Talk:Seigniorage
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Collecting the US State quarters is given as an example of seigniorage. But even if the quarters are spent, isn't seigniorage also occuring? It doesn't seem like the coin collecting angle is relevant. (disclaimer: I know nothing of numismatics, ended up here by accident reading about the fed and money supply). Also, I think I found a citation for the statement "The U.S. Treasury estimates that it has earned about $5 billion in seignorage profits from the quarters": http://www.usmint.gov/about_the_mint/coin_production/index.cfm?action=production_figures&sqYear=2005#starthere Adding up the figures in my head (1999-2005) gives about $5 billion worth of quarters produced, in total. However the article as it reads now gives the impression the entire $5b is in the hands of coin collectors, which is probably not what was meant. 128.255.22.232 21:49, 6 February 2006 (UTC)Dylan
Funny, I ended up here for the same reason. I never hear this term before, but it does seems illogical that the quarters example has anything to do with this. And the fact that people save the quarters has nothing to do with wheather the gov. is making money or not. The gov. makes money if they do not destroy the money they receive in exchange for the new quarters or if they sell the new quarters for more than $.25 a piece (plus the cost to create the quarter in the first place).
- Actually it does. If the mint had made this many quarters without the attraction of collectors, they would be sitting on shelves in the mint. The collectible interest keeps banks coming back to the mint to get more quarters and allows the mint to move more pieces into circulation increasing the total seignorage. Ruidh (talk) 19:21, 29 November 2007 (UTC)
EJG: There are two things to keep in mind about the state quarter series and seigniorage. First, the introduction of the new designs spurs demand for quarters so the mint has to produce more coins, thereby generating more seigniorage. Treasury keeps track of demand for coins and knows that new designs mean more demand. See http://www.phil.frb.org/files/br/brq203dc.pdf[1] for a report analyzing this phenomenon. Second, the earlier comment is right that seignorage occurs when the coin is put into circulation and it does not matter that the coins are collected. Where it does matter is on the back end of the seignorage equation. Ordinarily seignorage is only an interest free loan to the government because when the coins are worn out the government buys them back at face value, thereby negating the "profit" earned when the coins were put into circualtion. The big difference with collectable coins, of course, is that the back end of the deal never occurs because the coins never returned to the government. So the government gets to keep the seignorage profits. In order for the claim that the state quarters have resulted in $5 Billion in profit for the government virtually every state quarter issued must be colelcted and never turned in on the back end. That seems a bit extreme, although many of these quarters will, indeed be kept out of circualtion forever.
Questions about the factual accuracy of an example in an article are not, strictly speaking, NPOV concerns. I've removed the NPOV template from this article. palecur 00:36, 2 May 2006 (UTC)
- Seigniorage occurs commonly when financing deficit funding. It occurs as inflation, printing more money then was previously in the market, the government however being the first issuer gets the previous full value of the money. Because the currency is inflating by the time the Government has to buy back the currency (some % of which is never returned anyways) the money is worth less then the original amount it was issued as. For instance a dollar issued in 1960 can be bought back by the government for about 15 cents of the value it was issued at. For more economic data on this see Advanced Macroeconomics by David Romer, or a similar advanced MacroEconomic Textbook [jh] —Preceding unsigned comment added by 24.10.179.73 (talk) 01:37, 19 December 2007 (UTC)
Dated: April 25, 2005 http://www.cbo.gov/showdoc.cfm?index=6271&sequence=0 or http://www.cbo.gov/ftpdocs/62xx/doc6271/hr902.pdf (on page 5 of 5, last line of top text) or google's cache if you are impatient http://64.233.161.104/search?q=cache:wAWT15SZ5HIJ:www.cbo.gov/showdoc.cfm%3Findex%3D6271%26sequence%3D0+site:www.cbo.gov+50+state+quarters+Seigniorage+OR+seignorage+OR+seigneurage+OR+profits+site:.gov&hl=en&gl=us&ct=clnk&cd=3
"The Mint estimates that the 50 State Quarters program has generated about $4.6 billion in seigniorage since the program began in 1999."
- All of the above comments involve the cost of producing the coins, and what the coins are used for, and that makes sense to me. The part that I do not like is the "How it works" section of the article, which discusses interest. If I allow the gov't to hold a dollar's worth of gold, while I have a mere paper dollar to hold, the "How it works" section claims that I have given the gov't an interest-free loan, with the implication that Seigniorage is the interest which I am forfeiting and allowing the gov't to profit with. But if that gold simply sits in the govt's vault, then it too generates no interest! I really don't see how interest is relevant to this article at all. --Keeves 15:56, 30 January 2007 (UTC)
- Agree- the interest section is unclear. Interest does play a role in seigniorage in fiat money systems (for example: http://www.bankofcanada.ca/en/backgrounders/bg-m3.html), but that doesn't really have anything to do with gold. It might be true to say that this sort of seigniorage doesn't occur in a gold-standard monetary system, but that's probably all that needs to be said. As written, the gold example might also give the impression (probably unfairly) that the article has been goldbugged (the link to "digital gold" at the bottom does not help with this impression). --66.142.63.106
[edit] Pronounced?
Like "senior" or like "say"?
Payment Cards, VISA, AMEX also are a recognized form of "coinage" by monetary policy makers. Merchants pay to give their customers the convenience of using payment cards. Add a second definition? Somebody more expert in the use of Wiki should chime in. Also is there a payment card group or monetary policy group to attach this to or cross reference. Google today had a number of articles supporting this definition.
[The following is written by Pål-André Haugen:]On the wikipedia-page http://en.wikipedia.org/wiki/Seignorage, one can read this under the subheading "Further discussion":
"Ordinarily seigniorage is only an interest-free loan to the issuer because when the currency is worn out the issuer buys it back at face value thereby negating the revenue earned when it was put into circulation. Currently under the rules governing monetary operations of major central banks, seigniorage on bank notes is simply defined as the interest payments received by central banks on the total amount of currency issued. However if the currency is collected instead of being returned to the issuer the back end of the deal never occurs."
I sent an e-mail to economist Morten Linnemann Bech, Ph.D., who works at the Federal Reserve Bank of New York Research and Statistics Group, and asked him if it is true that "the back end of the deal never occurs"..., ..."if the currency is collected instead of being returned to the issuer?
In his reply to me, Morten wrote;
"Hi,I do not completely understand the use of the word "collected". I think the Wikipedia paragraph reads fine if "collected" is replace with "somehow destroyed."
In Morten's reply, he also made it clear, that a government/state issuing currency, which it eventually collects and "somehow destroyes", is using a form of tax that is a tax on money holdings.
This form of tax - i.e. a government/state issuing currency, which it eventually collects and "somehow destroyes" - seems to have been used with success by the government of the English Channel island Guernsey in 1813.
But what does it mean that "the back end of the deal(=Seigniorage) never occurs", if a government/state issues currency, which it eventually collects and "somehow destroyes"? This does actually read like being the perfect kind of taxation-system for a government/state, i.e., it seems to me to be too uniform, too perfect, too uncomplicated, and too non-bureaucratic.
