The trouble with inflation is that eventually the money’s worth nothing
We all know of the grand experiment in the Magic Money Tree of recent years of course.
According to the lore the last print run wasn’t worth enough to buy the ink for the next print run.
But there are other examples. We’ve always been very taken by De La Rue’s problems over printing money for Venezuela:
The British banknote printer De La Rue reported an £18.1 million ($22.8 million) “exceptional charge” on its annual results due to unpaid bills from the Central Bank of Venezuela, as its chief executive resigned.
The obvious solution, simply sell the banknotes to pay the bill for printing the banknotes couldn’t be used. For no one other than the Central Bank of Venezuela was willing to pay for “strong” bolivars and the CB of V wasn’t able to.
But Modern Monetary Theory insists that those aren’t fair cases. A proper government (“proper” here having definite colonialist, even eurocentric, overtones) can’t end up producing so much money that it becomes worthless. Why, they can insist you must pay taxes in that currency and that will always support the value.
The Royal Mint has left millions of unwanted 1p and 2p coins abandoned in warehouses across Britain as speculation over the future of copper coins grows.
Roughly 260m surplus copper coins worth around £4m are piling up after being stored indefinitely in cash centres across the country, industry data shows.
This includes roughly 150m – or two thirds – of all the 225m 2p coins in the UK as well as 110m of the 200m 1p coins that have been minted.
The amount of surplus cash is now so large that the total volume is the equivalent of more than 2,000 washing machine-sized cages – each weighing a tonne – filled with coins.
No one wants them as coins (tho’, to be fair, we’d happily take delivery ourselves, shipper pays of course) so they’re worthless? Well, melt them down for the copper then!
The Royal Mint, the official maker of British coins, has not recycled or melted down surplus coins since it closed its smelting facility more than a decade ago.
Tsk, Tory austerity, eh? Except, no, not so. Traditionally we made coppers from a copper, tin, zinc alloy (a “bronze”) but copper and tin - especially tin - are far too valuable to be used in mere money these days. They’re now steel with a copper coating. That is, they used to be worth melting down and now they’re not. So close that furnace then - to say nothing of the required tech being entirely different anyway.
But, but, steel has a scrap value, right? And indeed it does. But in steel scrap the thing to look out for is “tramp elements”. Things that wander through the system when you don’t want them to do so. Copper being the big bugbear in steel recycling. Therefore copper tainted steel doesn’t, in fact, have that much value. Possibly even a negative value given the cost of transport.
So, yes, even a “proper” money issuer like the UK has managed to make the money of the country - even though you can pay your taxes with it! - valueless. Magic Money Trees have their problems, see? The difference is only the speed at which it happens.
Tim Worstall