Orphaned currency: the odd case of Somali shillings (2013)(jpkoning.blogspot.com) |
Orphaned currency: the odd case of Somali shillings (2013)(jpkoning.blogspot.com) |
What I find particularly interesting is the notion that most governments have maybe around a dozen different pieces of currency they issue, and have to decide what goes on them. Thus it's an interesting insight into the values the government wishes to promote to users of the money. For example, money in many developing nations shows images of large infrastructure projects to demonstrate and communicate some kind of progress and thus justify to the the citizens and users of the money that they should stay in a position of power.
In my collection are several orphaned currencies no longer used in any capacity like Japanese occupation Philippine Pesos that look almost exactly like U.S. dollars from the era. Why? I don't know all of the reasons, but it's interesting to contemplate how quickly after occupation these were produced, the decision to use Pesos instead of Dollars or Yen or some other alternative. [1]
Another interesting currency I have is a coin known as a Maria Theresa Thaler (MTT) [2] -- and for historic reasons that will become apparent, probably a counterfit, but was still traded. There's a long and interesting history about the coin, but the 1780 minting (or rather coins with the year of 1780 on them) became an important currency throughout many parts of the world long after the Austrian-Hungarian Empire was no longer in existence. In some areas, Merchants would not accept any other currency than 1780 MTTs and in a few areas is still used. However, due to this popularity it was often copied, counterfeited or otherwise minted by various groups and governments long after 1780. You can still by proof coins from the Austrian Mint to this day.
1 - https://en.wikipedia.org/wiki/Japanese_government-issued_Phi...
It's an interesting thought experiment to think about how urgent the Japanese government felt that local currency was to their territories that almost immediately they had new currency designed, plates engraved and money printed, maybe even on existing local equipment! Why not just print "Yen"?
As to shipping hard currency during War Time, I also have a small collection of U.S. Military "Milk Caps" (Pogs) which were issued as coinage/change on Wartime bases in Iraq and Afghanistan instead of coinage. I've heard it was because the cost of shipping in and out enough coins to support the local on-base economies was simply too high and was better used shipping in and out other things. [3][4]
1 - https://en.wikipedia.org/wiki/Taiwanese_yen
2 - https://en.wikipedia.org/wiki/Korean_yen
You almost have the feeling there are made of cardboard and that you could snap them in two.
But I guess they didn't finish as most dead coins: so worthless that getting a bag of them and selling it as scrap metal would actually earn you money ^^.
On the other hand, if it's an income tax, something like "How many quatloos did you make this year? Send in one-third of them", and I didn't make any quatloos because I use some other kind of money, well, I owe exactly zero quatloos (until the government figures out the loophole and, worse, fixes the exchange rate).
Rather than government backing or historical precedent, simple supply and demand propped up the shilling. Currency, even fiat currency, is not intrinsically worthless, it's useful on its own merits as providing a convenient alternative to bartering. This also explains why the counterfeits were accepted, people simply saw the warlords as providing liquidity that the government couldn't.
Once a government steps in with an alternative, the existing tender will slowly stop circulating. Or perhaps a mobile network may get froggy and offer cheap connectivity along with a payments network. Currency is like any other asset class.
Undermining faith in the system through heresy or counterfeit is considered to be much worse than individual acts of violence, and so it tends to be punished more harshly. The real value of money / faith is in the shared belief. Not that weird or difficult to understand when you think hard enough about it.
In other words, while individuals hold money and beliefs, faith systems like money are themselves social goods, held by the entire society.
Currency has value because we say it has value, and people will tend to default to the status quo. Your money is basically worth something because everyone is too lazy to actively consider it to be worthless.
If the society collapses, go and see if that farmer really wants to sell you a gallon of milk for a piece of paper - or even for an exquisitely printed bar of gold that you purchased because you were quite convinced the coming Armageddon would make all the silly paper money worthless.
(As an aside, I find one of the least believable parts of Fallout to be the fact that there is soda in the world and the bottle caps of that soda are a currency)
- The new Belarusian ruble also known as the "third ruble" which was introduced in 2016. The first and second generation ruble never had any coins; but with the third generation they introduced denominations <1 rubel, subdividing 1 rubel into 100 kapeks and minting kapek coins despite their very low value (1 kapek being ~0.0046 USD)
- In 2014, the defacto state of Transnistria (official the Pridnestrovian Moldavian Republic) introduced transnistrian ruble coins made out of plastic.
I would like the article better if it mentioned the difference between money as a store of value (my risk if I have a lot of it) versus as a medium of transactions (risk is limited to the amount in my wallet) versus inherent worth (tradable item). The first case needs belief in some form of backing. The second doesn't.
And of course we should mention using leaves as money by the Golgafrinchan people of Ark Fleet Ship B.
I am delighted by this as a real world physical example of a proof-of-work currency.
The above is regarding the southern US Greenback, during the civil war.
I'm not convinced its measuring what its supposed to be measuring though. I assume the gold dollar is a Yankee dollar, so this is also measuring the relative values of waring currencies, rather than to some 3rd party standard. Its unclear to me if a gold dollar is actually physically gold, which would ameliorate most of my concern, but theres still the risk of debasement, getting stuck with coin from the losing side etc.
In contrast Greenbacks (paper money issued by the US government) were only a promise to provide gold in exchange for the note. The value of the greenback relative to hard currency would have effectively been a measurement of how much faith people would have had that the government could make good on that promise. During the civil war, when the government was short on cash due to half their tax base leaving and the enormous costs of fighting the war, it's unlikely they would have been able to redeem all of those Greenbacks for hard currency (and in fact that was the whole reason they printed them: they didn't have enough hard currency to mint new coins) so under those conditions it's only rational that Greenbacks would trade at a discount.
Also if I'm a European cotton trader, do I want to be left with north US currency if the south won, and visa versa?
So yes the gold itself has a value, but as the article itself shows, currency without backing has value.
With that in mind, I would prefer to see a comparison to an independent currency.
Don't quote me on this, but I remember reading a good example. In the U.S. Waiters and waitresses frequently tip (and willingly accept) counterfeit notes from others who work in the industry. At the next opportunity, they pass them on by doing the same.
If anyone can find a good citation for this please feel free to add.
This is an actual theory? I thought it was just something people made up for the purpose of "proving" that bitcoin is worthless in internet discussions. It just sounds so silly.
There is a lot wrong with colonization - one of those things is that subsistence farming/ranching/being alive isn't really profitable to anyone else, so requiring that taxes be paid in a currency that is rewarded for doing a job that the government wants done is a way to force people to do that job in a sneaky way that doesn't technically count as slavery.
This was used extensively by GB in South Africa[1] to make sure there was enough labour to run mining operations.
[1] https://en.wikipedia.org/wiki/Hut_tax though this wikipedia article is incredibly whitewashed.
> ... several new issues of counterfeit notes joined them. These counterfeit 1000 and 500 shilling banknotes were created by warlords and businessmen subsequent to the country's collapse. ... Even without these imperfections, fake banknotes would have been instantly recognizable to anyone—they would have been crisp and clean relative to the limp and dirty legacy issue.
> Despite being easily differentiable, Somalians willingly accepted counterfeit 1000 and 500 shilling notes.
From https://en.wikipedia.org/wiki/Somali_shilling#Modern_history
> Competition for seigniorage drove the value of the money down to about $0.04 per ShSo (1000) note, approximately the commodity cost. Consumers also refused to accept bills larger than the 1991 denominations, which helped to stop the devaluation from spiraling further. The pre-1991 notes and the subsequent forgeries were treated as the same currency. It took large bundles to make cash purchases, and the United States dollar was often used for larger transactions.
Also, a 1000 Somaliland shilling bill is approximately US$2, so the producer of the counterfeit bills don't gain a lot.
I don't think this is accurate at all. Gold was valued as a trade good, and used to create majestic artworks. Government-created currency occurs a long time after gold becomes a major element of international trade. So, (1), the value of gold has nothing to do with a worry that the government will debase the currency.
(2), governments frequently did debase their currency, including gold-based currency. In the west, they did that by mixing precious metals with base metals and claiming the whole coin was pure precious metal. (Or, in the case of Croesus, by mixing precious silver with precious gold in a percentage that could be adjusted to meet current monetary needs.) In the east, they did it by issuing... paper currency. In general, governments were totally incapable of issuing fiat currency without issuing far too much and experiencing massive collapses in its value. But they still did it. Note that gold can be used to resist inflationary paper currency (though it wasn't), but it can't be used to resist debased coins that purport to be gold while actually being partly gold and partly lead. Such coins are a reason to distrust gold.
I'm sure many here have played the mental have of 'what if money was eradicated and use a bartering system' which leads to the basic logic of (eg.) I have a cow to sell and need some eggs that you own... How do we come to an arrangement? Bits of paper with an IOU on is one of the answers.
To me, this is what's happened here in Somalia... But it's just the next step. Rather than IOU's all over the place there's agreed upon bits of paper that represent some 'debt' that can be called in. It's little different than the concept of a promissory note which is legal in many (?all?) countries.
So when I read this in the article:
> According to chartal theory, the requirement that people pay taxes with government-issued bits of paper is what drives the positive value of these bits.
I don't agree at all.
The difference is of course that people can create any number of pieces of paper with numbers on them, but they can not create gold.
So you can be sure that your pieces of gold will be equally rare in 10 years, but the rarity of your 1000 Elbonian Dollars depends on the whim of people.
You could jump start TokenA by giving it the states backing (taxation etc), and it could probably coast just like TokenX for a while though.
It's not "trust" in the way most people trust their grandmother.
That's why paper money was issued: it was outside of the purview of the Mint and not subject to the legal restrictions on debasement. Referencing [2] again, we can see that at the height of the war in 1864 the market price of gold rose from its statutory price of $20.67 to $47.02 (which, due to the effective disappearance of hard currency from ordinary commerce, would have been relative to the paper currency). In other terms, each Gold Dollar was effectively worth $2.27 in Greenbacks or each Greenback could only buy 44% of a Gold Dollar. That matches up pretty closely with the figure cited in the linked article.
If you were a foreign person holding US gold coins in the Civil War era you could sell those gold coins for their gold content (whose value matched their pre-war face value exactly) even if the US government collapsed. You could not do the same with US paper currency.
[1]https://fraser.stlouisfed.org/title/1094
So the emergence of TokenA is that someone promises that it's worth some value and that the promise made is trusted by enough people.
If you enjoy a good read, I'd suggest you check out Going Postal and Making Money by Terry Pratchett, they discuss (among much hilarity) the emergence of a postal system and stamp trading, along with the eventual evolution into paper money. There are certainly better academic papers about the technical side but I honestly think those two novels make a much more compelling case because you are given a narrative where people start accepting a fiat currency and everyone is doing so for perfectly logical reasons.
Sure, but they can mine, discover, or loot more of it.
> So you can be sure that your pieces of gold will be equally rare in 10 years
Consider historical events, like the colonial Spanish economy going kerplooey because they brought back too much gold from the Americas and it made the value of the stuff drop like a rock.
2. You don't/cant educate people timely on a new money. Peso is peso in Philippines, the time period, shy of 40 years Philippines went from Spain, American to Japanese Custodianship. Too many changes == not accepted.
3. Local printing, typetext and fonts. It isn't like today where you can use comic sans immediately and change it in post. It used to all be done by hand in a printing press.
What's also interesting is you can still find silver pesos around Luzon diving, there's also this good story: http://corregidor.org/chs_trident/silver/hubbell_01.htm
If you ever have a chance to visit the Philippines, I highly suggest looking for pesos. :) I found so many, and all the locals I talk to don't know the story or history, most don't really know their history at all...
But +1 on infrastructure projects and such. Philippines also reissued the pesos coins, and they, suck, the 1 and 5 peso coin are similar in diameter and size, there is no color difference as previous currency it was gold color and silver color (not metals), and for a while, people were confused which were which -- getting change means you'd get 15 pesos back instead of 3!
Also, they are now following the ASEAN style of design with flowers and local "treasures" on the coins. The locals I talk with didn't really know there was a national plant -- always fun!
Your snark seems misplaced, for the US at least. They had an isolationist policy at the time, and no empire. I also wonder where Britain fits into this. They seem to have signed with everyone else. But with the largest empire I would have expected them to have a seat at the table.
Also, the fact that the US settled the territory it conquered and integrated it into the metrople does not change the fact that it conquered it any more than the fact that Russia did that in Central Asia or Siberia does, or France in Algeria.
[1]World Wide War 2.
In the end, he earns a tribute from Egypt by sending his daughter to marry the pharaoh. He receives several truckloads of gold -- but writes to express his disappointment that it has already been worked into statues.
So yes, you can use gold or you can spend it, but, like everything else, you can't do both.
Hadn't the US agreed to give the Philippines independence by that point? And Panama a case of picking the friendly side?
Not that I necessarily disagree with you but these are 30 years prior, and not exactly an empire compared to European ambitions. The US seems a poor target to beat with the 'empire' stick.