An interesting arbitrage opportunity has some buying coins from the U.S. Mint at face value and with free shipping and then immediately depositing the coins into their bank accounts in order to pay off their credit card balances. The purchases, made using airline credit cards, provide purchasers frequent-flier miles at no cost. Well, other than a trip to the bank.
What's interesting is the following:
Now, airlines have turned miles into more than a competitive device; they have become a currency that airlines can sell, usually at less than a penny a mile, to other merchants to generate revenue. More miles are put into circulation by companies -- including credit-card issuers, hotels, mortgage servicers, and florists -- than are given to travelers for flights.
The mile is such a cherished commodity that airlines have even bolstered their balance sheets by preselling billions of miles. Citigroup Inc., which gives away American AAdvantage miles to credit-card customers, agreed to lend American $1 billion in September. The loan is to be repaid between 2012 and 2016 -- not in cash but in miles.
Now that frequent-flier miles have become a tradeable currency, are they now a new monetary aggregate?
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