seigniorage

/seen"yeuhr ij/, n.

1. something claimed by a sovereign or superior as a prerogative.

2. a charge on bullion brought to the mint to be coined.

3. the difference between the cost of the bullion plus minting expenses and the value as money of the pieces coined, constituting a source of government revenue.

Also, seignorage.

[1400-50; late ME seigneurage < MF seignorage, seigneurage; see SEIGNEUR, -AGE]

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Charge over and above the expenses of coinage that is deducted from the bullion brought to a mint to be coined.

From early times, coinage was the prerogative of kings, who prescribed the amount they were to receive as seigniorage. This was sometimes compensated for by replacing part of the gold or silver with base metal, resulting in debased coinage. In England all such charges were abolished in 1666. Because coins are now issued only as token money, they no longer need to possess a high intrinsic value, and low-standard silver or base-metal alloys are sufficient. The margin between the cost of producing a coin and its currency value is known as seigniorage.

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▪ coinage

      the charge over and above the expenses of coinage (making into coins) that is deducted from the bullion brought to a mint to be coined. From early times, coinage was the prerogative of kings, who prescribed the total charge and the part they were to receive as seigniorage. The deduction was sometimes supplemented by replacing part of the bullion with base metal, resulting in debased coinage. Because the seigniorage and coinage charges were collected by withholding part of the bullion brought for coinage, the currency value of the coins received in exchange was often less than the bullion's market value. Eventually, merchants stopped providing bullion for the mint, and the supply of coins became inadequate. In England all charges for coinage were abolished in 1666.

      Because coins are now issued only as token money for domestic purposes, they no longer need possess a high intrinsic value, and low-standard silver or certain base-metal alloys provide all the qualities required. A substantial margin usually exists between the cost of producing a coin and its statutory currency value; this margin, or profit, is known as seigniorage.

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