bank before becoming the UN general secretary

Question 30

What was the interest rate coup

Answer 30

Per Åkeson convinced the council to raise the interest rate without notifying the ministry of finance and was severely reprimanded for it even though he technically had the tight

Question 31

Why does the central bank need to be independant

Answer 31

So it can be the hero the country needs not the one it wants. F.ex sacrifice employment for better output

Question 32

What does the EU demand in regards to separation of bank and state

Answer 32

They need to be separate institutions and the gov cannot loan from the nations bank