[OPE-L:5782] Re: Commodity Money (Questions)

Gerald Levy (glevy@pratt.edu)
Mon, 1 Dec 1997 08:29:38 -0500 (EST)

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Paul C wrote on Mon, 1 Dec:

> Where a natural monopoly garners rent, the ability to issue money
> accrues seigneurage.

Oil? What would be some other examples of seigneurage in this context?

> When we deal with modern forms of electronic money like Visa cards,
> what prevents forgery here? At one level, obviously the care that
> Visa take to make the production of forged cards difficult, but at
> another level what stops anybody else stepping in and issueing their
> own cards?

Anyone (I guess) can issue their own credit cards -- just as anyone (who
can afford the fee for incorporation) has the juridical right to form a
corporation. To be able to be competitive and profitable, however, a
significant amount of money capital and credit is required. Perhaps one
could be able to think of brand recognition and brand loyalty to firms
like VISA as a form of barrier to entry?

> For the process or doing so is surely profitable, the interest that
> Visa charge is merely decapitalised seigneurage.

Given the interest that VISA charges, perhaps they are more aptly
described as being engaged in "loansharking"? In this context, what would
be the difference between loansharking and seigneurage?

> Is it that the capital necessary to set up an international credit
> card network is its own certificate of authenticity?

To be competitive, the credit card companies obviously need a lot of money
capital. What gives them "authenticity" is "consumer confidence" and brand
recognition. To establish that, they need to expend a lot of money on

In solidarity, Jerry