January 12, 2009
By Wade Rousse
The title of this posting should make your “jargon alert” siren begin to flash and whistle. A friend recently asked me to explain “seigniorage.” I consider the friend an intelligent person, and his question prompted me to think others might be equally confused about the meaning of the term, thus this posting.
There are three ways a government can get revenue to finance its spending. First, it can tax. Second, it can borrow – by selling government bonds. And third, it can print money. The revenue raised from printing money is called seigniorage.
Harvard University professor Greg Mankiw writes an interesting case study in his text book titled “Macroeconomics.” He mentions that seigniorage hasn’t been a major source of revenue in the U.S. for a very long time. However, this was not always the case. During the American Revolution, the Continental Congress relied on printing fiat money to help finance the war.
In 1775, $6 million of new Continental currency was printed, and in 1776 $19 million more was added to the pile. The trend continued in 1777, 1778 and 1779, as $13 million, $63 million and $125 million of new currency was printed.
This large increase in the quantity of the Continental dollar made it nearly worthless. At the time, a familiar expression was, “It’s not worth a continental,” – meaning that the item had little real value.
So, seigniorage is simply another economics term that sounds confusing at first but essentially refers to a fairly simple concept – raising revenue by printing money.
Posted by Wade at January 12, 2009 8:15 PM
This is factually inaccurate and largely misses the point. Seignorage is actually a very important factor in today's economy.
Seignorage is indeed the profit made by printing money, but your explanation leaves out the important details.
When the treasury prints a $100 bill, they send it out into the economy in exchange for $100 worth of something, be it gold/treasury bill/etc. 5 years down the road, this asset has generally increased in value. However, the $100 bill is still worth $100. This additional profit earned by the government is seignorage.
Where seignorage is most profitable is when currency becomes popular abroad. The US government earns approximately $25 billion per year in seignorage due to the fact that the dollar is in wide circulation overseas.
Posted by: Brian at October 31, 2009 11:48 PM
Hi, i just thought i'd post and let you know your blogs layout is really messed up on the K-Melonbrowser. Anyhow keep up the good work.
Posted by: Erkmar Baur at October 1, 2010 10:47 AM
Hi! I found your blog on Bing.It's really comprehensive and it helped me a lot.
Continue the good work!
Posted by: Lonnie Figary at October 18, 2010 4:25 PM
Have you thought of adding some videos to your posts to keep the visitors more entertained? I just read through the entire article and it was quite good…thanks for the share
Posted by: Versicherung at November 5, 2010 12:21 PM
I was scanning something else about this on another blog. Interesting. Your linear perspective on it is diametrically opposed to what I read before. I am still pondering over the various points of view, but I'm tipped to a great extent toward yours. And regardless, that's what is so super about modern democracy and the marketplace of thoughts on-line.
Posted by: Rina Rioz at November 9, 2010 7:23 AM
I am new to your blog and just spent about 1 hour and 30 minutes reading. I think I will frequently visit your blog from now on. I will definitely learn a lot from them.
Posted by: chilis coupons at May 5, 2011 1:54 PM
Incredibly unique piece of writing. I normally do not comment post, however this time I made an exception, because I have located here a lot helpful info. Thank you for the useful and important information.
Posted by: handsome men at June 1, 2011 6:49 AM
Posted by: Billee at June 1, 2011 7:45 AM
That's very insightful. I'm as of this moment developing a related thesis revolving around the energy sector in developing nation and I'll definitely be citing your work.
Posted by: Tagalog Movies at June 2, 2011 7:50 AM
This article is blue ribbon material as far as I’m concerned. I haven’t used my brain so much in years. This is very interesting content.
Posted by: Karolyn Plett at June 3, 2011 12:42 PM
Excellent work !!
Posted by: Keitha Chanley at June 5, 2011 3:43 AM
Sweet blog! I found it while browsing on Yahoo News. Do you have any tips on how to get listed in Yahoo News? I've been trying for a while but I never seem to get there! Cheers
Posted by: Anja Boin at June 6, 2011 9:03 AM
How come this site is so slow? Takes like 20 seconds for this page to load!
Posted by: Ferdinand Cicione at June 7, 2011 11:42 AM
Enjoyable post. I've just added it to my bookmark list|.
Posted by: Andy Simon at June 7, 2011 8:36 PM
Seigniorage.. Peachy :)
Posted by: marginalthoughts.chicagofedblogs.org at June 22, 2011 11:30 AM
Pretty impressive post. I just stumbled upon your blog and wanted to say that I have really enjoyed reading your opinions. Any way I'll be coming back and I hope you post again soon.
Posted by: Legal sounds at June 23, 2011 8:05 AM
i love your blog!
Posted by: siletina at June 27, 2011 12:13 AM
Great site with lots of information.I found you on I will be back soon. Thanks
Posted by: Rubin Barrer at June 27, 2011 1:31 AM
I just added this blog to my feed reader, great stuff. Can't get enough!
Posted by: inception review at August 16, 2011 7:57 AM
I saw this page through Facebook (one of my friends posted it). After checking your article, I of course clicked Like and also reshared it. More power.
Posted by: Leinhart at September 15, 2011 4:09 AM