Icewine Tales

This is fun.

While some of my friends from around the world were mugging it up on Facebook about Greek debt, monetary vs. fiscal US policy, Italian bonds, Euros and other economic news of current interest, I was hiding in another part of the Internet researching large numbers and the future of privacy.

I don’t know who among the Johns et al are right in that discussion, but at some point we are going to have to acknowledge that there are some clear options to acknowledge may happen based in our soon to be economic history.

From Wiki on “Large Numbers”:

“Some names of large numbers, such as million, billion, and trillion, have real referents in human experience, and are encountered in many contexts. At times, the names of large numbers have been forced into common usage as a result of excessive inflation.

“The highest numerical value banknote ever printed was a note for 1 sextillion pengő (1021 or 1 milliard bilpengő as printed) printed in Hungary in 1946. In 2009, Zimbabwe printed a 100 trillion (1014) Zimbabwean dollar note, which at the time of printing was only worth about US$30.[11]. 

Sweeping inflation bills after the introduction of the forint (August 1946) Source: Wikipedia

How did Hungary get out of the Pengő in 1946?  Simple. They introduced the florinc and set a generous official conversion rate.  I would attempt to describe it, but the numbers are simply boggling.  Here is how the scholars at Wiki describe it.

“End of the pengő

The Hungarian economy could only be stabilized by the introduction of a new currency, and therefore, on 1 August 1946, the forint was reintroduced at a rate of 400 000 000 000 000 000 000 000 000 000 (400 octillion) = 4×1029 pengő, therefore the total amount of circulating pengő notes had a value of less than 0.1 fillér. The exchange rate to adópengő was set at 200 000 000 = 2×108 (hence the 2×1021 ratio, mentioned above).[4] The exchange rate for the US dollar was set at 11.74 forints.”

In 2008 I had the privilege of being a guest at the UN observation mess (bar) in Sukumi, Abkhazia (Georgia).  I sat for 4 hours or so sharing drinks with members of UNOMIG about 3 weeks before the 2008 Georgian-Russian war erupted all around them.  Each was from a different country.   One of the soldiers I really enjoyed chatting with was from Zimbabwe.

We shared drinks for 4 hours.  If I establish the Zimbabwe rate of  inflation in late 2008 and apply it to his bar bill, I am going to come up with a rather interesting number.  If he had bought all of his drinks and my drinks and paid in advance, would the inflation have saved him enough money to cover my drinks?    I would bet that it would be worth prepaying and I’ll do some math later to figure it out.

I may not be an economist, but I play one on the bar stool.

But it didn’t work that way for my Zimbabwe friend.   There is no cash at the bar, which meant that as a guest, I could never reciprocate with cash from my pocket.   Each member’s bill is offered and paid after the end of the month.

This could severely affect my friend’s lifestyle.  He bought a $5 drink in the middle of July in USD and paid the bill a month later in Zimbabwe dollars.   I’m going to do the math on that one as well.  How much did he pay in ‘late charges’ rather than being allowed to pay cash up front?

These two history lesson make me wonder why nobody is wondering how a possible  hyperinflation in Greece will affect the price of a tea in Rotterdam when both are using the same Euro.

Buddy can you lend a pengő?

Contact VinoCanada for Export of Icewines and Canadian Wine Exports at www.vinocanada.com

I met Joseph Smith in 1998 or so, in a first class seat doing a red eye flight from Calgary to Toronto, back in my Natural Gas executive days.   We didn’t talk for the first hour and then I decided that Harvey Mackay was right, “Never Miss a Chance to Meet Someone”, or perhaps Mr. Smith, as I recall his name was, was twenty or thirty years more mature than I was and started the conversation.  He might have been seventy, or eighty, or pushing ninety, but talking with him was as pleasant as sharing trucks in a sandbox with a new kid.

After the ‘what do you dos, ‘and the small talk, Joseph Smith told me was head of Danzas’ Russian oil rig logistics division.  “Image an oil field that costs $50,000 per hour to operate and it is shut down by a single part; what do you do?”

“Whatever it takes!” he said with a triumphant smile, “including buying the replacement part an airplane seat.”

He clearly loved life, and loved his job. I understood how much he loved his wife when he tried to call her from the airplane phone and the connection was bad, and then he was cut off.  At 36,000 feet, He began to worry about her sitting comfortably at home.

“How did you get into logistics, especially in Russia?”

He began the story.   He had three friends in Russia and they formed a company in the 1960s to run a small courier and logistics business that focussed on moving specialized goods in and out of the Soviet Union.   He said that they started operating and within three or four months they realized that they were going to be successful, even wealthy from the enterprise.  FedEx was started in 1971 and DHL didn’t go international until the late 1970s.

Then late one night three big men knocked on his door with a single message, “Call Your Partners”.  He said, “Why?” and they repeated “Call Your Partners”.

In the 1960s there was no internet.  There were rotary dial phones and long distance calling was a big deal, but he got through to his partners.  All three said the same thing.  They too had suffered a visit in the night by large men who demanded that the company be turned over to them.   There was no ‘or else’.    These were the Russian thugs of the 1960s.

It wouldn’t be polite to do what I wanted to do, which was jump at him across the armrest with a blurted out “What did you do?”   In fact, the stewardess came by with the drinks cart on either side and our attentions were divided.  Then dinner came and I suppose that we did some small talk, but the elephant called “Tell me what happened!” remained, and I think he might have been enjoying this.   He was able to get through to his wife and confirm that both of them knew that the other was all right.  I want that when I am eighty.

Trays cleared, and about an hour from landing, we reconnected.    I asked him about some of the details of his business and about his wife, and how they met, but the answers were lost in the screaming question that so far remained unanswered.

“So Joseph, you were in quite a predicament. “  “Yes I was”.  “That was a tough thing to face.” “Yes it was”.

Finally, “How did you get from there to Danzas 30 years later?”  I was thinking this was subtle.

He smiled.  He’d had me on the razor’s edge for about an hour.

“When one is faced with a big Mafia, one goes to a bigger Mafia.”

What on earth did that mean?

He went on to say that he took his company books into the head of the dockworker’s union in St. Petersburg. He walked up to his desk and dropped his company books on his table and said “I would like to give you this company.  Free.   As you can see, it is very profitable company and because of certain troubles, I cannot continue to own it, so I’d like to give it to you.  However, I and my partners would be happy to stay on in a small capacity to ensure that it continues to make everybody money”.  He said that the man looked over his desk and said, “Tell me of your troubles”.

He says he told him, and continued to run his business with a new major partner and his original partners.  He never heard from the first set of thugs again.

The flight was coming to an end, we buckled up, but I felt that there was more to this incredible story.

He continued, “Very shortly we became known as a company that could get freight through the port of St. Petersburg in hours, where every other logistics company could take days or weeks to get their freight through.   We made a lot of money! “

I remember the story clearly. I recall that his birthday was on January 6 and the next year I sent him an email congratulating him.  I’m not positive that his name was actually Joseph Smith, but I recall seeing his business card and writing his birthday on the back.

Thanks to his story generously shared, we all know that there is always another way.

Contact VinoCanada for Export of Icewines and Canadian Wine Exports at www.vinocanada.com