Coin hoarding, Gresham's Law, and base metals

Argentina's weird coin shortage got some press back in 2008 and 2009, and it continues into 2010. Some suspected hoarders or melters when inflation was at 25%, and led small businesses to give change in mints or candy.

Where are Argentina's coins? (Global Post, 2009-05-11):

The coin scarcity has created a strange predicament: Merchants regularly refuse to sell their goods or services if it means they’ll have to give coins back as change. For small transactions, they’d rather lose the revenue than spare the change. ...Many of the banks are as loath to let go of their coins as the small businesses are.

...The cause of the coin scarcity isn’t clear. The Central Bank says it’s supplying enough: a record 524 million new coins in 2008, up 13 percent from 2007. This year will likely bring a new record, and there are supposedly 5 billion Argentine coins currently in circulation — about 125 per person.

Many blame coin hoarders and black-marketeers, several of whom have been caught. But they seem to be effects, rather than causes, of the shortage. Another scapegoat is the city buses, which until now have only accepted coins.

...The shortage might have been precipitated by the rise in commodity prices in the last few years, said Dardo Ferrer, chief economist at the Market Foundation. There have been reports of people inside Argentina and across its borders melting coins for their metal, which became worth more than coins's face value when the price of raw materials rose.

Coin hoarding and melting were common in an earlier age, when money derived most of its value from the intrinsic value of the metal, James Surowiecki explains:

Hoarding of this sort, and the resulting coin shortages, was once a recurring economic problem, one that the Italian economic historian Carlo Cipolla dubbed “the big problem of small change.” But these shortages were thought to be a feature of premodern times, when coins were made out of precious metal, and people literally brought silver to the mint to have it turned into coins. If the value of silver rose beyond the face value of coins, hoarding silver was a natural response. Today, coins are government-issued tokens, and their value is theoretically unconnected to the metal they contain.

This isn’t to say that the material worth of a coin’s metal can’t still exceed its face value; the rising value of zinc, for instance, meant that, last year, every new penny issued cost the U.S. Mint about 1.7 cents. But hoarding no longer makes sense unless it’s done on a large scale, and most people in Buenos Aires are not melting down their coins into hunks of copper.

Gresham's law implies that coins with a lower intrinsic value will replace coins with a higher intrinsic value if the nominal value of the coins remains the same. A lot of this happened in the 1960s and 1970s, when the U.S. shifted to a true fiat currency and started minting dimes (and other coins) in a copper-nickel alloy rather than silver. Numismatists shifted through change for decades to collect all the silver dimes and remove them from circulation. According to Coinflation.com, the intrinsic value of a silver Mercury or pre-1964 Roosevelt dime is US$1.59, although the face value remains US$0.10.

So, how likely is it that hoarders are (or were) melting down the coins of Argentina for a profit? The Central Bank of Argentina's Web site is a little strangely laid out, but has useful information about the coins. Most of Argentina's coins are minted in aluminum bronze or cupronickel, and some of them have a brass-plated steel variant. Let's look at three of them: the aluminum bronze 50-centavo coin, the aluminum bronze 25-centavo coin, and the cupronickel 25-centavo coin. Since there are no brass-plated steel variants, these would be among the easiest to collect and melt down.

• The 50-centavo coin weighs 5.8 grams, and is composed of 92% copper and 8% aluminum. The metal in each coin is thus worth US$0.044. The nominal value of 50 centavos is US$0.12.
• The aluminum bronze 25-centavo coin weighs 5.4 grams, and is composed of 92% copper and 8% aluminum. The metal in each coin is thus worth US$0.04. The nominal value of 25 centavos is US$0.063.
• The cupronickel 25-centavo coin weighs 6.1 grams, and is composed of 75% copper and 25% nickel. The metal in each coin is thus worth $0.072. The nominal value of 25 centavos is US$0.063.

Only the cupronickel coin has greater intrinsic value than face value. But Argentina, like the U.S., has a penny problem. Both of the 1-centavo coins are worth more than US$0.01 for the copper, while the face value of the coin is only worth a quarter of a U.S. cent. Argentine pennies are worth nearly four times as much for their metal as for their face value. Melting may make economic sense with the 1-centavo coin, and possibly others. But if melting was the culprit, it seems like steel coins would eventually make their way into circulation. Or perhaps, having gotten swept up in a hoarding dynamic, hoarders can profitably sell even steel coins, which helps maintain the hoarding behavior.

However, there have been at least some cases where it is known that people have been melting down base metal coins to use as a raw material.

Sharp practice of melting coins (BBC, 2007-06-26):

Millions of Indian coins are being smuggled into neighbouring Bangladesh and turned into razor blades. And that's creating an acute shortage of coins in many parts of India, officials say.

Police in Calcutta say that the recent arrest of a grocer highlights the extent of the problem. They seized what they said was a huge coin-melting unit which he was operating in a run-down shack.

The grocer confessed to melting down tens of thousands of Indian coins into razor blades which were then smuggled into Bangladesh, police said.

"Our one rupee coin is in fact worth 35 rupees, because we make five to seven blades out of them," the grocer allegedly told the police. "Bangladeshi smugglers take delivery of the blades at regular intervals."

This was three years ago, and prices have changed since 2007, but a quick comparison at contemporary prices may be interesting. According to the Royal Bank of India, all currently-minted Indian coins are minted in stainless steel. The old two- and five-rupee coins were cupronickel. Assuming a 75% copper/25% nickel alloy, the metal in the old six-gram two-rupee coin would be worth approximately US$0.07, while one nominal rupee is worth US$0.02 at current exchange rates. So it's entirely plausible that hoarders were melting the coins for copper and nickel. It seems like steel prices would have to be higher for the metal for the new 5.62-gram stainless steel two-rupee coin to be worth more than the face value of the coin, but perhaps Bangladeshi melters have additional costs to obtain raw materials otherwise.

Falls City Beer in 2010

Perhaps I noticed this in passing and then completely forgot, but it appears an entrepreneur has bought the old Falls City Beer and relaunched it as a craft beer. Louisville is a really great town for beer, compared with our neighbors.

Falls City was a Louisville brand for many years, probably most (in)famous nationally for the market flop Billy Beer. It eventually devolved into the kind of weak alcopop politely and euphemistically known as "American pale lager", contract brewed in Evansville and then Pittsburgh. It had a surprising amount of loyalty, and I'd long hoped it could be revivified as a purveyor of good beer. It appears to be so. Here's their new FaceBook page.

Apparently this happened some time ago, and I completely missed it. Blogging at Mojo back in December 2009, John LaFollette said:

A new Falls City Brewing Company has set up shop in the city that gave the iconic brand its name, pledging to recreate the craftsmanship and high-quality standards that, in its heyday, earned Falls City beer national distinction.

The new owner, Louisville businessman David Easterling, declined to be interviewed until his plans for the company were clearer, but said they should be producing beer and test-marketing it around town within the month.

...Falls City beer was once a staple of Louisville bars. Falls City bar signs are still hanging at Check's Café in Germantown—the bar gets regular requests for it, and says they will carry the new version—and at the Outlook Inn in the Highlands.

In the years following Prohibition, Falls City competed locally with the Fehr's and Oertel's breweries and with Evansville-based Sterling, and by 1950 was producing 750,000 barrels a year, making it the most popular beer in Louisville.

Still, by the late 1960s, the brewery struggled to keep up with larger, national brands, and made cuts in ingredient and production quality. Facing declining sales and a declining reputation, Falls City was sold in 1978 to the Wisconsin-based G. Heileman Brewing Company

Roger Baylor had an interview with owner David Easterly in the LEO, beside some consumer reactions, back in April 2010.

Has anyone had the new brew? It sounds like it may be worth supporting.

Greatest hits from the Zombie Apocalypse

My previous blog (2006-2008) was known as Surviving the Zombie Apocalypse, as noted before, and mostly consisted of tongue-in-cheek reviews of zombie movies.

I've been considering importing at least some of that old content, especially now that the company hosting the old blog is changing its business model. My plan at present is to post stuff here backdated to the date of its original post, but edit the content as I see fit: Archive the interesting stuff, but give it a buff and polish. Stay tuned.

The down side of "sound money"

I have a soft spot for goldbugs: they're at willing to consider how our economic system could be different with very different foundations, and relitigate century-old monetary disputes. It's like a steampunk monetary policy. Although I always wonder why they never talk about silver, the international standard for thousands of years, instead of gold, a colonial-era fad. Or why something like the terra wouldn't be more plausible going forward.

But the gold standard is a bad idea. Gold is deflationary, because it can't be mined at a pace that keeps up with global economic growth. Deflation discourages investments in future production rather than savings, and it's difficult to get people to accept nominal pay cuts during a recession. Modest, controlled inflation is more conducive to long-term growth, but everybody really, really hates inflation.

But this chart from Doug Short lays out the effects pretty clearly.


The gold standard offered great price stability in its day. Because it more frequently interrupted inflation and economic growth with deflation and protracted recessions.

Happy Equinox

...btw; today's the autumnal equinox (and the week of Oktoberfest).

I managed to find Jupiter with my wee telescope on Monday, but I couldn't get it to focus any sharper than a blur.

Visualizing Louisville

Yesterday I saw Eric Fischer's maps of race and ethnicity in American cities, but somehow managed to miss his map of Louisville (h/t tVV).



Louisville Magazine has a brief piece about Charlie Farnsley's effort to bring back the old city flag. Bumper stickers are available at Brand Louisville (h/t WFPL The Edit).

The Louisville metro council 6th district race is a mess

It's kind of a long story, but the Louisville Metro Council election in my district (6th) looks like it's going to be a huge mess.

Back in 2008, Ken Herndon ran against the incumbent, George Unseld, in the Democratic primary. Days before the election, a truly vile and viciously homophobic mailer was sent out to residents of the district attacking Herndon and his campaign. The mailer attacking Herndon came after Metro Councilman Jim King had pressured Herndon to drop out of the race.

After Unseld very narrowly won the primary (by only 112 votes), Herndon filed a lawsuit in an attempt to uncover the source of this flyer. He found evidence linking Unseld and King's offices to the flyer (allegedly at the behest of Mayor Abramson's office), but no smoking gun.

Councilman Unseld died this June in his offices, suffering extensive bleeding following a fall. Hundreds came to his funeral.

Twenty applicants applied to fill the open seat, of whom several dropped out. The Metro Council interviewed the remaining 11, including Herndon, U of L Pan-African Studies professor Deonte Hollowell, and attorney Neena Parks Thompson. A long series of deadlocked votes ensued. Finally, independent Deonte Hollowell was chosen as a compromise; he's reportedly the first Independent to serve on the Metro Council.

Dr. Hollowell came to our neighborhood association meeting after announcing that he was running as an Independent in the November election to fill the remainder of Unseld's term (the first such meeting we've attended, btw). He says that he is very committed to running as an Independent rather than seeking the backing of a party, since he feels (IIRC) that such partisan disputes are not relevant to the welfare of the district. It is a noteworthy sentiment, but I suspect it's somewhat naive: the district's voters are registered 71% Democratic, 17% Republican, and 11% independent or other.

Hollowell was likely chosen as a seat-warmer until a Democratic candidate could fill the seat in November. I suspect he was not taken very seriously at the time. But since taking the seat, he's been working with Unseld's staff and has been doing a very competent job, to my understanding.

For the November election, the Democrats selected former FOP president David James, despite potential residency problems. James was nominated after a weighted vote by a nine-member panel. At the last minute, the GOP selected Candace Jaworski for the race.

In August, Ken Herndon launched a write-in campaign, making it a four-way race. Normally, a write-in campaign is not a serious effort. But Herndon is well-known in the district with a large bloc of support, the nomination process was badly tainted by party shenanigans, and the electorate is already very split since the incumbent is an Independent. There are a ~lot~ of Ken Herndon signs (left over from the primary) with a "Write In" sticker on them in Old Louisville.

So at present, there are four candidates: Republican Candace Jaworski, Democrat David James, incumbent Independent Deonte Hollowell, and write-in candidate Ken Herndon. Anything could happen.

Now, a lawsuit has been filed to remove Hollowell from the ballot, alleging that he didn't have enough petition signatures to be eligible to run as an independent. Ed Springston points to former Democratic Party chair Jennifer Moore among others (you can guess who).

At this point I think it's responsible only to vote for Deonte Hollowell or write in Ken Herndon. And it's certainly plausible that someone could win the seat outside the two major parties. The parties have made a real mess of this. But at least the results will be "interesting".

More electoral fusion in New York

New York is about the only state in the country that has a system where third parties robustly participate in elections, since the state retains electoral fusion. Electoral fusion allows small parties to cross-endorse the candidates from the major two parties. Although the two major parties continue to dominate the state's politics, this means that the smaller parties can wait in the wings for unusual situations and allow ideological voters to express their preferences in other ways.

It got a lot of attention back in the 2009 special election for New York's 23rd Congressional district, in which more Conservative Doug Doug Hoffmann beat more liberal Republican Dede Scozzafava for the seat, as voters in the right-leaning district attempted to signal their preference for a more conservative candidate.

Now, it might be consequential in the 2010 New York gubernatorial election, as Rick Lazio is still on the Conservative Party line against Republican nominee Carl Paladino after losing in the Republican primary.

More coverage:
Paladino Rout of Lazio Jolts New York G.O.P. (NYT)
Paladino and New York’s Republicans (538@NYT)
Poll Showing Gains by Paladino Excluded Key Candidate From Ballot (538@NYT):

A new poll this morning from Rasmussen Reports suggests significant tightening in the New York governor’s race. The poll has the Democrat, Andrew Cuomo, ahead 54 percent to 38 percent against Carl P. Paladino, the boisterous Buffalo businessman who soundly won the Republican primary last week against Rick Lazio.

...Still, there is one clear flaw with this poll, which is that it did not include an option for Mr. Lazio, who – even as he lost to Mr. Paladino among Republicans — won the Conservative Party’s nomination for governor and is expected to remain in the race. The Conservative Party is a big deal here in New York because of fusion voting, which allows multiple parties to endorse the same candidate on the ballot (Mr. Cuomo, for instance, is the nominee of the Democrats, as well as the liberal Working Families’ Party). Some voters in New York look toward the endorsements of the Conservative Party and the Working Families’ Party when filling out their ballots, and they can sometimes tip the outcome in a race.

But sometimes, the Conservative Party and the Republican Party split, as they have in this case — and this can have a much bigger influence on the outcome.

EDIT
Or not. Rick Lazio has dropped out.

More English spelling reform

Via Johnson via John Wells, I learned of Masha Bell's blog Improving English Spelling covering spelling reform. Some of the best posts are among her earlier ones, in which she makes the case for very modest regularizations of the most common English words to facilitate education and literacy among young students:

• Arguments against Reform 1
• Arguments against Reform 2
• Arguments against Reform 3
• Vested interests against spelling reform
• How much to change?

...as well as plenty of posts discussing individual spellings or the weird history of irregularly spelt short u. The sheer pigheadedness behind some of the irregular spellings is always amazing, as when the inkhorns added a "p" to the front of Gaelic "tarmigan" in order to make it look Greek and thus edumacated.

Wells makes a great point, too:

She also compares the ‘redundant’ -e in such words as accurate, adequate, delicate, private, with the ‘phonic reliability’ of words such as accelerate, assassinate, calculate. ...This implies, interestingly, that perhaps we ought to complicate our spelling by introducing a difference between moderate (verb, ˈmɒdəreɪt) and moderat (adjective, ˈmɒd(ə)rət), or separate (verb, ˈsepəreɪt) and separat (adjective, ˈsep(ə)rət) and other similar pairs.

It would certainly, I think, be advantageous to abolish the -e not only in love but also in have and give. These three very basic words immediately undermine the ‘magic e’ rule that reading beginners are taught. It would be nice, too, to be able to distinguish liv (verb, lɪv) from live (adjective, laɪv).

A great idea. Spelling reform has been going nowhere for years, and is generally done in countries more comfortable with language policy, language planning, and more significant government power over elements of popular culture. More recently, it was controversial in Germany.

I suspect the only hope for spelling reform in English is through guerilla and asymmetrical means, such as by endorsement of popular respellings like "nite" for "night". It will happen when writers just begin writing and publishing in reformed spellings, and the spellings that make sense drift from signs and text messages into usage in increasingly formal or prestige contexts.

Letters to a future age

...on the Georgia Guidestones, an American Stonehenge: Monumental Instructions for the Post-Apocalypse (Wired).

It's kind of amazing how relatively easy it is to send Rosetta Stones forward into the future, although I wonder how this monument would hold up over 10,000 years. That is a truly mind-boggling distance of time, and yet but a pittance if our species is to continue to survive in geological time.

EDIT
The third directive is "unite humanity with a living new language".