This is, in fact, fairly pathetic:
Their battered metal safes, filled with millions of Somali shillings, are closed and locked. The paper fortunes inside have suddenly become worthless. “It’s like we went bankrupt overnight,” says Jama.
Last month, fed up with greasy, ripped and aged banknotes, a handful of traders in Mogadishu decided they would no longer accept them. Soon businesses, shops and even bus drivers were following suit, and the decision quickly spread to regions outside the capital.
The impact on prices was immediate, pushing up everyday expenses such as groceries, medicines and public transport. A small bag of powdered milk, for example, more than doubled in price.
Amid global food price rises and Somalia’s ongoing drought, poor people are bearing the brunt of the effects of an economy that is becoming completely “dollarised”.
Of course, as soon as anyone started using something as evil as American dollars then it was the poor who got screwed.
That’s the way The Guardian’s going to play it at least. A simpler explanation dsoes present itself. The Somali shilling lost another 50% of its value and there was a collective decision to “fuck this shit”. A sensible one too, as those shillings seem to have lost even more of their value since, no?
I will admit it’s amusing The G using a currency trader as a source and also being sympathetic to them….
We all know if it wasn’t for double standards, the Left wouldn’t have any, right?
On 4 May, dozens of exchange traders staged a protest, waving wads of the old banknotes as they walked through the streets of Mogadishu, shouting: “Somalia is the only country without a currency.”
Seems appropriate, since it lacks all the other things that makes for a thriving country..
The choice between things doubling in price and going up 1000x has not really occurred to them.
There’s your answer, Brits. If you don’t use Starmer’s pound he can’t tax you.
So Gresham’s Law is a load of crap is it?
This case is almost the precise opposite of the conditions under which Gresham’s law applies
I don’t think so.
Why is that?
Bad money drives out good would mean everyone used the Somali shillings, no?
Tho’ the end state of G’sL is that all the bad money gets spent and ends up somewhere – with the FX traders who traded for too long. No?
Surely GL means that everybody gets rid of the bad money. You are now saying that some people don’t do this which of course invalidates GL.
Someone’s going to end up as the patsy now, aren’t they.
If someone ends up a patsy how does Gresham’s Law apply? Under GL everybody (without exception) has to behave the same. If some are hesitant then the law collapses. What you may be seeing is an example of Thiers’ Law.
But this runs counter to GL (ie good money drives out bad). Both can’t be true except to say in some circumstances GL applies and in some circumstances TL applies. But what are those circumstances?
Also it seems the Somali government accepts tax payments in US dollars. If it insisted in tax payments in Somali shillings this would increase demand for the latter would it not?
Ah! A student of Spudanomics.
Perhaps you need to learn English so that you understand the meaning of words before you opine on them
From the wiki article on Thiers’ Law: “examples show that in the absence of effective legal tender laws, Gresham’s law works in reverse. If given the choice of what money to accept, people will accept the money they believe to be of highest long-term value and not accept what they believe to be of low long-term value. ” So you have been arguing against yourself the whole time. Kenneth Williams would, at this point, sneer and call you” an arse”.
Legal tender laws. What are they then? I don’t think KW ever called anyone an arse. He was much too witty for that.
Oh they were great fun. Especially as UK had bank notes not issued by the Bank of England. From memory, copper was legal tender up to two shillings & silver up to four pounds(?) I’m not sure if Jockish Or NI banknotes were legal tender in England. I know they were often refused. Curiously enough, sovereigns are legal tender. But you’d be a fool to use one as a quid
Here more than 1000€ is not legal tender when paying a business & more than 10,000 when paying an individual.
Scottish banknotes were not legal tender in England (if they had been then they could not have been refused) but most banks and some businesses would accept them.
John, any money can be legally refused. Hence you have shops accept cards not cash. Conversely, anything can be accepted. UK money’s not legal tender here but a lot of businesses quite happily accept them.
I’m really not sure about the currrent situation there regarding settling a debt in legal tender. Twenty years since I’ve lived there. Even government departments are getting shirty about handling cash.
I find all this stuff about valuta interesting because it negates so much of the bilge people like Spud propagate. Commerce can be conducted in any token of value will be accepted. It doesn’t require governments & laws. And it also gets rid of the bollox about fiat the goldbugs obsess over. Money is valued by what it can be confidently exchanged for. It’s that simple.
Scottish banknotes are/were not even legal tender in Scotland. In fact after the abolition of the BoE £1 note no banknotes are/were legal tender in Scotland. £1 and £2 coins are legal tender in Scotland and other coins are as well (subject to limits).
Incidentally, I wonder if the Eminence Graisseux knows this stuff. That not only the government can print money. Anyone can. Anyone can issue promissory notes & as long as they’re accepted in commerce, they’re money. The legal tender thing is only about whether one is obliged to accept it in payment of a debt. And there’s limitations on that, now. One isn’t obliged to accept legal tender in a transaction going forward. Why shops can specify card not cash.
And, in the past, have done.
But in England it was made illegal (by the Bank Charter Act 1844) for any bank to issue its own currency, or even promissory notes that are payable to bearer on demand, unless it was doing so prior to the Act.
The last one I think survived until after the Great War, but was bought up by one of the big banks and so lost its permission,
What I’m not sure about is whether non-bank companies can issue currency (or, as you say, promissory notes payable on demand to bearer). Could ICI or M&S issue its own banknotes? Not sure, but they don’t.
Yup. People think ‘legal tender’ is much more important than it is. As you say, it’s got a pretty limited relevance.
And it’s actually that “payment of a debt” thing that allows shops to refuse to take cash. In English contract law, a contract in a shop is only made at the point of payment. Therefore there is never a debt, and so whether something is legal tender is irrelevant.
Thank you BiSD!!
If the the source of those dollars is the profits from various Minnesotan learing centres, would they be just as evil?
Was it a Bad Thing when the Deutschmark became the de facto currency in the Balkans during the 1990s ?
The Graun monkey seems to have mixed up cause and effect. Or is being deeply disingenuous. As if it was just about a few traders rejecting mucky notes.
Simple solution: get the cousins in Minnesota to send some of their many dollars back to their impoverished relatives.
As the only joke might have it: there’s only one thing worse for the poor than being “dollarised” – not being “dollarised”.
Presumably the Guardian would prefer they adopt the RMB?
So the Somalis would give Minnesota huge profits from China??
I don’t understand – shouldn’t Somalia have several hundred billion dollars floating around from the theft they’ve been doing over here;)
Interesting question. Would they? One would have thought the remittances would have been digital. Did they ship paper. Technically it wouldn’t be necessary. You could issue a dollar token of value with an issuance equal to dollar holdings.
Of course if it was readily, widely & confidently accepted in commerce, the dollar backing becomes less important. You’ve got yourself a currency.
If you’ve seen the news from Minnesota, USA, Somalis have stolen, through fraudulent government programs run by our Democrats, close to 9 Billion dollars, and it is suspected that the bulk was sent back to Somalia.
So it’s stolen money that may be devaluing existing bad money.