NODE 4fa584beRe: e$ Signorage
James Gleick <gleick@around.com>Fri, 5 Apr 1996 06:50:42 +0800
>I believe money which is never redeemed back at the bank is called
>signorage in the currency biz. Whatever signorage *actually* is, Kawika
>Daquio of the ABA (B for "Banking"), the Fed makes $20 billion a year on
>it. Not much against a trillion dollar federal budget, but, hey, every
>little bit helps...
Seigniorage is actually the Government's interest income on all the currency in circulation. It's not obvious, but it's true, that the Fed collects the "float" on dollar bills you carry in your pocket, exactly as American Express collects the float on traveler's checks.
And, I don't know, call me crazy, but $20 billion sounds like a lot of money to me.
--
James Gleick
gleick@around.com
http://www.around.com
NODE 119016e4Re: e$ Signorage
Simon Spero <ses@tipper.oit.unc.edu>Fri, 5 Apr 1996 22:56:49 +0800
On Thu, 4 Apr 1996, James Gleick wrote:
> Seigniorage is actually the Government's interest income on all the
>currency in circulation. It's not obvious, but it's true, that the Fed
And there I was thinking it was the right for Greenspan to sleep with any
unmarried woman on the eve of her wedding...
---
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There is no middle way Which side are you on
You'll either be a Usenet man Which side are you on boys
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NODE db94b9b7Re: e$ Signorage
"Perry E. Metzger" <perry@piermont.com>Sat, 6 Apr 1996 15:44:35 +0800
James Gleick writes:
> >I believe money which is never redeemed back at the bank is called
> >signorage in the currency biz. Whatever signorage *actually* is, Kawika
> >Daquio of the ABA (B for "Banking"), the Fed makes $20 billion a year on
> >it. Not much against a trillion dollar federal budget, but, hey, every
> >little bit helps...
>
> Seigniorage is actually the Government's interest income on all the
> currency in circulation.
Seignorage is neither of these things. It is the difference between
the cost of producing a currency token (like a quarter or a dollar
bill) and the face value of the token. In essense, its the profit
margin on printing or minting money.
> It's not obvious, but it's true, that the Fed collects the "float"
> on dollar bills you carry in your pocket,
Oh, really? From whom? First I've heard of this.
Now, it is indeed true that the Fed holds large numbers of government
bonds and theoretically earns interest on them, and that banks in a
free banking system do indeed loan out the money that backs their
notes. However, the fed has no mechanism to earn interest on dollar
bills, nor, in fact, does it need to.
Perry