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October 29, 2020

Isarescu: BNR has stock of printed money

The National Bank of Romania (BNR) has a reserve of printed cash equivalent to “several tens of percent points” of the money supply, necessary for moments of bank panic like those which occurred in the years ‘90-2000, BNR Governor Mugur Isarescu announced yesterday, quoted by Mediafax. “A bank panic is treated with mountains of visible money. An irrational panic was never treated with advice. If you are so ill inspired to deliver a monetarist lecture at the desk, you increase the panic and withdrawals are even higher,” Isarescu said in a seminar on the relation between money supply and inflation. He insisted that one must promote in public a less simplistic discourse about the role of BNR in the evolution of the money supply and the relation money supply – inflation, explaining that, in most cases, the increase of prices was not directly connected to the evolution of the money supply. “Inflation is a monetary phenomenon, but simplifying things is something which certainly does not help. The relation between money supply and inflation is clear. What is being denied is the practical significance of this relation,” Isarescu said, quoted by Money.ro. The governor drew a parallel between inflation, as a shock in the society, and what happened Monday, when a gunman shot several people in the center of Bucharest.

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