
Orphaned currency: the odd case of Somali shillings (2013) - rargulati
https://jpkoning.blogspot.com/2013/03/orphaned-currency-odd-case-of-somali.html
======
bane
I collect world and some historic currency as a small side hobby and have
maybe over a thousand pieces. Most of them are worthless in value but many of
them are sources of interesting analysis about the societies that produced
them.

What I find particularly interesting is the notion that most governments have
maybe around a dozen different pieces of currency they issue, and have to
decide what goes on them. Thus it's an interesting insight into the values the
government wishes to promote to users of the money. For example, money in many
developing nations shows images of large infrastructure projects to
demonstrate and communicate some kind of progress and thus justify to the the
citizens and users of the money that they should stay in a position of power.

In my collection are several orphaned currencies no longer used in any
capacity like Japanese occupation Philippine Pesos that look almost exactly
like U.S. dollars from the era. Why? I don't know all of the reasons, but it's
interesting to contemplate how _quickly_ after occupation these were produced,
the decision to use Pesos instead of Dollars or Yen or some other alternative.
[1]

Another interesting currency I have is a coin known as a Maria Theresa Thaler
(MTT) [2] -- and for historic reasons that will become apparent, probably a
counterfit, but was still traded. There's a long and interesting history about
the coin, but the 1780 minting (or rather coins with the year of 1780 on them)
became an important currency throughout many parts of the world long after the
Austrian-Hungarian Empire was no longer in existence. In some areas, Merchants
would not accept any other currency than 1780 MTTs and in a few areas is
_still_ used. However, due to this popularity it was often copied,
counterfeited or otherwise minted by various groups and governments long after
1780. You can still by proof coins from the Austrian Mint to this day.

1 - [https://en.wikipedia.org/wiki/Japanese_government-
issued_Phi...](https://en.wikipedia.org/wiki/Japanese_government-
issued_Philippine_peso)

2 -
[https://en.wikipedia.org/wiki/Maria_Theresa_thaler](https://en.wikipedia.org/wiki/Maria_Theresa_thaler)

~~~
bobthepanda
As far as the Phillipines is concerned, the Peso was actually in use during
the US colonial era as well. Practically speaking, before the digital age, it
was impractical to ship currency across the ocean just to provide the money
supply for a colony or another country; better to have the local authorities
manage it locally so that they can respond to local economic situations in a
timely fashion. While by 1939 speed of travel is no longer an issue,
reliability of wartime travel is, so the Japanese have to rely on the local
mint to issue currency.

~~~
bane
Right, and it's really interesting to speculate on these kinds of matters.
I've spent a little bit of time looking into it and can't find a definitive
story behind the decisions made. Other Japanese occupied territories ended up
with a local Yen-type. For example, Korea [1] and Taiwan [2] both had a
locally produced Yen. Why not the Philippines?

It's an interesting thought experiment to think about how urgent the Japanese
government felt that local currency was to their territories that almost
immediately they had new currency designed, plates engraved and money printed,
maybe even on existing local equipment! Why not just print "Yen"?

As to shipping hard currency during War Time, I also have a small collection
of U.S. Military "Milk Caps" (Pogs) which were issued as coinage/change on
Wartime bases in Iraq and Afghanistan instead of coinage. I've heard it was
because the cost of shipping in and out enough coins to support the local on-
base economies was simply too high and was better used shipping in and out
other things. [3][4]

1 -
[https://en.wikipedia.org/wiki/Taiwanese_yen](https://en.wikipedia.org/wiki/Taiwanese_yen)

2 -
[https://en.wikipedia.org/wiki/Korean_yen](https://en.wikipedia.org/wiki/Korean_yen)

3 -
[https://en.wikipedia.org/wiki/Milk_caps_(game)](https://en.wikipedia.org/wiki/Milk_caps_\(game\))

4 - [https://www.ebay.com/bhp/aafes-pogs](https://www.ebay.com/bhp/aafes-pogs)

~~~
barry-cotter
Korea and Taiwan were both integral parts of the Japanese Empire before WWWII.
Their conquest pre-dated the outlawing of conquest and annexation in
international law, when France and the USA decided they’d conquered enough of
the world and no one else should be allowed to do so [1]. Taiwan had been
Japanese since 1895 or so and Korea 1910. I’m sure if the Japanese had been in
charge of the Philippines for more than a decade they’d have introduced
Filipino yen too. But there was never a period when the Philippines was part
of the Empire of Japan under civilian administration.

[1][https://en.m.wikipedia.org/wiki/Kellogg–Briand_Pact](https://en.m.wikipedia.org/wiki/Kellogg–Briand_Pact)

~~~
benj111
>when France and the USA decided they’d conquered enough of the world and no
one else should be allowed to do so

Your snark seems misplaced, for the US at least. They had an isolationist
policy at the time, and no empire. I also wonder where Britain fits into this.
They seem to have signed with everyone else. But with the largest empire I
would have expected them to have a seat at the table.

~~~
barry-cotter
The Philippines (1898), Hawaii (also 1898), Cuba (1898, not annexed but Platt
Amendment allowed US free reign to intervene in Cuban affairs. The Panama
Canal Zone was an unincorporated territory of the US from 1903 to 1977 and
it’s separation from Colombia was accomplished with US warships.

Also, the fact that the US settled the territory it conquered and integrated
it into the metrople does not change the fact that it conquered it any more
than the fact that Russia did that in Central Asia or Siberia does, or France
in Algeria.

~~~
benj111
Well theres always exceptions :)

Hadn't the US agreed to give the Philippines independence by that point? And
Panama a case of picking the friendly side?

Not that I necessarily disagree with you but these are 30 years prior, and not
exactly an empire compared to European ambitions. The US seems a poor target
to beat with the 'empire' stick.

------
qwerty456127
AFAIK historically people could use shells like money although there was no
central bank, no taxes and some random people could occasionally "issue" new
with the help of the sea. Any token that is reasonably convenient to be used
as money and is not too easy to issue can be used as money. The idea that
taxation is what makes them valuable looks pretty bizarre to me.

~~~
AnimalMuppet
If there's a head tax of three quatloos per year, then I have to get three
quatloos every year. So does everybody else. That creates a value for
quatloos, no matter how useless they otherwise are.

On the other hand, if it's an _income_ tax, something like "How many quatloos
did you make this year? Send in one-third of them", and I didn't make any
quatloos because I use some other kind of money, well, I owe exactly zero
quatloos (until the government figures out the loophole and, worse, fixes the
exchange rate).

------
vinceguidry
I propose a different explanation for the continued circulation of shillings
after the central bank collapsed. Social need. Since there was no available
currency of worth for Somalians to use as a medium of exchange, they simply
kept using shillings. Had there already been an alternative currency, say
euros or dollars, shillings would have reduced in value and most trades of
value would be going through the legitimate currency.

Rather than government backing or historical precedent, simple supply and
demand propped up the shilling. Currency, even fiat currency, is not
intrinsically worthless, it's useful on its own merits as providing a
convenient alternative to bartering. This also explains why the counterfeits
were accepted, people simply saw the warlords as providing liquidity that the
government couldn't.

Once a government steps in with an alternative, the existing tender will
slowly stop circulating. Or perhaps a mobile network may get froggy and offer
cheap connectivity along with a payments network. Currency is like any other
asset class.

------
rbobby
Thus proving that the closer you look at money the weirder it gets. A bit like
religion in a way. Which, I suppose, is unremarkable given that belief/faith
plays such a significant role in both.

~~~
vinceguidry
The intrinsic value of money is that it prevents you from having to barter.
Religion works the same way, providing a shared culture that allows people to
relax with the understanding that there's an implicit contract. The
alternative to money is barter, the alternative to faith is never being able
to trust someone.

Undermining faith in the system through heresy or counterfeit is considered to
be much worse than individual acts of violence, and so it tends to be punished
more harshly. The real value of money / faith is in the shared belief. Not
that weird or difficult to understand when you think hard enough about it.

In other words, while individuals hold money and beliefs, faith systems like
money are themselves _social_ goods, held by the entire society.

------
Animats
Confederate money is now selling for above face value on eBay. When I was a
kid in Virginia, we had Confederate money as play money.

------
munk-a
This article is interesting... but confusing. It seems to be someone's organic
journey to how we don't need to be on the gold standard anymore. Currency has
always existed based on trust, at one point we thought that gold is really
trustworthy (for some weird reason) then we thought that governments were
really trustworthy (again, wat?) eventually we all settled on the idea that
not all governments were trustworthy, but that the US government was _super_
trustworthy (REALLY WAT?).

Currency has value because we say it has value, and people will tend to
default to the status quo. Your money is basically worth something because
everyone is too lazy to actively consider it to be worthless.

If the society collapses, go and see if that farmer really wants to sell you a
gallon of milk for a piece of paper - or even for an exquisitely printed bar
of gold that you purchased because you were quite convinced the coming
Armageddon would make all the silly paper money worthless.

(As an aside, I find one of the least believable parts of Fallout to be the
fact that there is soda in the world and the bottle caps of that soda are a
currency)

~~~
AnimalMuppet
Gold was considered trustworthy because it was rare. The earth's crust only
contains a small amount of it. The attack that people were worried about was
the government creating a whole bunch of currency and insisting that it was
all valuable. They couldn't do that with gold, so gold was trusted.

~~~
bobthepanda
Gold also has properties that make it hard to fake, if you know what you're
looking for.

~~~
analog31
And it could be kept long term without corrosion

~~~
lazyasciiart
And it was too soft to use in tools and such, so people didn't have to choose
between doing something with it and spending it.

~~~
thaumasiotes
Gold was valued for its use in ornamentation. For example, we have
correspondence between a Mesopotamian city-king and an Egyptian pharaoh; the
king sends many letters expressing his need for unworked gold and hoping the
pharaoh will let him know of a need -- any need -- of Egypt's that he might be
able to satisfy.

In the end, he earns a tribute from Egypt by sending his daughter to marry the
pharaoh. He receives several truckloads of gold -- but writes to express his
disappointment that it has already been worked into statues.

So yes, you can use gold or you can spend it, but, like everything else, you
can't do both.

------
sparkling
Other interesting currencies to look into:

\- The new Belarusian ruble also known as the "third ruble" which was
introduced in 2016. The first and second generation ruble never had any coins;
but with the third generation they introduced denominations <1 rubel,
subdividing 1 rubel into 100 kapeks and minting kapek coins despite their very
low value (1 kapek being ~0.0046 USD)

\- In 2014, the defacto state of Transnistria (official the Pridnestrovian
Moldavian Republic) introduced transnistrian ruble coins made out of plastic.

------
robocat
Title should say (2013).

I would like the article better if it mentioned the difference between money
as a store of value (my risk if I have a lot of it) versus as a medium of
transactions (risk is limited to the amount in my wallet) versus inherent
worth (tradable item). The first case needs belief in some form of backing.
The second doesn't.

And of course we should mention using leaves as money by the Golgafrinchan
people of Ark Fleet Ship B.

~~~
dang
Year added. Thanks!

------
shoo
Previously: 2017 HN discussion of similar link about the Somali shilling from
same blog:
[https://news.ycombinator.com/item?id=14414272](https://news.ycombinator.com/item?id=14414272)

I am delighted by this as a real world physical example of a proof-of-work
currency.

------
benj111
>The discount had hit its widest point as the paper (greenback) traded at 38
cents on the gold dollar.

The above is regarding the southern US Greenback, during the civil war.

I'm not convinced its measuring what its supposed to be measuring though. I
assume the gold dollar is a Yankee dollar, so this is also measuring the
relative values of waring currencies, rather than to some 3rd party standard.
Its unclear to me if a gold dollar is actually physically gold, which would
ameliorate most of my concern, but theres still the risk of debasement,
getting stuck with coin from the losing side etc.

~~~
MrRadar
Keep in mind at the time that the world was on the gold standard so the value
of every currency was measured against gold (and all currencies were, in
theory, convertible directly to gold). The Gold Dollar[1] was an actual coin
(made of an alloy of 90% gold and 10% copper) in circulation at the time so it
was literally impossible for it to be worth less than its face value under the
gold standard.

In contrast Greenbacks (paper money issued by the US government) were only a
_promise_ to provide gold in exchange for the note. The value of the greenback
relative to hard currency would have effectively been a measurement of how
much faith people would have had that the government could make good on that
promise. During the civil war, when the government was short on cash due to
half their tax base leaving and the enormous costs of fighting the war, it's
unlikely they would have been able to redeem all of those Greenbacks for hard
currency (and in fact that was the whole reason they printed them: they didn't
have enough hard currency to mint new coins) so under those conditions it's
only rational that Greenbacks would trade at a discount.

[1]
[https://en.wikipedia.org/wiki/Gold_dollar](https://en.wikipedia.org/wiki/Gold_dollar)

~~~
benj111
'gold' coins can and were debased. So theres a legitimate fear of nations
minting coins with lower gold content but the same face value. Devaluing your
own coin with it (if people cant differentiate).

Also if I'm a European cotton trader, do I want to be left with north US
currency if the south won, and visa versa?

So yes the gold itself has a value, but as the article itself shows, currency
without backing has value.

With that in mind, I would prefer to see a comparison to an independent
currency.

~~~
MrRadar
At the time (and I believe also today but I'm not sure) the metal content of
coins issued by the US government was set by Congress in law. The law
authorizing the minting of the Gold Dollar coins specified they needed to be
worth exactly $1.00[1] and, based on the statutory exchange rate of $20.67 per
troy ounce of gold between 1849 and 1861[2] (which was also effectively fixed
in law[3]), they contained exactly 0.04837 troy ounces of gold (as noted in
the Wikipedia article I linked in first reply). Thus it would literally be
illegal for the Mint of the United States to debase US currency.

That's why paper money was issued: it was outside of the purview of the Mint
and not subject to the legal restrictions on debasement. Referencing [2]
again, we can see that at the height of the war in 1864 the market price of
gold rose from its statutory price of $20.67 to $47.02 (which, due to the
effective disappearance of hard currency from ordinary commerce, would have
been relative to the paper currency). In other terms, each Gold Dollar was
effectively worth $2.27 in Greenbacks or each Greenback could only buy 44% of
a Gold Dollar. That matches up pretty closely with the figure cited in the
linked article.

If you were a foreign person holding US gold coins in the Civil War era you
could sell those gold coins for their gold content (whose value matched their
pre-war face value exactly) even if the US government collapsed. You could not
do the same with US paper currency.

[1][https://fraser.stlouisfed.org/title/1094](https://fraser.stlouisfed.org/title/1094)

[2][http://onlygold.com/Info/Historical-Gold-
Prices.asp](http://onlygold.com/Info/Historical-Gold-Prices.asp)

[3][https://en.m.wikipedia.org/wiki/Coinage_Act_of_1834](https://en.m.wikipedia.org/wiki/Coinage_Act_of_1834)

------
aarong11
Counterfeits are only counterfeit when you take them to the bank. As long as
you can pass them on to someone else, they still have value.

Don't quote me on this, but I remember reading a good example. In the U.S.
Waiters and waitresses frequently tip (and willingly accept) counterfeit notes
from others who work in the industry. At the next opportunity, they pass them
on by doing the same.

If anyone can find a good citation for this please feel free to add.

------
scotty79
> According to chartal theory, the requirement that people pay taxes with
> government-issued bits of paper is what drives the positive value of these
> bits.

This is an actual theory? I thought it was just something people made up for
the purpose of "proving" that bitcoin is worthless in internet discussions. It
just sounds so silly.

~~~
munk-a
It is a theory, but it's a pretty silly one. Most discussions of Chartalism
usually end up being excuses for colonialism.

There is a lot wrong with colonization - one of those things is that
subsistence farming/ranching/being alive isn't really profitable to anyone
else, so requiring that taxes be paid in a currency that is rewarded for doing
a job that the government wants done is a way to force people to do that job
in a sneaky way that doesn't technically count as slavery.

This was used extensively by GB in South Africa[1] to make sure there was
enough labour to run mining operations.

[1]
[https://en.wikipedia.org/wiki/Hut_tax](https://en.wikipedia.org/wiki/Hut_tax)
though this wikipedia article is incredibly whitewashed.

------
roywiggins
I suppose one nice thing about an orphan currency is that other than really
good counterfeits, nobody is around to inflate it by printing more.

~~~
gpvos
_> Counterfeit notes and contingent redemption_

 _> ... several new issues of counterfeit notes joined them. These counterfeit
1000 and 500 shilling banknotes were created by warlords and businessmen
subsequent to the country's collapse. ... Even without these imperfections,
fake banknotes would have been instantly recognizable to anyone—they would
have been crisp and clean relative to the limp and dirty legacy issue._

 _> Despite being easily differentiable, Somalians willingly accepted
counterfeit 1000 and 500 shilling notes._

~~~
gus_massa
I agree with the GP that the useful part is that they are difficult to
counterfeit, not impossible, just difficult enough.

From
[https://en.wikipedia.org/wiki/Somali_shilling#Modern_history](https://en.wikipedia.org/wiki/Somali_shilling#Modern_history)

> _Competition for seigniorage drove the value of the money down to about
> $0.04 per ShSo (1000) note, approximately the commodity cost. Consumers also
> refused to accept bills larger than the 1991 denominations, which helped to
> stop the devaluation from spiraling further. The pre-1991 notes and the
> subsequent forgeries were treated as the same currency. It took large
> bundles to make cash purchases, and the United States dollar was often used
> for larger transactions._

Also, a 1000 Somaliland shilling bill is approximately US$2, so the producer
of the counterfeit bills don't gain a lot.

