Spice and Wolf: Economics of the Silver Coin Scheme

The economics of spice and wolf’s silver devaluation scheme is difficult to get your head around, and the fact that it took me so long to find an answer makes me feel like writing a post for other people who might have been just as clueless as me.

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Who’s Responsible for the Scheme and What Are They Specifically Trying to Do?

The antagonists of this arc is the Medio trading company who notice the depreciating percentage of silver in their coins and decide to make an investment by collecting more of the old currency in exchange for the new. This is done through paid rumour spreading to encourage more merchants to exchange their old Trenni Silver coins for new ones.

The first thing I didn’t understand was why this would benefit the Medio trading company specifically, well it turns out they exchange the silver coins so they get to keep all the old ones. There are two things to consider about this though.

The first thing is called herd speculation and it’s got a lot to do with the idea of a self-fulfilling prophesy. If a large amount of people behave in the same way towards a currency (e.g. invest or pull out) the currency will automatically gain/lose value due to its use. So if many people start believing in the new currency and buying more of it, surely that would cause its value to increase country to the ideas of the Medio trading company? Well depending on the number of people who buy the answer is initially yes, however once the word spreads of the currency’s reduction of silver its value is lost and the heard behaves in the opposite way allowing the Silver Trenni to drop to its new value. So herd speculation really doesn’t matter a whole lot to the company.

The last thing is that if the value of the new Trenni silver coin drops, the value of all coins will drop as well. Can you really imagine a future where there are many different values of silver coins depending on their era? Or a world where specific shops ask for a silver coin that’s 10 years old instead of one that was made yesterday? Their value will be the same yet their value as silver different. But this brings up another question as to why the hell the Medio trading company would want these coins in the first place.

It’s to enforce economic concessions from the kingdom of Trenni. Well that’s helpful isn’t it! So how might they do that and what does it mean?

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How the Medio Trading Company Would Have Used Their Old Coins + plot holes explained

A plot hole you may be asking yourself by now is why the medio trading company would be the sole benefactor from this arrangement; after all other trading companies exist where other merchants can exchange their coins instead. This could be simply a plot hole however I think the show wants us to believe that exchanging the same currency is rare and that only this company is doing it since they’re the only ones who know about it.

So they were using their old coins as a means to bargain better with Trenni. And this brings me to a need to explain why Trenni might want these things. It’s pretty complicated at this point and difficult to explain because every question seems to lead to a series of other questions!

Trenni is the only country who makes their own coin, so by collecting their old coins they can remake them into new ones of the same value yet using a smaller amount of silver. For example if the amount of silver is halved (which could be possible, it’s not like theirs a high % of silver in their coins anyway) the old ones (worth the same amount of money as the new) can be made into two new ones without any extra effort on mining silver, transportation and e.c.t. But wouldn’t that cause inflation? The answer is probably, however the country really doesn’t want to waste any silver it doesn’t need too. The fact that they lowered the amount of silver means they’re struggling economically anyway so they don’t have that much of a choice. The devaluing of their coin will cause more inflation anyway.

I am no economist; I’m more of an armchair economist trying to explain to a level that I am satisfied with the plot of an anime to an audience of other armchair economists. So there is a chance I could be wrong when I say that Seigniorage allows a currency to retain its value in its original quality only provided the people continue to trust in it, so it may not change much. This is the one thing I’m less sure about though.

So what this means is that the company who can exchange the most old silver coins have the best bargaining rights when it comes to getting exclusive deals such as land and mines from their country. So it really isn’t to do with a quick gain in money, it’s to do with a long term investment in Trenni land.

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So Where Do the Main Characters Fit in, and how did they prophet?

Through Holo’s legendary hearing our duo of main characters discover the scheme and want a way to get back at the Medio trading company.  The biggest way to get back at them is by using another trading company; one that Lawrence has good connections with, how about the Milone trading company?

The company also has the power to do the same negotiations as the Medio trading company and potentially beat them. As well as this they have an underhanded way of getting more coins quickly (apparently) and are able to get to the negotiations quickly. The medio trading company are aware of this and therefore kidnap Holo in an attempt to negotiate with Milone and prevent them from going to Trenni.

Yes, it wasn’t just the main characters who would have been affected if medio reported Holo to the church. Since Holo was working with Milone it was very necessary to prevent the word from spreading therefore creating a need for the rescue operation from happening.

The final question of this fairly long post is how the Milone trading company was able to make a high initial prophet at all, since their winnings would be from the land. Well that’s still a mystery but it was one of two things. They either sold some or all of their land after negotiation or made a loss in paying Lawrence knowing that in the long-term the land would pay for itself.

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Questions

This whole scheme is pretty impressive and it really shows how great spice and wolf was to introduce this crazy, difficult to understand plot line and still have it be incredibly entertaining to watch. I’m leaving this place blank for any questions to do with the scheme, there are likely a few things that I might have forgotten and answering your questions might help to clear it up! So if you’re still uncertain feel free to ask! And thank you for reading this post about economics disguised as an anime discussion!

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