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Seigniorage

Seigniorage, also spelled seignorage, is the net revenue derived from the issuing of currency. It arises from the difference between the face value of a coin or bank note and the cost of producing and distributing it. Seigniorage is an important source of revenue for national governments.

Seigniorage can be regarded a form of tax levied on the holders of a currency, and as such a redistribution of resources to the issuer. Expansion of the monetary base, by issuing currency, can however induce inflation and a government relying heavily on seigniorage, as source of revenue, will find it counter productive in the long run. Examples include the hyperinflation in Germany, during the 1920s.

See also: Central bank, Money



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