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.
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