In a post about Penny on June 10th, I wrote:
The US government makes quite a penny (intended for Punid) with seignioge. That’s not what it was about scholarships, but more and more people use credit cards and cryptocurrency to buy good services. Still, that’s a fair amount.
The biggest profit from Seiigniorage is $100 billion. Printing one costs the federal government only 9.4 cells. So, if the Fed spends this $100, it will make a profit of $99.90. Not bad. Printing for $1 will charge you a FRB.3.2 cell. So even a $1 invoice will still make 97 cells.
In the comments, Rob Rawlings wrote:
I’m a bit confused by the idea that the government is getting Signireg by printing new memos. I’m glad that I’m right if I’m wrong, but if I buy back my bonds with newly created e-money, rather than printing a new paper note, why don’t they get seigniorage? When you print these new notes (as they match the increased demand for holding rather than electronic money), there is the cost of printing SEMs like the actual cost.
He added that the printing costs are the actual cost of less than $100 billion or even $1 billion in par value.
Rob replied:
Where is “net Signalage” if a newly printed memo is offered to the bank in exchange for an equal base amount? It is sems that occurred before Ken before the government created new basic money by buying bonds.
In response, I missed the second sentence of Rob above. I think that’s true. The bottom line means that there is Zeniorage and you have identified where it will happen.
As you see when quoting Jeff Jeff Hammel below, I think I made the mistake of moving in the direction of talking about “Net Zenyoji.”
I bought it from Jeff Hammel, a leading expert in Montary Theory and Poli. He sent me the next paragraph.
I think there is a critical difference here. If you want to see Zeniorage online while defining, that’s fine. But what I think is the standard way to think about seigniorage (tax on actual cash balances), similar to explicit taxes and government borrowing. Both of these have costs associated with the cost of collecting that you have a reputation for, at least in theory. But how the government creates new dollars and puts them in circulation, it collides with government subjects (through ultimately the final reduction of real cash balances) as well as the reserves of banks that hold coins, invoices, or non-wages.
Add it with Jeff. Well, most of it. I’ll do something a little fussy here and point out that tax burden is not an income that is never collected. It is, in this case, the loss of death from those who economy to hold actual cash balances, in addition to that amount.
Looking back at me now, I might think that the federal government is insisting on printing more $100 bills. i haven’t.
Instead, I’m making a more modest point, and that’s this. However, let’s say the Federal Reserve chose the best monetary policy. However, it is defined. Scott Sumner has one definition, John Taylor has another. But let’s assume that, in choosing this optimal monetary policy, the Fed assumes there is no additional demand for the US currency in other countries. In other words, they assumed that even if US currency is currently being held overseas, there would be no additional demand.
But, after all, there is additional demand. Rather than that optimal monetary policy is not chosen by the Fed. The best policy is to print an additional $100 invoice.
Note 1: I would like to thank Rob Rawlings for putting up a good point, and Jeff Hummel for helping me think through it.
Note 2: I gave ChatGpt instructions to draw a $100 bill because it was a whim on my part, and the size of Ben Franklin’s head is exaggerated. Above all, I think Franklin’s representation makes him look like Jack Benny.
