I need help understanding what is going on with the Trenni silver coin scheme plot that is mentioned throughout episodes 3-7 of Spice and Wolf season 1. Let me explain what I understand and hopefully get some clarity about these Spice and Wolf episode plots (also if someone can block out the impending spoilers that would be awesome, I don't know how to do it)

So our main protagonist Lawrence gets word that the Trenni silver coin currency is about to go up in its silver purity. This means that both the actual metal value of the Trenni silver coin and its representative value will go up.

This all turns out to be wrong though, as Lawrence finds out the Trenni silver coins are actually becoming less pure and going down in value and what he was told was a lie. This plot then leads Lawrence to go over to the Milone trading company where somehow he hopes to make a profit off of telling the company this info.

Now this is where it gets complicated. How was the Milone trading company going to make money off of the devaluing currency and how was Medio involved with this?

  • In the anime the Milone Trading company,

    upon hearing the devaluing silver info from Lawrence, started stockpiling Trenni silver coins. Why are they trying to stockpile the silver coins if their price and purity is going down? Shouldn't they be trying to get rid of all of their Trenni silver coins if the value is decreasing?

  • Also it is mentioned that the Medio trading company is

    hiring people to give merchants the wrong info about how the Trenni silver coins are going up in value instead of actually going down. Lawrence was even told this lie. How does the Medio Trading company possibly gain any advantage from this?

Basically I am asking what is the economic plot in the episodes 3-7 of Spice and Wolf season 1, explained in little kid terms, so I can hopefully comprehend what is going on in the story and enjoy the anime even more. I am sorry for not being more economics-savvy with this, but if you understand the plot be much appreciated for some insight.

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    Use >! to make the content hidden unless hover. – nhahtdh Jun 5 '13 at 3:44
  • I actually haven't watched Spice Wolf yet but from what I've understood based on what you detailed out (correct me if I'm wrong), they were spreading rumors that the silver coins are going up on value probably because they would want to sell it for a higher cost, when actually, the value of it is really low. They'll sell it at a higher cost so they can gain more than they should. Example, I'd sell silver coins for a higher cost when I can actually buy it a lower cost, so I'd gain more. Hope I somehow made sense. – xjshiya Jun 5 '13 at 3:50

Ok, let's look at the situation more carefully. You have your Trenni silver coins, which have some % of silver in them. The market value of such a currency is bound to the amount of the noble metal in each coin. It's very simple and intuitive: silver is rare and valuable, so the more silver there is in a coin, the more is the value of that coin.

Now, we have a situation where the amount of silver in the coins is going to be decreased. What is going to happen? Well, the new Trenni coins (with less silver) will become less expensive than the old Trenni coins. That means, that it is profitable to save all the old coins you have.

By spreading the rumors that the amount of silver is going to increase, the Medio company is accomplishing two things at once. First, it makes people think that it's profitable to sell their coins now (because they think that after the new coins arrive, the value of the old ones will decrease). Second, it creates a possibility to make people selling their coins for even a lower price than they are now, simply because they want to get rid of the coins ASAP, before the price drops.

Also, if they already have some new coins, they can even trade them for a larger amount (say, 2 old ones for 1 new, people think the new ones are more valuable, remember) of old ones.

This lets the Medio company stock plenty of old silver coins, which as we know, in reality, will be worth more when the new ones are released. That's how they want to make the profit.

The Milone company, after getting the information from Lawrence, starts doing the same thing: buying Trenni coins to get a large stock of them before the new coins are released. After the new coins will be in play, people will, of course, know that they are really less valuable, and the value of Milone company's stock of old coins will increase further.

I hope the explanation wasn't too messy ;)

  • Weren't they talking about them getting some advantage over people fleeing the market too? – Sam I am Jun 5 '13 at 22:18
  • Thanks dude, I would hazard to guess by the profile pic that you're a fan of Spice and Wolf. I re-watched the episodes with what you said in mind and it all seemed to come together. There are a few fill-in-the-blank spots that I needed to get over, but definitely dude your explanation helped a lot. – kevluv97 Jun 6 '13 at 21:44
  • @kevluv97, glad I could help :P – SingerOfTheFall Jun 7 '13 at 4:24
  • should also point out that there was a second part to the scheme which involved the company trading the Trenni silver coins they have stockpiled to the original country, since the purity was now lower a single older Trenni silver coin could be recycled and made into x number of newer Trenni silver coins, the company with the most coins could bargain with the country with their stockpile of coins for exclusive deals – Memor-X Oct 16 '13 at 22:27
  • This answer is not correct, and the coin valuation works the exact opposite way. All Trenni silver coins are worth the same amount, just like any other standardized currency. When the silver content is decreased, it causes the value of ALL Trenni silver coins to decrease. This means buying the coins at the current (higher) value is a bad investment, because they'll be worth less in the near future (worse exchange rates, higher prices, etc). That's why this question was asked in the first place, because it seems bad to stockpile them. Memor-X gave the correct answer in the comment before this. – Azrael Apr 13 '14 at 10:35

The comments on SingerOfTheFall's answer is on the right track but not quite got it yet.

Yes, when new coins of lower purity are introduced to circulation, all coins of that type will lose value. It's due to the people using the coins having less trust in said coins.

While that is the first step to understanding the scheme, it goes much deeper. When Milone Trading company starts collecting the Trinni Silver Coins, they are not doing so because they want them to be recycled in exchange for exclusive deals. First, you have to think about why that particular country would be lowering the purity. It's because the country of Trinni doesn't have the silver to continue making coins of such high purity.

Yes, in the short view Trinni can make more coins, but this also means that outside of their own borders, the coin will be worthless. In addition, within their borders, the coin is not valued on how much silver is in it so much as it is by how much the government says it is worth.

For example, let's say you have one pure 1 gram gold coin. Let's also say these pure gold coins are the common currency in your country. That means even though it is just 1 gram of gold, the government can say that the 1 gram is worth 2 grams. This is something called seigniorage. Now, this only works to a certain degree, which depends on how much faith the people have in the coins purity and the government manufacturing the coins. So, it is in the country's best interest to keep purity high. However, when they decrease the purity, while it will make a lot of money really fast and put more in circulation, it does decrease the faith that the people have in the coin. Meaning that even with a small decrease in purity, you may see a drastic increase in how many coins any given item is worth due to people not having faith in the purity of the coins. Therein lies why it isn't a good idea to reduce the purity so drastically.

If the Government is reducing the purity, you can assume this means their funds are getting low. Meaning that they would be more than eager to trade exclusive deals for coins they can recycle. In that, the commenters were correct. But, think. If Trinni were to suddenly come into a large amount of silver they wouldn't have to recycle all these coins into lower value ones. They could slowly reintroduce them into circulation and therefore solve the problem of having such low funds. That is why this deal was so valuable and the land of Trinni would be willing to sacrifice quite a bit for the older coins.

Also, Milone's goal was not to trade for deals. No, instead they traded all the older higher purity coins for land, large area mining rights, tariff control, and other privileges generally held solely by the government. Meaning they could move their goods without paying tolls, resale the land at a higher price, and sell individual mining rights for a small area to smaller companies for a higher price per acre. For that matter, they could even further use the land and mining rights for future income by leasing the land and mining rights for certain areas in segments. Though it would be a little longer before you made your money back, you would in the long term have a potential to earn much more than you would just by selling it.

Now considering they were able to pay Lawrence back the next morning, I would assume they resold all or at least some of the privileges they acquired, which is the least risky way to play it since if they were to lease the land, there is no guarantee that people will be willing to lease it. That leads to the risk of actually losing money. It's my guess they sold the risky investments and kept the privileges that would lead to the saving money in the future as their portion of the profit.

Or there is a second option in which they could have kept all the assets and privileges they gained and gave Lawrence Trinni coins out of the Companies pocket based on the estimated value of the assets they'd acquired. That way, Milone Trading still has the potential gain from the mining rights and such.

And then there's yet another option where they sold just enough of the assets to make sure they hadn't suffered a loss in addition to the amount needed to pay Lawrence. This, in my opinion, would be the smartest play considering it would mean there is no risk of loss and their debts are settled. In addition, they would have the leftover assets to do what they wanted with them. In theory, this option is almost no risk with high potential gain.

Now to tackle why Medio would be spreading words of raising purities, and truthfully, compared to the rest of all this, it's quite simple. If the community believes the purity is going to raise, then they will begin getting rid of older coins and trying to acquire these newer "thought to be more valued" ones. This gives Medio to act as if they are a third uniformed party and give the people newer coins in exchange for older coins. Likely they had the same goal as Milone, this was just their way of collecting the coins. Unfortunately, the direction they chose to collect the coins also requires them scamming all the people that they tell into having the newer less pure ones. That part of it really is quite simple.


Part of the answer to this(which isn't as explicitly mentioned in the anime), is that when Milone sells the gathered silver Trenni to the government, they actually make the government pay more than the coins are worth. The government can do this because the resmelting the coins still gives more coins than was provoided+the extra fee. (Example, sell 10 coins for 11 coins. These 10 coins are then smelted into 13 new coins. That way, the company gets 1 coin in profit and the government gets 2).

This was however the lesser valuable trade(as shown by the initial sale profit being quite low). The real profit came from selling the coins in exchange for trade rigths and privileges(like no tariffs on wheat from the company holding this privilege). This second option doesn't require the government to shell out cash here and now(though they still lose in the long term), which is why it was so attractive. In this case, Milone then sold the wheat privilege to Medio, who actually traded fairly heavily in wheat, and from there made most of their overall profits.


When the silver coin in question has more silver in it, it is worth much more. So the current coin that everyone is using is about to increase in value. It is because the area is making more coins with less silver in them there, making anyone with the current coin want to keep it because the value will soon go up.

The kid who talks to our main protagonist tells him that the coin will decrease in value due to the area making a coin with more silver, which is the complete opposite of what will happen. So the people with the current coin who have this info will want to get rid of the current coin ASAP. So they will sell it to people for a low amount of money.

This is where that trading company comes in. They buy the coins that are really about to increase in value. So, in the end, they make a profit, and the traders given false info have been cheated out of a great deal of money.

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