Seigniorage

Seigniorage /ˈseɪnjərɪdʒ/, also spelled seignorage or seigneurage (from Old French seigneuriage 'right of the lord (seigneur) to mint money'), is the difference between the value of money and the cost to produce and distribute it. The term can be applied in two ways:

  • Seigniorage derived from specie (metal coins) is a tax added to the total cost of a coin (metal content and production costs) that a customer of the mint had to pay, and which was sent to the sovereign of the political region.
  • Seigniorage derived from notes is more indirect; it is the difference between interest earned on securities acquired in exchange for banknotes and the cost of printing and distributing the notes.
For the medieval land ownership system, see Seigneurialism.

"Monetary seigniorage" is where sovereign-issued securities are exchanged for newly printed banknotes by a central bank, allowing the sovereign to "borrow" without needing to repay. Monetary seigniorage is sovereign revenue obtained through routine debt monetization, including expansion of the money supply during GDP growth and meeting yearly inflation targets.

Seigniorage can be a convenient source of revenue for a government. By providing the government with increased purchasing power at the expense of public purchasing power, it imposes what is metaphorically known as an inflation tax on the public.

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