1. What is Seigniorage and Who Should Get It? Nicolaus Tideman Professor of Economics Virginia Tech

2. Seigniorage in the Context of Monetary and Banking Reform Three Important Reforms: Ending Fractional Reserve Banking Stabilizing the Value of Money Distributing Seigniorage Fairly Concentrate today on seigniorage 2

3. What is Seigniorage? Oxford English Dictionary seigniorage, seignorage 2. A duty levied on the coining of money for the purpose of covering the expenses of minting, and as a source of revenue to the crown, claimed by the sovereign by virtue of his prerogative. – 1891 Daily News 6 Nov. 3/5 Any profit which the State gets from note circulation, seigneurage, and the like. 3

4. What is Seigniorage? It is the profit from producing money It is not the bank profit from fractional reserve banking – That is competed away if banking is competitive – If banking is not competitive, profit should be attributed more to barriers to entry than to fractional reserve banking Seigniorage tends to be modest for coins and substantial for paper money The would be no seigniorage if there were 100% reserves for currency 4

5. What Happens to Seigniorage Now? It does not appear in the National Income Accounts because dollars are debts (?!!!?) It appears indirectly in the profit of the Federal Reserve Banks, which is taxed at a rate of 100% (NIPA Table 3.2, Line 8) So the U.S. Treasury collects all of the seigniorage that the Federal Reserve banks don’t spend. 5

6. Is Anything Wrong with Having the Treasury Collect All the Seigniorage? At least it is collected publicly But collection by the Treasury is akin to Taxation without Representation It is reasonable to wonder whether the Federal Reserve Banks overspend. There is an argument for equal sharing of seigniorage Seigniorage makes a nice revenue source for a Basic Income Guarantee 6

7. 77 How Much Seigniorage is There? About $15 per person per month It could support a life-time interest-free loan of about $4,000 It would be much bigger if there were no fractional reserve banking It increased by about $3,000 per person in the fall of 2008

8. Sharing the Seigniorage Could Conceivably Prevent a Run on Dollars 8 A run on dollars is imaginable Sharing the seigniorage would provide a framework for reducing the money supply to whatever extent was necessary Having the framework might make it possible to avoid a severe reduction in the demand for dollars

9. Should Seigniorage Be Used to Finance Infrastructure or other Projects? 9 That would generally be unjust But it would not be unjust to allocate to each project the seigniorage from the increase in the demand for money that resulted from that project

10. Conclusion 10 Think about how you would like to recommend that seigniorage be shared Equal sharing has a lot to recommend it

11. Thank you! Nicolaus Tideman Virginia Tech ntideman@vt.edu 11