• Choose a category
• All
• Classic-Fiction

In April 1906, representatives of the United States and sixty-two other countries gathered in Rome with the goal of making it easier to send mail across national borders. All were members of one of the world’s first international governmental organizations: the Universal Postal Union, founded in 1874 to reduce the maze of postal regulations that made mailing a letter overseas a high-risk, high-cost proposition. A key item on the Rome agenda was to create a way for a person in one country to essentially send a stamped, self-addressed envelope to someone in another.

The lack of such a mechanism posed a problem to anyone with an overseas family member or business associate. Consider, for instance, a lawyer in New York who wanted a Paris accountant to send him an important document. The lawyer would reasonably be expected to enclose with his request an envelope with his return address and the necessary postage. But at the turn of the twentieth century, there was no way to do that. The New York lawyer’s stamps would be United States issue. If the French accountant tried to use them, he would be turned away by any self-respecting, law-abiding Parisian postal clerk. The accountant would have to pay the postage himself, in French postage stamps, to send the document. Of course, it was possible that the American lawyer could enclose a few dollars to cover the return postage, but then the French accountant would need to exchange the dollars for francs before buying the stamps—hardly an efficient system. The same problem arose when young immigrants tried to correspond with parents or grandparents in the old country. The young émigrés wanted to hear back from their faraway family members, often as soon as possible, and so were happy to include postage for a return letter.

As a solution, the Rome treaty writers created a system of international postal currency, paper that held a fixed value from one country to the next and could be redeemed for stamps in any post office of a country belonging to the Universal Postal Union. They called the currency they created International Reply Coupons. But they were not finished. The treaty writers wanted to make sure no one tried to profit from the purchase and redemption of their coupons. They created regulations that set the rate of exchange between countries’ currency and postal reply coupons, so coupons purchased for one American dollar in New York yielded the equivalent of one dollar’s worth of French stamps in Paris, minus a small processing fee.

All that was fine in 1906, but the Rome treaty negotiators did not foresee a world war a decade later. The Great War left some countries’ currency deeply devalued. Governments were too busy dealing with massive human and economic losses to worry about recalibrating postal exchange regulations. The result was an opportunity to profit. The Spaniard who’d sent Ponzi the coupon considered it nothing more than an act of proper business etiquette. He was, after all, asking to be sent a copy of the Trader’s Guide. But in a flash of insight, some might even say genius, Ponzi saw something more, a global currency whose value fluctuated wildly depending on where it was used. He took out a pencil and a pad of paper and began calculating the possibilities.

The coupon had cost the Spaniard thirty centavos, or roughly six cents. After a penny processing fee, it could be exchanged in the United States for a stamp worth five cents. Ponzi knew that the Spanish monetary unit, the peseta, had been devalued after the war, so he began figuring how many pesetas he could buy for a dollar. Using exchange rates published in Boston newspapers, Ponzi concluded that a dollar was worth six and two-thirds pesetas. Because there were one hundred centavos to a peseta, Ponzi calculated that a dollar was worth 666 centavos. If each International Reply Coupon cost thirty centavos, a dollar could buy twenty-two of the coupons in Spain. If Ponzi brought them to the United States, those twenty-two coupons would be worth five cents