8 ms·

Argentina's coin crisis

54 points by alex_c 18y ago

sdurkin 18y ago
I don't understand why the government can't mint more coins and exchange them with the banks for notes.
- emmett 18y ago
  They did, in record numbers. It didn't help; the coins were simply hoarded.
- compay 18y ago
  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.
  - jyothi 18y ago
    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.
    - Zaak 18y ago
      Bills cost more than coins because they don't last as long.
      - tibix 18y ago
        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.
- malekov 18y ago
  making coins cost a lots of money (ironically), more than making notes... so, that is the problem
mattmaroon 18y ago
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?
- diego 18y ago
  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 on the distance). A couple of times in the past year I did have to stand in line at the bank to get change for laundry.
  - mattmaroon 18y ago
    So since bus fares have more than doubled, maybe it's a great time to be a taxi driver?
    - diego 18y ago
      The ratio between a cab fare and a bus ride has been more or less constant for decades.
- compay 18y ago
  Yes, there is a black market for coins here in Buenos Aires. That is part of the problem.
  - mindslight 18y ago
    That sounds like part of the solution! The way to stop hoarding is through exchanges based on actual value. If one can only exchange coins for their face value (from which the real value has deviated), a rational person will hold onto as many of them as they can.
- 18y ago
elai 18y ago
This feels like something out of the onion.
- tibix 18y ago
  It's for real. I'm Argentinian and watching the onion is pretty much the same as watching a news channel. I opt to laugh, but I should be crying. No country is as little serious as Argentina... to name a few examples: -VAT it's at 21% -The government lies about the inflation index (they say it's 8%, the real number is 25%)... a total theft. -Farmers have to pay a 30% tax on net incomes... and after that, a 35% tax on profit... -The president is a woman (joking)
  - thomasmallen 18y ago
    You could argue that the president never left office in 07...
gibsonf1 18y ago
Hmm, seems like a 1 peso bill would solve the problem more or less.
- alecco 18y ago
  The 2 peso bills are so worn out you can barely recognize them.
toffer 18y ago
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 subway. A huge pain, but in exchange for a 2 peso bill, I would get a subway ticket and a precious $1.10 in coins. Only the ticket clerk at the subway stop I most often frequent stopped selling me single tickets. I would show my 2 peso bill and ask for 1 ticket, and he would say "No monedas" and wave me through the gate for free. Every day, the same thing would happen. Same clerk. Same 2 peso bill. No coins, and he would wave me through for free. This went on for 2 weeks. You would think that I'd be pretty happy about this, but actually, it infuriated me. I really want the coins instead! Sure, I get a free ride, but now I've got to go buy a bottle of water and tangle with a kiosk owner to try and get change. 2) Paying cash at the supermarket can be glacial. They keep very few coins in the cash registers, so every time they run out of coins, the checkout clerk has to call for a manager, who has to go to the safe to get more coins, who then exchanges 2 pesos worth of coins for a 2 peso bill. Yes, that's right...they restock the coins in the register the equivalent of 60 US cents at a time!
- tc 18y ago
  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 truly free-market goods. For a deeper background, read: Get Government Out of Coin Manufacture http://news.ycombinator.com/item?id=386392 http://news.ycombinator.com/item?id=386392 Private Coinage http://news.ycombinator.com/item?id=386409 http://news.ycombinator.com/item?id=386409
  - mechanical_fish 18y ago
    Here's a book I tried to read once: The Big Problem of Small Change. From http://press.princeton.edu/titles/7306.html 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 through the lens of one of the classic problems of monetary history--the recurring scarcity and depreciation of small change. Through penetrating and clearly worded analysis, they tell the story of how monetary technologies, doctrines, and practices evolved from 1300 to 1850; of how the "standard formula" was devised to address an age-old dilemma without causing inflation. One big problem had long plagued commodity money (that is, money literally worth its weight in gold): governments were hard-pressed to provide a steady supply of small change because of its high costs of production. The ensuing shortages hampered trade and, paradoxically, resulted in inflation and depreciation of small change. After centuries of technological progress that limited counterfeiting, in the nineteenth century governments replaced the small change in use until then with fiat money (money not literally equal to the value claimed for it)--ensuring a secure flow of small change. But this was not all. By solving this problem, suggest Sargent and Velde, modern European states laid the intellectual and practical basis for the diverse forms of money that make the world go round today. Alas, I couldn't follow their math. (Maybe I should try again, taking more time.) But their historical examples were quite extensive.
ojbyrne 18y ago
So someone explain Canada to me, where they got rid of $1 and $2 bills, and visitors regularly complain about how they end up with pockets full of those coins.
- alecco 18y ago
  Same in Britain. And everybody gives you funny looks when you pay with a fistful of coins. Sigh.

54 points by alex_c 18y ago

sdurkin 18y ago

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

emmett 18y ago
They did, in record numbers. It didn't help; the coins were simply hoarded.
compay 18y ago
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.
- jyothi 18y ago
  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.
  - Zaak 18y ago
    Bills cost more than coins because they don't last as long.
    - tibix 18y ago
      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.
malekov 18y ago
making coins cost a lots of money (ironically), more than making notes... so, that is the problem

mattmaroon 18y ago

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?

diego 18y ago
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 on the distance). A couple of times in the past year I did have to stand in line at the bank to get change for laundry.
- mattmaroon 18y ago
  So since bus fares have more than doubled, maybe it's a great time to be a taxi driver?
  - diego 18y ago
    The ratio between a cab fare and a bus ride has been more or less constant for decades.
compay 18y ago
Yes, there is a black market for coins here in Buenos Aires. That is part of the problem.
- mindslight 18y ago
  That sounds like part of the solution! The way to stop hoarding is through exchanges based on actual value. If one can only exchange coins for their face value (from which the real value has deviated), a rational person will hold onto as many of them as they can.
18y ago

elai 18y ago

This feels like something out of the onion.

tibix 18y ago
It's for real. I'm Argentinian and watching the onion is pretty much the same as watching a news channel. I opt to laugh, but I should be crying. No country is as little serious as Argentina... to name a few examples: -VAT it's at 21% -The government lies about the inflation index (they say it's 8%, the real number is 25%)... a total theft. -Farmers have to pay a 30% tax on net incomes... and after that, a 35% tax on profit... -The president is a woman (joking)
- thomasmallen 18y ago
  You could argue that the president never left office in 07...

gibsonf1 18y ago

Hmm, seems like a 1 peso bill would solve the problem more or less.

alecco 18y ago
The 2 peso bills are so worn out you can barely recognize them.

toffer 18y ago

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 subway. A huge pain, but in exchange for a 2 peso bill, I would get a subway ticket and a precious $1.10 in coins. Only the ticket clerk at the subway stop I most often frequent stopped selling me single tickets. I would show my 2 peso bill and ask for 1 ticket, and he would say "No monedas" and wave me through the gate for free. Every day, the same thing would happen. Same clerk. Same 2 peso bill. No coins, and he would wave me through for free. This went on for 2 weeks. You would think that I'd be pretty happy about this, but actually, it infuriated me. I really want the coins instead! Sure, I get a free ride, but now I've got to go buy a bottle of water and tangle with a kiosk owner to try and get change. 2) Paying cash at the supermarket can be glacial. They keep very few coins in the cash registers, so every time they run out of coins, the checkout clerk has to call for a manager, who has to go to the safe to get more coins, who then exchanges 2 pesos worth of coins for a 2 peso bill. Yes, that's right...they restock the coins in the register the equivalent of 60 US cents at a time!

tc 18y ago
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 truly free-market goods. For a deeper background, read: Get Government Out of Coin Manufacture http://news.ycombinator.com/item?id=386392 http://news.ycombinator.com/item?id=386392 Private Coinage http://news.ycombinator.com/item?id=386409 http://news.ycombinator.com/item?id=386409
- mechanical_fish 18y ago
  Here's a book I tried to read once: The Big Problem of Small Change. From http://press.princeton.edu/titles/7306.html 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 through the lens of one of the classic problems of monetary history--the recurring scarcity and depreciation of small change. Through penetrating and clearly worded analysis, they tell the story of how monetary technologies, doctrines, and practices evolved from 1300 to 1850; of how the "standard formula" was devised to address an age-old dilemma without causing inflation. One big problem had long plagued commodity money (that is, money literally worth its weight in gold): governments were hard-pressed to provide a steady supply of small change because of its high costs of production. The ensuing shortages hampered trade and, paradoxically, resulted in inflation and depreciation of small change. After centuries of technological progress that limited counterfeiting, in the nineteenth century governments replaced the small change in use until then with fiat money (money not literally equal to the value claimed for it)--ensuring a secure flow of small change. But this was not all. By solving this problem, suggest Sargent and Velde, modern European states laid the intellectual and practical basis for the diverse forms of money that make the world go round today. Alas, I couldn't follow their math. (Maybe I should try again, taking more time.) But their historical examples were quite extensive.

ojbyrne 18y ago

So someone explain Canada to me, where they got rid of $1 and $2 bills, and visitors regularly complain about how they end up with pockets full of those coins.

alecco 18y ago
Same in Britain. And everybody gives you funny looks when you pay with a fistful of coins. Sigh.