SEIGNIORAGE

This article appears in Volume V24, Page 586 of the Encyclopedia Britannica.

Encyclopedia Britannica - Main :: SCY-SHA

SEIGNIORAGE , the due levied by the authority that possesses the right of coining on the metal that it manufactures into coin. The term " brassage " has been used to describe this due, when confined to the mere cost of the process; the wider term " seigniorage " being employed when the charge is so raised as to become a profit to the imposer. The exercise of the right of seigniorage has been the

instrument

INSTRUMENT (Lat. instrumentum, from insincere, to build up, furnish, arrange, prepare)

by which most of the debasements of currency have been carried out. Under feudalism, especially in France, the

chief

CHIEF (from Fr. chef, head, Lat. caput)

nobles had this prerogative. In the modern state it is reserved for the sovereign authority. Most countries adopt a moderate seigniorage charge. Thus the fundamental currency law of France (1803) provides that " only the expense of coining " shall be charged. At present this due is 6 fr. 70 c. per kilo. of gold 1-90- fine, or 0.24%. The charge by the same law on silver was 3 fr. per kilo. or 1.66%. The limitation on the coinage of silver in practically all countries has made the seigniorage on that metal very heavy. The policy of England in respect to gold has been peculiar. Since 1664 it has been freed from any charge, though the delay in return amounts to a small due. In consequence of this gratuitous coinage, English gold has been regarded as equivalent to bullion, and exchange fluctuations have been reduced. The policy was severely criticized by

Adam

Smith

, and it does in fact amount to a

bounty

BOUNTY (through O. Fr. bontet, from Lat. bonitas, goodness)

on the coinage of gold. The amount is, however, too insignificant to deserve attention, especially as there are compensating gains. The employment of a seigniorage of about 1% on the " sovereign " was suggested by the proceedings of the Paris Monetary Conference of 1867; in order to bring about an assimilation of English and French money. By reducing the amount of gold in the sovereign to that in the proposed 25-franc piece an exact par would have been created, and, so it was hoped, the English currency and accounts need have undergone no

change

CHANGE (derived through the Fr. from the Late Lat. cambium, cambiare, to barter; the ultimate derivation is probably from the root which appears in the Gr. «a urmu', to bend)

. The

scheme

SCHEME (Lat. schema, Gr. oxfjya, figure, form, from the root axe, seen in exeiv, to have, hold, to be of such shape, form, &c.)

was, however, rejected by a Royal Commission on the ground that an adjustment of obligations would be required.
The theory of the effects that a seigniorage produces have been discussed at length. The definitive results obtained may be briefly stated as follows:(r) A seigniorage charge is the same as a debasement, but its evil effect may be avoided by limiting the amount of coin issued. (2) Seigniorage operates as a tax on the metal subject to it, and this tax tends ultimately to fall on the producers, or rather on the rent obtained through the production. A heavy seigniorage on gold would tend to lower the profits derived from the gold mines of the world, and might even compel the abandonment of the least productive ones.
See MONEY, MONETARY CONFERENCES, and TOKEN MONEY.
(C. F. B.)

End of Article: SEIGNIORAGE

If you wish, you can link directly to this article.

<a href="http://jcsm.org/StudyCenter/Encyclopedia/SCY_SHA/SEIGNIORAGE.html">
SEIGNIORAGE
</a>

(Previous)
SEIGNEURS AND COUNTS OF LAVAL

(Next)
SEIGNORY, or SEIGNIORY (Fr. seigneur, lord; Lat...

JCSM was founded in 1997 and exists to help the community and bring people into a life-changing and productive relationship with Jesus Christ. JCSM offers over 200,000 free web pages, including its weekly inspirational emails that were sent continuously for over a decade.

Jesus Christ Saves Ministries
P.O. Box 9297
San Diego, CA 92169
1-888-887-0417 or Email