Final Word from Friday, August 3, 2007
Take the following quick-and-dirty test, without giving it any thought: Which is more, E8 or Kč 200? Although E8 is only E7.14 at today's rate, a surprising number of people have the feeling that prices are lower when they're expressed in crowns. It's a strange phenomenon, and it's the result of a sort of mental inflation that isn't directly linked to price increases or supply and demand. It's partly due to the way banks force Kč 2,000 notes on us at ATMs, or the way the CNB is phasing out heller coins and small banknotes. When the 50-heller coin is abolished a year from now, the smallest Czech coin will be worth five times more than the smallest U.S. coin and three times more than the smallest euro coin (at today's rates). Abolishing 50-heller coins will cause actual inflation of only 0.1%, according to Aleš Michl of Raiffeisenbank. But mentally, it will make Kč 200 seem like less and less.[Czech Republic Czech National Bank automatic teller machine]