1 Seigniorage Seigniorage, (seignorage) Entrepreneur, arbitrage, tranche Prepared by Conall Boyle March 2007

2 (Bank of England) ^ Seigniorage?

3 Bank of England (BoE) Annual Report and Accounts p91 Issue Department Account for the period ended 28 February Note £m £m Income and profits Securities of, or guaranteed by, the British Government Other securities and assets including those acquired under reverse repurchase agreements 1,082 1,124 1,710 1,743 Expenses 2 Cost of production of Bank notes Cost of issue, custody and payment of Bank notes Other expenses Payable to HM Treasury 1,653 1,698

4 ( payment to GB: £1,653) £38,449 - £36,920 difference = £ 1,569

5 Bank of England (BoE) Annual Report and Accounts p91 Statement of balances: 28 February Note £m £m Assets Securities of, or guaranteed by, the British Government 3 13,370 13,370 Other securities and assets including those acquired under reverse repurchase agreements 425,079 23,550 Total assets 38,449 36,920 Liabilities Notes issued: In circulation 5 38,449 36,914 In Banking Department – 6 Total liabilities 38,449 36,920 ( payment to GB: £1,653) difference = £ 1,569

6

7 notes: 3 Securities of, or guaranteed by, the British Government £m £m Ways and Means advance to the National Loans Fund 13,370 13,370 13,370 13,370 The Ways and Means advance earns interest at the Bank’s repo rate. 4 Other securities and assets including those acquired under reverse repurchase agreements £m £m Deposit with Banking Department Short-term reverse repurchase agreements 10,030 17,497 Longer-term reverse repurchase agreements 15,000 6,000 25,079 23,550 5 Notes in circulation £m £m £5 1,100 1,052 £10 5,886 5,591 £20 23,740 22,690 £50 6,705 6,510 Other notes(a) 1,018 1,071 38,449 36,914 (a) Includes higher value notes used as cover for the note issues of banks in Scotland and Northern Ireland in excess of their fiduciary issues

8

9 Information from Bank of England Annual Reports. Only 2 years info per Report; earlier Reports not on-line, were supplied to me directly.

10 From BoE Annual Report, but can also be found as M0 elsewhere. Some discrepancies

11 Calculated by CB from the published figures

12

13

14

15 The only clue to the nominal rate of interest ‘earned’ on Note-issue?

16 Source: BoE statistics publications. Averages shown for previous year to roughly coincide with Report publication date.

17

18

19 Seigniorage (Bank of England Style) Seigniorage for the year = Total Note Issue X Average Bank Rate

20 BoE uses the S. word! Seigniorage by Willem H. Buiter Professor of European Political Economy European Institute, London School of Economics and Political Science from LSE Economics website Discussion Paper March 1, Buiter was one of the MPC external appointments.

21 Use cash – back Britain Keep one of these in your wallet/handbag; earn 25p for us. Use a cheque or credit card – Nil USE CASH ONLY! IT’S PATRIOTIC! (and saves us paying tax )

22 Make ‘em pay! –For their raw materials M3/M4 - £1,550, % £85,000 mn