tag:blogger.com,1999:blog-6704573462403312459.post7687106789991759246..comments2024-03-19T04:32:14.899-04:00Comments on Moneyness: Bringing back the Somali shillingJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger38125tag:blogger.com,1999:blog-6704573462403312459.post-38908035459711766452021-06-15T05:54:45.096-04:002021-06-15T05:54:45.096-04:00Bringing back the hay penny then?Bringing back the hay penny then?Someguyhttps://www.blogger.com/profile/04320868434966243515noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-33433198258657050502021-06-15T05:53:32.851-04:002021-06-15T05:53:32.851-04:00See my questions and answers below.See my questions and answers below.Someguyhttps://www.blogger.com/profile/04320868434966243515noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-54385847138074927612021-06-15T05:52:42.923-04:002021-06-15T05:52:42.923-04:00Anyone who has played Democracy 4 or paid attentio...Anyone who has played Democracy 4 or paid attention the last year knows that adopting the dollar is stupid as hell for Somalia.<br /><br />How do they control the value of their own currency, if they are using dollars? How do they control inflation or interest rates? How do they do quantitative easing? <br /><br />China has repetitively devalued it's own currency for a reason. It's very bad for a poor nation to be pegged to a rich nations currency.<br /><br />Just look at West Africa...Suffering.Someguyhttps://www.blogger.com/profile/04320868434966243515noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-14645216384374613042020-05-23T06:54:30.401-04:002020-05-23T06:54:30.401-04:00panama solution maybe the best option so far. but ...panama solution maybe the best option so far. but they do need smaller denomination than 1 cent since their 1000sh is roughly 4 cents.<br />anyway, good job.kurosagihttps://www.blogger.com/profile/00249342011457737581noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-8132040478244888602019-08-22T06:03:47.660-04:002019-08-22T06:03:47.660-04:00I just want to thank you for sharing your informat...I just want to thank you for sharing your information and your site or blog this is simple but nice Information I’ve ever seen i like it i learn something today. <a href="https://www.moneyshopway.com/product/buy-undetectable-counterfeit-pounds-online47000-pounds/" rel="nofollow">Counterfeit currency</a><br />StevenHWickerhttps://www.blogger.com/profile/05864349482360534088noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-66422027908612182612018-08-15T09:43:17.223-04:002018-08-15T09:43:17.223-04:00What about the make up of the Somali society, as a...What about the make up of the Somali society, as a homogeneous society, where trust plays a strong role in social interactions. Wouldn't social trust give its value. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-65374771866321005102017-10-15T09:37:12.742-04:002017-10-15T09:37:12.742-04:00Do you think deciding to only issue USD denominate...Do you think deciding to only issue USD denominated coins, instead of its own independent currency, would have a negative effect on the country's fiscal limitations? MMTers consider issuing a currency to be an important part of national sovereignty. Do you think issuing a currency can offer some degree of fiscal flexibility for a nation like somalia, or would it be worse off, due to inflation risks, if it tried to use its own currency as a fiscal tool? What kinds of issues do CBs in these kinds of countries deal with? I imagine that external financial entities, like the IMF, play a significant role. Depending on your perspective that role could be considered friendly support or a continuation of colonization. Do you see any good political reasons to issue your own currency, or are these countries better off if they don't try to undertake that burden?Derekhttps://www.blogger.com/profile/11265404998402355578noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-12742622862842707172017-05-25T21:37:10.432-04:002017-05-25T21:37:10.432-04:00Thanks Pierre. I like the comments section here to...Thanks Pierre. I like the comments section here too... I always learn something.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-11209545976771851022017-05-25T21:34:43.291-04:002017-05-25T21:34:43.291-04:00When and how did Myanmar successfully de-dollarize...When and how did Myanmar successfully de-dollarize? Do you have a link?<br /><br />"Panama's coins are minted by the U.S. mint. "<br /><br />Fair enough. Doesn't change any of my points, really. Somalia should mint its own dollar coins, either by getting a mint of its own or contracting out with someone to do it for them. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-2140641963685718252017-05-25T21:12:55.077-04:002017-05-25T21:12:55.077-04:00Yep, good point. It's become a commodity money...Yep, good point. It's become a commodity money, like a gold coin. Except the commodity is paper, not gold.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-29014729936702792412017-05-25T09:46:33.328-04:002017-05-25T09:46:33.328-04:00"why is fiat money valuable?"
Money is ..."why is fiat money valuable?"<br /><br />Money is whatever people agree to accept and use as money. I don't think it's that surprising that the 'real' currency and the new are seen as equal; why wouldn't they be? The issuing authority behind the original currency no longer exists, the fact that the money came from them is no longer relevant. And the amount of that money is fixed, so if they need more, they make it for themselves. The exchange rate against the dollar is the regulating mechanism. Anonymoushttps://www.blogger.com/profile/16548174449197903623noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-22955913148626539022017-05-25T08:53:20.138-04:002017-05-25T08:53:20.138-04:00Wow... some of the most intelligent comments I'...Wow... some of the most intelligent comments I've seen on the Internet.. (present company excepted :o)<br /><br />Were it that comments in other blogs would be as articulate.Pierre Clouthierhttps://www.blogger.com/profile/14656043477858844404noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-22282507338087754522017-05-25T02:08:52.816-04:002017-05-25T02:08:52.816-04:00"The literature on dollarization teaches us t..."The literature on dollarization teaches us that once the dollar begins to be used by a country...it is very hard to remove it." Not necessarily true: Myanmar had no problem dumping the dollar for the kyat. Plus, you're wrong about Panama: Panama's coins are minted by the U.S. mint. Also, Cambodia uses local currency to make change for dollars in lieu of coins. m.o.kanehttps://www.blogger.com/profile/18000971708371483547noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-10406503668023348682017-05-25T02:05:05.792-04:002017-05-25T02:05:05.792-04:00In the case of the Somalia shilling - the note is ...In the case of the Somalia shilling - the note is no longer fiat. It has become actual money - you stated it yourself - the 1,000 shilling note - "real" or "counterfeit" is valued at the cost of the paper and ink it is made with. It is valued as a medium of exchange based on its portability, acceptance and the value of the raw material and efforts that went into creating it - just a few cents. This is the true paper equivalent of metal coinage. This is as close to real money as paper can ever get - they've done it - and it works. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-51428414813751596802017-04-05T08:05:14.706-04:002017-04-05T08:05:14.706-04:00It is reasonable to figure that an established cur...It is reasonable to figure that an established currency does not need any backing prior to its loan contracts. In a debt based, loan contract generated currency , the deposits of private banks, the value of the currency is the economic resources sold by the borrowers to honour their loan contracts.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-26316441349286564622017-03-30T16:37:53.623-04:002017-03-30T16:37:53.623-04:00I wouldn't write of #1 so quickly. Chartalists...I wouldn't write of #1 so quickly. Chartalists have a few examples of tax-driven currencies, or the idea of twintopt, as they like to call it. And using your wording, taxes can be thought of as a type of 'redemption channel.' [Hmmm, redemption channel: sounds like you've been reading Mike Sproul.]<br /><br />But I don't think shillings were #1.<br /><br />"But I think this case of the Somali shillings is a special case because counterfeiters were able to print as much of it as they liked without legal punishment, in effect turning the old shilling itself into a commodity."<br /><br />If you look at the chart above it took almost two decades for notes to fall to their commodity cost. Until then, 1-3 can help explain their value.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-25197793296392994102017-03-30T16:07:26.137-04:002017-03-30T16:07:26.137-04:00"My guess: because there were no such officia..."My guess: because there were no such official denominations before, and they would stick out as being obvious fakes. Whereas it appears that everyone knows...etc."<br /><br />Makes sense to me.<br /><br />The other story is if you want Somalis to think that a future central bank will adopt your counterfeits, avoid choosing notes that the first central bank didn't print.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-30306562331964103882017-03-29T11:10:16.319-04:002017-03-29T11:10:16.319-04:00I would argue it is a combination of 2 and 3. Whe...I would argue it is a combination of 2 and 3. When fiat gets started, it must be tied to some commodity or asset. And the reason fiat currencies continue to hold value after the redemption for commodities or assets is suspended is because people anticipate that the monetary authority will either choose to, or have to, re-open those redemption channels at some point in the future. <br /><br />But I think this case of the Somali shillings is a special case because counterfeiters were able to print as much of it as they liked without legal punishment, in effect turning the old shilling itself into a commodity. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-42151303257473245092017-03-28T22:05:17.050-04:002017-03-28T22:05:17.050-04:00Yep, having one's own currency isn't an im...Yep, having one's own currency isn't an important part of nationhood.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-2331745069410285972017-03-28T21:54:43.254-04:002017-03-28T21:54:43.254-04:00"Value doesn't disappear overnight. In fa..."Value doesn't disappear overnight. In fact, the disappearance of the producer of money would tend to make it more valuable as they are still held and something must be used."<br /><br />I'm not so sure of that. Look at the 1000 rupee note. After they were demonetized by the Modi government, they lost their value very quickly.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-20395257070100788762017-03-28T21:40:04.937-04:002017-03-28T21:40:04.937-04:00Perhaps I should have stated it differently. The n...Perhaps I should have stated it differently. The nagging question is: how does positively-valued fiat money emerge?<br /><br />There are three theories. 1. The government forces it on the population 2. It is linked to a commodity but when that link is severed the valuable services it is already providing give it enough momentum to continue as a fiat currency, and 3. people expect a tether to be re-established at some point in the future. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-72691989271066722422017-03-28T14:31:57.547-04:002017-03-28T14:31:57.547-04:00In the case of those other demonetizations, those ...In the case of those other demonetizations, those various notes could have only continued circulating past the redemption period at their commodity values--based on the costs of the paper and ink used to print them. It is to be expected in those cases that people would much prefer to redeem those notes for a higher value instead of continuing to use them. <br /><br />And like you yourself admitted, the Ethiopian central bank will probably have to offer a premium over the commodity value of the old shilling notes--perhaps 5 or 6 cents per note--in order to get people to voluntarily redeem the notes instead of continuing to use them. <br /><br />The real interesting question is, why didn't any old shilling counterfeiter (who, at this point, is really just a producer of the old shilling as a paper commodity just like a gold miner is a producer of gold) try to add a bunch of 0s to their notes? That way, they could only spend 4 cents/note to produce something with a thousand or a million or a trillion times the face-value. <br /><br />My guess: because there were no such official denominations before, and they would stick out as being obvious fakes. Whereas it appears that, for the counterfeit old notes to circulate along with the real old notes, some plausible deniability was needed. Even if everyone "knows" that there are a bunch of fakes floating around, and even if it seems trivial to spot them, perhaps they were missing the level of "not everyone knows that everyone knows...etc."<br /><br />"But why should it matter whether the fakes are clearly distinguishable?" Well, why did it used to matter that gold money was real gold and not fool's gold? Back when gold was a medium of exchange, why didn't fool's gold, a substance with practically the same useful properties (color, appearance, etc.), get substituted for real gold as money? Likewise, why wouldn't Somalis embrace a new type of counterfeit note with a few extra 0s on the end as just as legitimate? Whatever the curious answer is, it's the same in each case. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-56909270699098833342017-03-28T10:38:18.513-04:002017-03-28T10:38:18.513-04:00When central banks stop accepting a currency as th...When central banks stop accepting a currency as their liability, i.e. when it is demonetized, it usually doesn't continue to circulate as money, even though it has a long history of use. An example of this is when a country suffering from high inflation replaces a currency with many 0s with one that has few 0s. Or the recent Indian demonetization. Or the demonetization of lira/francs etc to create the euro. No one keeps using the replaced notes.<br /><br />The Somali situation is very much like a demonetization. The shilling effectively lost all central bank support. Except unlike a demonetization the shilling continued to circulate. Why is that? One theory is the "future central bank" theory. When news hit in 1991 that the central bank has been destroyed, Somalians decided the shilling was still usable because at some point in time, maybe the next year, a new bank would take shillings on as their liability.<br /><br />25 years later, with shillings trading at their commodity cost, it makes no difference whether a future bank will buy them back, as you point out. But in 1991 it may have made a difference.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-43512165719489999712017-03-28T10:01:19.395-04:002017-03-28T10:01:19.395-04:00Thanks Ibn. If you click on the link to Luther'...Thanks Ibn. If you click on the link to Luther's paper, he gives a full list the various counterfeit issues and who printed them in table 1.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-11176636448403808052017-03-28T09:58:27.935-04:002017-03-28T09:58:27.935-04:00Good points, but as Mitchell points out below, the...Good points, but as Mitchell points out below, the Somali government probably isn't strong enough to enforce a ban. <br /><br />Did the Russian government ban the usage of dollars in the late 1990s? Wasn't aware of that.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com