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Argentina's coin crisis

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Re: Argentina's coin crisis

#21

Post by delackner »

cturner wrote: post #16
gills wrote: post #13

Earlier quoted context omitted.

Why trust money printed by the same government that just looted your private pension? They also went through a national default and currency death not too many years ago. I've heard they don't trust the fiat money; coins, while still fiat money and made of cheap metal, are perceived to be worth more than paper. I couldn't tell you why... At least they still hold the shared illusion that their coins have value as mone…

Why trust money printed by the same government that just looted your private pension? What would you trust if you were in Argentina? You don't want to carry gold around - people aren't accustomed to trading in it and would be wary of it, and even a little bit of gold is a lot of money. Key characteristic of something you can use as a currency of last resort is that it must be a liquid market - lots of people willing…

"What would you trust if you were in Argentina? You don't want to carry gold around - people aren't accustomed to trading in it and would be wary of it, and even a little bit of gold is a lot of money."

Actually a few months back as the economic crisis was hitting full swing, someone posted a really long diary from someone living in Argentina, and he said that (at least during their worst period a few years back) people used gold jewelery as currency, and that since no one trusted the purity, all gold got treated as junk gold, so you were best off having a stock of cheap gold jewelery.

Re: Argentina's coin crisis

#22

Post by jyothi »

compay wrote: post #6
sdurkin wrote: post #2

I don't understand why the government can't mint more coins and exchange them with the banks for notes.

It costs a lot of money to make coins. With inflation appearing to always be just around the corner, the government if afraid of investing tons of money to mint coins that could some become worth significantly less than the metal they're made of.

That is true. May be the govt should print notes for minor denominations too. They are the government they can legally launch a new currency note, can't they ?

The govt seems to be losing a lot more money with the shortage, like people forced to give free rides on subway.

Re: Argentina's coin crisis

#24

Post by mattmaroon »

diego wrote: post #4
mattmaroon wrote: post #3

This makes no sense to me. Why would people value a coin above face value, no matter how few there are? Isn't there significant arbitrage opportunity there then?

Because you need to take a bus to go to work. Buses have machines that only accept coins. If you don't have coins, you can't go to work. This is mostly an issue with one-peso coins, as the bus costs 90c. It's extremely stupid, and also self-fulfilling. Small businesses are afraid of running out of coins so they hoard them. It's really not that big of a deal if you don't take the bus (I either walk or drive depending…

So since bus fares have more than doubled, maybe it's a great time to be a taxi driver?

Re: Argentina's coin crisis

#25

Post by newsycaccount »

tc wrote: post #17
toffer wrote: post #15

I've been in Buenos Aires for about 2 months now, and it's still hard for me to believe how ridiculous this situation is. Two examples from my daily life: 1) I take the bus every day, which only accepts coins. So, everyday I have to figure out how to get more coins. One strategy I tried was to forgo the convenient subway card and actually stand on line to pay for a single fare card every time I happened to take the s…

What's really interesting about these coin shortages is that they are exactly what we should expect as governments have created monopolies over the manufacture of coinage. Central planning always leads to the systematic misallocation of resources, causing these nasty supply surprises which the government then proceeds to blame on other actors. An unappreciated miracle of our world is how rare shortages are among trul…

>An unappreciated miracle of our world is how rare shortages are among truly free-market goods.

Name some (specifically, name some in the United States).

Re: Argentina's coin crisis

#26

Post by iigs »

delackner wrote: post #21
cturner wrote: post #16

Earlier quoted context omitted.

Why trust money printed by the same government that just looted your private pension? What would you trust if you were in Argentina? You don't want to carry gold around - people aren't accustomed to trading in it and would be wary of it, and even a little bit of gold is a lot of money. Key characteristic of something you can use as a currency of last resort is that it must be a liquid market - lots of people willing…

"What would you trust if you were in Argentina? You don't want to carry gold around - people aren't accustomed to trading in it and would be wary of it, and even a little bit of gold is a lot of money." Actually a few months back as the economic crisis was hitting full swing, someone posted a really long diary from someone living in Argentina, and he said that (at least during their worst period a few years back) peo…

Awesome article.

http://www.frugalsquirrels.com/cgi-bin/ubb/ultimatebb.cgi?ub...

Re: Argentina's coin crisis

#27

Post by Zaak »

jyothi wrote: post #22
compay wrote: post #6

Earlier quoted context omitted.

It costs a lot of money to make coins. With inflation appearing to always be just around the corner, the government if afraid of investing tons of money to mint coins that could some become worth significantly less than the metal they're made of.

That is true. May be the govt should print notes for minor denominations too. They are the government they can legally launch a new currency note, can't they ? The govt seems to be losing a lot more money with the shortage, like people forced to give free rides on subway.

Bills cost more than coins because they don't last as long.

Re: Argentina's coin crisis

#28

Post by mattmaroon »

maw wrote: post #8
mattmaroon wrote: post #3

This makes no sense to me. Why would people value a coin above face value, no matter how few there are? Isn't there significant arbitrage opportunity there then?

How significant would said arbitrage be, though? In terms of percentages of individual purchases, sure, but if there's a way to scale it up it isn't obvious to me. In Mexico, the same problem exists, although by the sound of things it isn't nearly as acute as in Argentina. In general, established and professionally run businesses have change; small and informal ones do not. (I think this stems from security concerns:…

Pretty big I imagine if you could say, broker a deal with the bus companies to allow you to sell passes.

Re: Argentina's coin crisis

#29

Post by tibix »

Zaak wrote: post #27
jyothi wrote: post #22

Earlier quoted context omitted.

That is true. May be the govt should print notes for minor denominations too. They are the government they can legally launch a new currency note, can't they ? The govt seems to be losing a lot more money with the shortage, like people forced to give free rides on subway.

Bills cost more than coins because they don't last as long.

Argentina's peso has been around for only 20 years. Before that, no currency lasted more than 30 years in most of the last century.

Re: Argentina's coin crisis

#30

Post by Tichy »

mechanical_fish wrote: post #20
tc wrote: post #17

Earlier quoted context omitted.

What's really interesting about these coin shortages is that they are exactly what we should expect as governments have created monopolies over the manufacture of coinage. Central planning always leads to the systematic misallocation of resources, causing these nasty supply surprises which the government then proceeds to blame on other actors. An unappreciated miracle of our world is how rare shortages are among trul…

Here's a book I tried to read once: The Big Problem of Small Change . From http://press.princeton.edu/titles/7306.html : "The Big Problem of Small Change" offers the first credible and analytically sound explanation of how a problem that dogged monetary authorities for hundreds of years was finally solved. Two leading economists, Thomas Sargent and François Velde, examine the evolution of Western European economies t…

Voted up for coining the phrase "a book I tried to read once" ;-)
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