The Silver Coin Scheme

Sep 2, 2015 4:31 AM

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Jul 2013

(SPOILER FOR ENTIRE SEASON 1)

Hi there,

recently finished the anime and really enjoyed it. I was pretty intrigued by the silver coin scheme in season 1 and i thought quite a bit about it.
I'm wondering if i understood it correctly so i'll just write down my take on it. Maybe it can help people who are still wondering what was going on there :)

So first of all, by spreading the rumor that new coins with a higher content of silver are about to be issued, people now want to spend their old coins before they decrease in value.

With this actually being a lie - because the new coins will contain less silver than the current ones - the value of the trenni silver will decrease.

The Trading company now happily takes all the old coins of their customers and stockpiles them. They know the country / king is super broke and has to decrease the content of silver in the coins, so they can produce more coins with the same materials to counter that. The country has no choice but to do this, even though it will result in an eventual decrease of their currency and it will hurt their reputation.

Then, after the new coins have been issued, the trading company will approach the king with the offer of their stockpiled old coins. The deal will work out for both sides as follows:

Example:
They offer 10 "old" silver coins.
The country can produce 30 "new" silver coins with the amount of silver in them if they melt them down.
The country now pays the trading company with 15 new silver trenni coins.
Both sides now made a profit of 5 coins.

For the trading company, this deal will only work out though, if the value of the new currency is still high enough compared to the other 20 currencies we saw.
For example: 10 old coins could buy 10 Apples - 15 new coins can only buy 9 Apples. Taxes and exchange fees also play a role. If we factor in the mining rights the kingdom bestowed upon them it can still be profitable though.

Of course for the kingdom it's not a clear profit of 5 coins because they have to pay for the other materials for new coins aswell ( iron etc. )

So, tell me if i missed something or if you have questions.

GToastSep 3, 2015 4:27 AM

Nov 13, 2021 8:04 PM

Furryyyyy

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Sep 2017

Thanks for explanation. I was looking for it :D

Jan 14, 2022 1:03 AM

Weebookey

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Oct 2017

464

Nice explanation, If anyone is still confused I highly recommend reading the novels :)

WeebookeyJan 14, 2022 1:09 AM

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Feb 17, 2022 10:05 AM

alveolate

Offline

Jan 2017

seems roughly correct to me, though i don't recall them giving actual values for the (predicted) exchnage rates.

specifically, that 10 old coins can be melted down to make 30 new coins - is that just a hypothetical? because that sounds pretty extreme.

at the risk of digging too deep... if the company only gets 15 new coins for 10 old coins (assuming that 10 old = 30 new formula the op stated), then they don't actually "earn" 5 coins, since they paid for what 10 old coins were worth.

even if we assume they got the old coins for cheaper (hypothetically, say they bought 10 olds for 9 olds) the margins seem extremely thin unless they know exactly how much silver the country (kingdom?) is putting into the new coins. to get a clearer picture, we would probably need an equation with a bunch of unknowns/variables... but at some point we would also need a way to compare the old/new coins to some external standard - which we don't have either. so we're kinda forced to play with hypotheticals just to guesstimate some favourable outcome for both the company and the kingdom.

if this whole vagueness was intended by the writer(s), that's lowkey brilliant... since they used an engaging story to pique the interest of people enough that they wanna look more closely at how such a scheme would work. if you're still interested in this topic and would like some clarity, try https://en.wikipedia.org/wiki/Short_(finance) which i consider a modern equivalent.

oh, and finally, it's not a spoiler for the ENTIRE season 1 xD the silver coins arc really only took up the first half of the season, ep1-6.

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The Silver Coin Scheme

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