tag:blogger.com,1999:blog-6704573462403312459.post862806256309915308..comments2024-03-19T04:32:14.899-04:00Comments on Moneyness: Orphaned currency, the odd case of Somali shillingsJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-6704573462403312459.post-70667133924334746382017-03-14T19:46:25.074-04:002017-03-14T19:46:25.074-04:00Good post.Good post.Tony M.http://entryleveljobscam.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-23230428115447022332016-07-31T06:24:59.576-04:002016-07-31T06:24:59.576-04:00One factor you didn't mention at all is the ec...One factor you didn't mention at all is the economy's need for a medium of exchange. You don't need a hard theory of why a note is perceived to be valuable if there is a scarcity of alternatives!matslatshttp://matslats.netnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-82803575827350391682013-03-03T14:21:39.770-05:002013-03-03T14:21:39.770-05:00If you want the Mubarak paper, email me. The rest ...If you want the Mubarak paper, email me. The rest are available on the web.<br /><br />I've got your thesis open on my computer and will get to it soon!JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-37921234804705211892013-03-02T15:17:30.592-05:002013-03-02T15:17:30.592-05:00I would need to read up the details (I read the ol...I would need to read up the details (I read the old Luther article but not the new one), but my guess is that the replacement process got stuck in the middle, before the old shillings were fully displaced. There have been plenty of cases where the state replaced an old currency with a new one, so we have a idea about how it works if the migration is successful. Maybe the case of New Somali Shilling is an example of an unsuccessful migration. That could explain the floating exchange rate and limited geographical acceptance.Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-32440425520503896552013-03-02T12:11:50.700-05:002013-03-02T12:11:50.700-05:00"Somali shillings circulate because they alre..."Somali shillings circulate because they already are the most liquid good in Somalia"<br /><br />As I pointed out in the post, I don't think this works for the New Shilling. New Shillings weren't liquid at all, yet they went into circulation. Why would the market have allowed this to happen if old shillings were already one of the more liquid instruments in Somalia? Something else is at force here. Unfortunately we don't have enough data on New Shillings.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-10338504605322997802013-03-02T06:27:07.735-05:002013-03-02T06:27:07.735-05:00Somali shillings circulate because they already ar...Somali shillings circulate because they already are the most liquid good in Somalia, and the state hasn't replaced them with new money. This is a rare case, where Rothbard and Krugman agree.<br /><br />If the new central bank issues new money and sets a fixed exchange ratio with the old schillings, the old schillings will be removed from circulation (Gresham's Law). With the New Somali Schillings, it looks like the process got stuck in the middle.<br /><br />I would say that there are two different questions:<br />- why do the Schillings act as money?<br />- why is the exchange ratio the way it is?<br /><br />These need to be treated separately.<br /><br />The reason why counterfeits are treated as fungible becomes apparent if you spend some time with the concept of immaterial goods and copying. Whether the copy is or isn't treated as a perfect substitute depends on the appraisal of the user, not the issuer. Typically, when the state (issuer) finds that you have a counterfeit note, it is confiscated and you might be even charged with counterfeiting. That motivates people to distinguish between them. In Somalia, this restriction is absent. It looks like this has a significant effect on the substitutability of the notes (this is just a remark and is not supposed to be interpreted as a general rule).Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-58426031109657035882013-03-01T14:40:22.115-05:002013-03-01T14:40:22.115-05:00Hi David.
On the supply side, Somalia certainly ...Hi David. <br /><br />On the supply side, Somalia certainly seems to have a commodity standard in which production is governed by cost & competition. I like Luther's account of this in his 2012 paper. <br /><br />It's a little bit weird on the demand side. In a cattle standard, for instance, the demand for a marginal head of cattle could be derived from consumptive use or monetary use. Same with a gold standard, in which demand for jewelery intertwines with demand for coins. In Somalia, I don't think there is any consumptive demand for shillings i.e. there is no demand on the margin for shillings as writing paper, or fuel for fires... there is only monetary demand.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-53397313153140237532013-03-01T13:26:06.944-05:002013-03-01T13:26:06.944-05:00Thanks for doing the post JP. So what are thoughts...Thanks for doing the post JP. So what are thoughts about the shillings become effectively a commodity money, "ink and paper" standard?David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-61954091815410365382013-03-01T13:07:52.123-05:002013-03-01T13:07:52.123-05:00I agree that the acceptance of the New Shilling wo...I agree that the acceptance of the New Shilling would be consistent with both tax-backing and chartal theories, however, there's no data to indicate that Ali Mahdi Muhammed actually took on the New Shillings as a liability, or that he required them to be used to discharge obligations to his faction. <br /><br />It could also be indicative of the <a href="http://jpkoning.blogspot.ca/2012/10/the-social-contrivance-of-money-bit.html" rel="nofollow">money-as-a social-contrivance theory</a>. A tribe might be small and close knit enough to decide to give value to some intrinsically useless bit of paper.<br /><br />"Also, I remember reading that the value of Somali shillings was close to being equal to the cost of printing the paper."<br /><br />Yes, that's in Luther 2012. Very good paper. Luther calls it an "ink and paper" standard.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-3701199156827393612013-03-01T12:08:32.405-05:002013-03-01T12:08:32.405-05:00"While New Shillings did gain acceptance, the..."While New Shillings did gain acceptance, their use was limited to a small area in North Mogadishu—the area controlled by Ali Mahdi Muhammed."<br /><br />That would be consistent with the view that the warlord gave them value because he accepted them in payment of protection money (i.e., taxes). The tax-backing theory still looks OK. (Subtle difference between the tax backing view and chartalism: Chartalism says taxes create a demand for money, while the tax backing view says taxes are an asset of the government, and as such serve as backing for the money, along with the government's other assets.)<br /><br />Also, I remember reading that the value of Somali shillings was close to being equal to the cost of printing the paper.<br />Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.com