Commentaries (some of them cheeky or provocative) on economic topics by Ralph Musgrave. This site is dedicated to Abba Lerner. I disagree with several claims made by Lerner, and made by his intellectual descendants, that is advocates of Modern Monetary Theory (MMT). But I regard MMT on balance as being a breath of fresh air for economics.
Wednesday, 21 October 2015
Does the state make seigniorage profits when it prints money?
That’s a nice simple exam question. My answer for what it’s worth is as follows.
If the state prints money and does helipcopter drops, the state gains nothing. All that happens (at least initially) is that the private sector’s paper assets rise in value.
If the state prints money and and that money just boosts CURRENT public spending (e.g. hiring more state employed bureaucrats), then again the state gains nothing. There are no seigniorage profits there.
A third possibility is that the state prints money and purchases items of a CAPITAL nature, e.g. roads, bridges, etc. In that case the state’s assets do rise in value, so there are seigniorage profits there.
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