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What a fascinating article, reality is sometimes remarkably and amusingly counterintuitive. I would've never guessed a culture would accept counterfeit currenc
by metadat 3y ago
What a fascinating article, reality is sometimes remarkably and amusingly counterintuitive. I would've never guessed a culture would accept counterfeit currency en masse.
If a 1000 shilling note is only worth 4 US cents, does buying stuff require a small mountain of bills?
Here are some costs for food in Somalia (USD):
Loaf of Fresh White Bread (1 lb) 0.86$
Rice (white), (1 lb) $0.54
Eggs (regular) (12) $2.37
Local Cheese (1 lb) $2.19
So, not exactly dirt cheap, paying in 4 cent increments.. imagine if you carried around only nickels, a backpack may be needed just to carry the cash. What if you want to buy a car, motorcycle, or bicycle? Where would you even store all that cash, haha.
One thing I don't fully understand, TFA says a 1000 shilling note is worth $0.04USD (meaning, $1USD would equal 25000 shillings), but when I searched for the exchange rate online, everywhere says $1USD converts to about 575 SOS (Somalian Shillings). Can anyone here enlighten me about what's going on with the shillings?
Edit: Thank you @roywiggins for explaining! https://news.ycombinator.com/item?id=39944411 https://news.ycombinator.com/item?id=39944411
- margalabargala 3y agoConsidering the cover photo for the article is a small mountain of bills, that appears to be the way.
- roywiggins 3y agoAt a certain point I guess you're just going by weight of paper.
- BitwiseFool 3y agoAnd then eventually the paper itself is worth more than the banknote.
- coffeebeqn 3y agoI do wonder how a somewhat valuable metal like copper would work here. The copper standard. Go by the weight of the coin times the spot price of copper. Then the govt can’t keep printing more but I gyess they’d have to be on board
- convFixb 3y agoI did the back-of-envelope calculation [and now you have to read it :)]: A slug about 2 inches in diameter, 1/4 inch thick, is worth about 1 USD at today's copper price (weight = 1/4 pound). So it might almost, but not quite, work as coinage. Maybe in a very poor country populated by body-builders.
- coffeebeqn 3y agoQuarter pounder. Yeah maybe it would have to be some kind of a fractional currency. Or some more suitable metal. Silver would work but the price is a bit volatile. There already exists “bullion” silver coins that fit the bill
- roywiggins 3y agoI think the argument of the article is that the banknotes' value is bounded below by the cost of the paper. If it costs more to print banknotes than they're worth, nobody will print more and as circulating notes wear out you'll get deflation.
- lainga 3y agoIt's happened before! "A total of 1000 coins strung together were referred to as a chuàn (串) or diào (吊) and were accepted by traders and merchants per string because counting the individual coins would cost too much time. Because the strings were often accepted without being checked for damaged coins and coins of inferior quality and copper alloys, these strings would eventually be accepted based on their nominal value rather than their weight; this system is comparable to that of a fiat currency." https://en.wikipedia.org/wiki/String_of_cash_coins_(currency_unit) https://en.wikipedia.org/wiki/String_of_cash_coins_(currency...
- Zancarius 3y agoIt's happened in the ancient Near East as well. Coins were expensive to mint, and sometimes there simply weren't enough of them in circulation. So, counterfeits tended to be accepted as legitimate currency. In fact, it was here on HN just about a month ago: https://news.ycombinator.com/item?id=39606093 https://news.ycombinator.com/item?id=39606093 (Edit: There's a post farther down-thread that linked this well before I did. Please give that post an upvote instead of this one as I neglected to check first.)
- roywiggins 3y ago> when I searched for the exchange rate online, everywhere says $1USD converts to about 575 SOS (Somalian Shillings). Can anyone here enlighten me about what's going on with the shillings? Official exchange rates and actual exchange rates can diverge a lot[0]. Here's the UN's estimates of exchange rates (for, I think, internal accounting purposes- not something to particularly rely on), which puts the rate at 24,300 shillings to the dollar. https://treasury.un.org/operationalrates/OperationalRates.php https://treasury.un.org/operationalrates/OperationalRates.ph... [0] often this means that you can easily legally sell dollars for the currency at the official rate (ie, at a huge markup), but good luck buying dollars with the currency at the official rate. Maybe you can in very small amounts, or if you are politically connected.
- deleted 3y ago[deleted]
- giva 3y ago24300 SOS per USD is about 4,11 cent per 1000 shilling, about the rate cited in the article.
- deleted 3y ago[deleted]
- AdamH12113 3y agoThe article explains later on: > For some time now Somalia has been partially dollarized economy. U.S. dollar banknotes are the most popular paper currency, with old shillings being used in small payments and in the countryside. Mobile payments are extremely popular, but they are usually denominated in U.S. dollars, not shillings, and tend to be prevalent in cities where network coverage is best.
- Aloha 3y agoThe article is also from 2017.