Tuesday, May 12, 2009

Seigniorage

Increasingly governments accross the globe are coming out with commomerative issues be it currency, stamps or limited anniversary issues to mark a special occasion through the issue of special mementoes. The Seigniorage income received from this is increasingly becoming a major source of revenue for governments leading to lessening the impact of inflation through the never ending expansionary monetary policies of governments. It is estimated that over 5 Billion $'s has been earned by the US government from the issue of its "state quarter" series in the past decade. with the additional 6 quarters and 4 dimes an additional 1-2 billion is estimated to be taken out of circulation. Similarly the estimated stamps that directly reach "collectors" is close to 8% of the stamps issued worldwide and hence gives an in built cost benefit to the government run postal system as opposed to the private couriers who have to compete with them.
Governments can use this as an added tool to lessen the impact of inflation by issuing new designs every time they issue new currency so that there is a never ending Seigniorage accruing to them.