Large Bills Take Care of Themselves

Old Blog Import

Like the Mexican folk saying that opens their paper: You should take care of small, loose bills, because large bills take care of themselves.

Listener Timur Friedman sent us an example of what he calls the reverse denomination effect.” On vacation in Argentina he could not get anyone to give him small change:

This even applied at my own bank. A clerk at an HSBC branch, breaking a ten-peson note for me, would give me no more than five Argentine pesos (about US$1.35) in 1-peso coins, insisting on giving me a 5-peso note for the remainder.

In our ten days there, the only exception we encountered was the group of muggers who robbed us at knifepoint. They took all the bills in our wallets. But when I asked if they could at least spare us some change (using the one Spanish phrase that I had learned in Argentina: Tiene usted monedas por el autobus?”) they readily handed me back my changepurse.

I discussed this coin hoarding phenomenon with an acquaintance who lives in Buenos Aires and is a well-known economist, and he had a theory to explain it. He suggests that coins are costly for the Argentine government to produce, so they try not to mint too many of them. But there is a demand for coins: stores need them to make change, and city residents need them to ride the bus.

Regarding the muggers, the only ones who would readily give us change, we have another theory. Their interest was in having us quickly leave the neighborhood. This would reduce the chances that we’d come across a police patrol and report on them.

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My brother was quoted on the Planet Money blog!