All monies are commodity monies

by on July 13, 2007 at 12:24 pm in Economics | Permalink

Millions of Indian coins are being smuggled into neighbouring Bangladesh and turned into razor blades.  And that’s creating an acute shortage of coins in many parts of India, officials say.

Police in Calcutta say that the recent arrest of a grocer highlights the extent of the problem.  They seized what they said was a huge coin-melting unit which he was operating in a run-down shack…

"Our one rupee coin is in fact worth 35 rupees, because we make five to seven blades out of them," the grocer allegedly told the police.

In some cases the temporary solution is a private money:

To deal with the coin shortage, some tea gardens in the north-eastern state of Assam have resorted to issuing cardboard coin-slips to their workers.

The denomination is marked on these slips and they are used for buying and selling within the gardens.

Here is the story.  The pointer is from www.geekpress.com.

1 Edgardo July 13, 2007 at 1:22 pm

The story is so poorly written that it is impossible to know (1) whether the coins are melted only to produce razor blades to be sold in Bangladesh, and (2) what is going on in Bangladesh and in particular in the razor blade market. BBC’s standards of reporting have declined so much that reading BBC online news is a waste of time.

2 Yancey Ward July 13, 2007 at 3:22 pm

Oh, by the way, is it just me or are the confirmation codes comments getting ever more difficult to see with the human eye? Lately, I have had to look two or three times to be sure I was typing the correct number or letter.

3 Bill July 13, 2007 at 6:58 pm

Ed Snible: please post more often

Yancey: yes

4 agm July 14, 2007 at 3:19 am

Actually, in the US, I believe it’s more profitable to simply dug up, vandalize, and otherwise destroy property to get at the copper wiring on site…

5 DCPI July 15, 2007 at 9:08 am

How can the Mint create a law without going through Congress first? Do we really want to make arbitrage illegal? Isn’t the cost of creating criminal behavior where there was none before larger than the cost of remaking the currency to reflect reality? Or does the Mint value American’s rights and freedom at $0? I know, silly questions all.

6 vic July 16, 2007 at 3:20 am

The value of a coin can be seen as the sum of its metallic content and a perpetual put option with
exercise price equal to the face value. See Steve Easton, Global Finance Journal, vol 17, March 2007

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