by wasoxygen

1. Starbucks, monetary superpower (2019)

Starbucks has around $1.6 billion in stored value card liabilities outstanding. This represents the sum of all physical gift cards held in customer's wallets as well as the digital value of electronic balances held in the Starbucks Mobile App.* It amounts to ~6% of all of the company's liabilities.

This is a pretty incredible number. Stored value card liabilities are the money that you, oh loyal Starbucks customer, use to buy coffee. What you might not realize is that these balances simultaneously function as a loan to Starbucks. Starbucks doesn't pay any interest on balances held in the Starbucks app or gift cards. You, the loyal customer, are providing the company with free debt.

7. The gold trick (2017)

Come October, imagine that the U.S. Treasury has expended all of its conventional extraordinary measures and Congress—despite having a Republican majority—can't decide on increasing the debt ceiling. Desperate for the cash required to keep basic service open, Treasury Secretary Mnuchin turns to an archaic, long forgotten lever, the official gold price. Maybe he decides to change it from $42.22 to, say, $50, or $100, or $1000—whatever amount he needs in order to fund the government. The mechanics would work exactly like they did in 1934, 1972, and 1973. The capital gain arising from a rise in the accounting price would be credited to the Treasury in the form of new central bank deposits, and these could be immediately deployed to keep the government running.

10. Kyle Bass's big nickel bet (2019)

In 2011, hedge fund manager Kyle Bass reportedly bought $1 million worth of nickels. Why on earth would anyone want to own 20 million nickels? Let's work out the underlying logic of this trade.

A nickel weighs five grams, 75% of which is copper and the rest is nickel. At the time that Bass bought his nickels, the actual metal content of each coin was worth around 6.8 cents. So Bass was buying 6.8 cents for 5 cents, or $1.36 million worth of base metals for just $1 million.

So Bass has upside exposure to the next bull market in copper and nickel prices. The neat part of this trade is that he has no downside exposure. That's because a nickel can never be worth less than its face value of five cents. For example, consider that the price of base metals has fallen by quite a bit since Bass bought his stash of nickels. And so the melt value of a nickel has tumbled too, currently registering at around 4 cents, or 41% less than when he bought them. But Bass needn't worry. His nickels can still be taken to the Federal Reserve where they can be exchanged for twenty to the dollar, or five cents each.

Huge upside and no downside—why isn't everyone doing this trade? There's a catch. Carrying costs.

and new:

How to debase the coinage in order to pay for wars (2023)

If you had to go back to 16th century Europe, and you were asked to operate the mints in a way such that they raised enough revenues so that your patron, the king, could wage war against a neighbouring country, how would you go about that?