I’ve been thinking outside the box to see if I can help with the big problem of small change, as they call it. I may get a medal for this.
There’s a thing that economists call “the big problem of small change”. If you’re interested, there’s a very good book about this, which is called “The Big Problem of Small Change”. In essence, there’s a problem because it’s hard to make a living out of producing small change, so no-one does it. Therefore the State has to do it, and deliver “token” money that is supported by law. But as inflation erodes the value of the small change, it becomes increasingly unprofitable to provide it and the State has to bear the cost in the interests of the economy as a whole. This why you get apparently bizarre behaviour such as the US Mint producing nickels that cost eight cents and that people throw in the trash rather than carry around with them. If this was your business you’d get out of it.
Is it still in the interests of the economy as a whole to produce these stupid small coins? I have no idea why the Royal Mint are messing about wasting our money on making 1p and 2p coins that nobody uses any more. It’s about time we recognised low-value coins for what they are.
“They are just scrap metal.”[From BBC News – Should the UK ditch the one penny coin like Canada?]
Now, if you want proof that our coins actually scrap metal then instead of taking my intemperate ranting at face value you should, as the man says, follow the money. And in this case it leads to China.
Denmark has freed two Chinese held for 48 days after they tried to exchange a massive hoard of scrap Danish coins that were mistaken for counterfeit money[From Denmark frees Chinese duo held in ‘fake’ coin mix-up | GlobalPost]
I thought it was a pretty unusual incident and I mentally filed it away to use asa conference anecdote at some point in the future. Then I spotted another similar case, and this caused me to suspect an interesting underlying story.
Two Chinese tourists have been briefly held in France on suspicion of forgery after trying to settle their hotel bill with one-euro coins. Police were called in after a hotel owner in Paris became suspicious about the two men, and 3,700 one-euro coins were then found in their room.
But the coins were not counterfeit.
The men said they had got the money from scrapyard dealers in China, who often find forgotten euros in cars sent from Europe.[From BBC News – Chinese tourists detained in Paris over one-euro coins]
This tallies with the Danish story. European coins are being collected in Chinese scrapyards. Who knew! I feel sorry for these enterprising people because my relentless campaign end the cash menace will one day result in their unemployment. But, for the time being, sufficiently large amounts of coins from Europe end up as scrap that it makes for a worthwhile enterprise (in China) to collect up these coins and ship them back here to use! How fun.
Italian police discovered over 500,000 euros’ ($623,000) worth of counterfeit coinage from a Chinese mint on Dec. 12 in a container ship docked in Naples.[From Italian Police Arrest 4 Chinese in Biggest Counterfeit Case Since Introduction of Euro]
Uh oh. If container-loads of euros are coming back to Europe from China, then it’s inevitable that this trade will attract counterfeiters looking to make a rather slow buck out of the business. So what should we do? I have a cunning plan.
I suggest we make a virtue out of necessity. Since the Chinese can presumably produce these coins at a lower cost than collecting them as scrap metal (otherwise they wouldn’t make them, they’d just collect them), why don’t we just stop producing coins above face value and sending them for scrap and instead let the Chinese counterfeits circulate in their place? Think about it. It costs the US Mint 1.66 cents to make a penny that no-one cares is real or not. So why bother? If the Chinese can produce one for half a cent, ship it to the US in a container and make a profit of 0.2 cents on it, let them.
Seasons greetings from your friends in Dublin.
The Irish Central Bank has produced figures on the scale of 1c and 2c production in Ireland: stacked on top of each other (for example) they would reach 4,000 km high (yes, 4000km. And that’s just the production of these coins for tiny Ireland). Or put side by side they would circumnavigate Ireland 7 times (actually 12 times, just 7 times if you go into all the in-y and out-y bits of Ireland’s coastline). In total Ireland has produced 1,500 of these coins for every family in Ireland since the introduction of the euro, which is only 13 years or so. Finally, the total weight of these coins is equivalent to the combined weight of 7,000 Irish rugby packs (cultural conversion factor: one Irish rugby pack is roughly equivalent to the combined weight of Tottenham’s starting eleven on boxing day).
The Irish Central Bank is now encouraging people to recycle these coins by giving them to charity or by other means, as hoarding is the default option currently.