Seignorage

December 10, 2012 in Uncategorized

Seignorage

Seignorage from the printing of bank notes and coins is a net profit to the Central Bank / government printing the bank notes and coins. Seignorage is the difference between the nominal (real) value of the new bank notes and coins and the cost to print and mould them. The real value of these newly printed bank notes and coins is generally equal to their nominal value only when this new money is first spent by either the Central Bank or by the national government departments on receipt from the Central bank when this new money is paid to the national government as a dividend from the Central Bank. Thereafter their real value is generally eroded by inflation over time. Bank notes and coins generally make up about 8 per cent of the broad M3 money supply in an advanced economy according to the figures available for the US Dollar money supply.
Unique advantage to the US of the reserve currency status of US Dollar
The historic reserve currency status of the US Dollar in the world economy results in the net profit from seignorage resulting from the Federal Reseve Bank of the US having to print new US Dollars as demand for the US Dollar naturally increases in Dollarized economies and worldwide outside the US as a result of economic growth in these Dollarized economies and the world economy outside the US. The benefit of this almost 100 percent profit on printing new US Dollars for Dollarized economies like Panama, Zimbabwe and Equador and for  the rest of the world economy outside the US, continously accrues directly to the well being and security of the people and the economy of the US at almost no cost to them and not directly to these Dollarized economies and the world economy outside the US. This is the result of historic developments in these Dollarized economies and the world economy outside the US. This is not ‘engineered’ by the US government or any entity in the US.
 

Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.

Comments are closed.