Never Miss an Opportunity

When a precious metal is used as currency (gold, silver), it creates a weird situation. The metal itself has a price (aka the price of gold or silver), which can fluctuate over time. But the value of the coin made from that same metal remains fixed: 10 rupees, 50 cents, whatever. Inevitably, there are periods where the price of the metal is higher than the value of the coin. When that happens, the following action is profitable: Melt the coin to get the metal. Then sell that melted metal for its market price. Put simply, melt a 10 rupee coin and get say, 11 rupees for the melted metal.

 

This has always been a problem with all metal-based currencies throughout history. But I didn’t realize it even happened in the 1950’s. Yemen found that its currency, the Rial, that was made of silver, was “disappearing from circulation”. Officials traced the disappearing coins to Aden, then a British colony. Even more specifically, the open orders to get as many Rials as possible came from an Indian clerk in his early 20’s. Based on the price discrepancy as explained earlier:

“He began buying Rials, melting them down and selling the silver ingots to bullion dealers in London.”

 

After 3 months, authorities put an end to this activity. By then though, the man had already made a few lakh rupees (This was in the 1950’s, so it wasn’t a trivial amount). The name of that Indian clerk? Dhirubhai Ambani.

“I don’t believe in not taking opportunities.”

 

This is one of the first of many such incidents of “taking opportunities” from Dhirubhai’s life, from Hamish McDonald’s book, Ambani & Sons.

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