Rob asks: >And as for the US - well, I think I understand their relative advantage in controlling the current international reference currency, but I'd love someone to explain this word 'seigneurage' to me.< As I understand it, the basic idea is that if a government can print (fiat) money and people actually accept it as money, it can make a profit (value of assets or goods or services purchased with printed money minus cost of printing it).[*} The ability to issue fiat money seems based on state power, including the ability to restrict the supply of money. (The loss of this power is associated with hyperinflation.) In most cases, seigneurage power is solely intra-national. But in the case of the dollar (and maybe the Deutschemark), where the money is accepted as an international currency, the seigneurage power is international, i.e., redistributing assets to the U.S. Is this a correct explanation? BTW, textbooks tell us that banks "create money," i.e., bank deposis in the form of bookkeeping entries. Does that mean that bank profit is partly based on seigneurage? Of course, the ability to create money is in effect delegated to the banks by the central bank, which in turn imposes all sorts of regulatory controls. So the banks' seignorage isn't free. [*] according to the New Palgrave, "seignorage" originally referred to the fee that the king charged for turning gold dust into gold coins -- and the difference between the value of token (non-gold) money in terms of gold and the cost of producing it. in pen-l solidarity, Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/Departments/ECON/jdevine.html "The only trouble with capitalism is capitalists. They're too damned greedy." -- Herbert Hoover
