As you walk into the Retiro train station in downtown Buenos Aires these days, you pass a long line of people snaking their way from the station’s entrance to a single window. At first glance, this is unsurprising: what’s more common than a queue in a train station? But there is something distinctive about this line: it ends at a window bearing a sign that reads “Coins.” The people standing patiently in line are not, it turns out, waiting to buy train tickets. Instead, they’re waiting to do something that’s become very difficult in Buenos Aires: make change.

Illustration by Christoph Niemann

The Retiro queue is a sign of the most peculiar economic crisis in recent memory: the great Buenos Aires coin shortage. For well over a year now, small change has been hard to come by there. Stores hang “No Coins” signs in their windows, and offer candies instead of change. Taxi-drivers round up—or down—to avoid giving up precious coins, while smaller merchants sometimes turn away business if you have only bills to offer them. The government has fined banks thousands of pesos for refusing to hand over coins, and, in October, the city’s subways became temporarily free when the booths ran short of change. For the average Bonaerense, everyday transactions now entail a complicated calculation of where coins can be acquired and when they will be needed.

That’s especially true because most people need change to get around Buenos Aires: the city’s buses accept only coins. This has made them an obvious culprit in the shortage, as they take in millions of pesos in coins but, unlike other businesses, don’t hand any out. If the bus companies hold onto the coins rather than depositing them in a bank, they can make a significant dent in the amount of change in circulation. And they did have an incentive to do this: before the government cracked down on them, they were reselling coins to businesses at a hefty markup.

But the buses alone can’t be responsible for the shortage: they’ve been coin-operated for many years, while the coin famine is a recent phenomenon. So two other theories of the origin of the crisis are regularly floated in the city. The first is that the left-wing government of Argentina is conspiring to make the right-wing government of Buenos Aires look bad, before coming to the rescue itself. And, indeed, the national government is supposedly implementing a plan for electronic bus cards, though it’s now well behind schedule. The second, and more common, explanation is that people are hoarding coins because inflation is making the metal in them more valuable than their face value.

Hoarding of this sort, and the resulting coin shortages, was once a recurring economic problem, one that the Italian economic historian Carlo Cipolla dubbed “the big problem of small change.” But these shortages were thought to be a feature of premodern times, when coins were made out of precious metal, and people literally brought silver to the mint to have it turned into coins. If the value of silver rose beyond the face value of coins, hoarding silver was a natural response. Today, coins are government-issued tokens, and their value is theoretically unconnected to the metal they contain.

This isn’t to say that the material worth of a coin’s metal can’t still exceed its face value; the rising value of zinc, for instance, meant that, last year, every new penny issued cost the U.S. Mint about 1.7 cents. But hoarding no longer makes sense unless it’s done on a large scale, and most people in Buenos Aires are not melting down their coins into hunks of copper. Yet, even if they’re not, the anxiety that others might be hoarding coins and melting them down seems to have been enough to start a panic. Hoarding causes shortages, but shortages also promote more hoarding.

It’s no coincidence that this kind of panic has taken hold in Argentina: the country’s history of financial crises has made people there profoundly skeptical of the way markets work. The sharp spike in inflation in the past couple of years, for instance, was almost certainly exacerbated by Argentina’s previous experience with hyperinflation. Businesses that have gone through an episode of hyperinflation become understandably alert to the threat of it: at the first hint of inflation, they’re likely to increase prices, since they’ve learned that if they don’t, and inflation hits, their businesses will be wrecked. In the same way, when it comes to holding onto coins, people hoard first and ask questions later.

You could, then, dismiss the Buenos Aires coin shortage as an anomaly. But the Argentine experience actually underscores the degree to which all modern financial systems depend on confidence, and the problems that erupt when that confidence disappears. In the U.S., after all, the chaos of last year both led to and has been exacerbated by a shortage of its own: credit. As people became worried about the health of the system, they took money out of any investment that smacked of risk and put it into cash (bank deposits have soared in the past six months) or government bonds. That, in turn, made others more anxious: less willing to lend and more interested in holding onto their money. Fear bred a credit crunch, which, in turn, bred more fear. And if fear has left the Argentines with too few coins, it has left us, paradoxically, with too much cash (and too little credit). This isn’t to say that financial crises are all in our head; certainly our own was sparked by problems that were very real. But there is an irreducible psychological dimension to both crises and recoveries. And if it’s hard for people in Buenos Aires to give up their pennies, think how much harder it will be for Americans to start taking risks again. ♦