Argentina's coin crisis

From 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.

Name some (specifically, name some in the United States).

I love the steak here, but a real salad is a rare treat in BA!

The govt seems to be losing a lot more money with the shortage, like people forced to give free rides on subway.

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.

   Why trust money printed by the same government
   that just looted your private pension?

Key characteristic of something you can use as a currency of last resort is that it must be a liquid market - lots of people willing to trade in it.

Things that affect this:

- Whether or not the government can successfully enforces exchange controls (i.e. you accept that thus much gold is equivalent to thus many units of currency).

- Government mechanisms to outlaw rival forms of currency.

- Whether it is easy to determine the worthiness of an item of currency (gold is subject to the archimedes test)

- Whether you can deal in small items (you don't want to have to carry a fortunate around in your pocket, you want to be able to make small purchases).

The idea of redeemable value stores is something I have quirky ideas about from time to time. I first became aware of Gresham's Law (bad money chases good out of a marketplace) at school with marbles, when I accidentally debased the valuing system. I was rubbish at marbles and had lost all of mine but convinced a few people that there would be value in playing for marbles which were 'demented' in interesting ways (this was all I had left). It wasn't a grand plan - just something to allow me to keep playing. People tend to be protective of their marbles, but playing for demended marbles allowed them to have games with lower risk. But after a bit I actually saw a younger kid cripple a worthwhile marble in order that he could enter a game and remember a guilty feeling that I'd done something bad. The marble craze was dead within days. Maybe the craze was on its way out and the only reason the demented thing got traction was because people were already tiring of it. It was an interesting introduction to the idea of a store of value though.

Ideas: barrels of printer ink, ipv4 ip addresses (could you forge a currency from these? Probably not - I think they're site-bound and therefore not all that transferable or fungible), staples, bicycle tires, quality first aid kits. There's an interesting battle going on between free banking and governments at the moment. By bringing the banks further "into the family", eliminating havens like Swizerland and Luxemburg through strategic bailouts and undermining Lietchenstein with espionage, governments are delaying a separation between currencies and governments. Iceland may be a good place from which to launch such a scheme - they have the infrastructure, would be generally considered trustworthy and they are at odds with Britain. New Zealand could work as a base, also.

You have to get some government money for you have to pay taxes in government money.