[OPE-L:5783] Re: Re: Commodity Money (Questions)

Paul Cockshott (wpc@CS.STRATH.AC.UK)
Mon, 1 Dec 1997 14:06:09 -0000

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

Money was invented by Midas, king of Lydia who took to stamping
small ingots of gold with the royal lion. Numismatic study reveals
that these were in fact made of electrum, a gold silver alloy. The
royal treasury is assumed to have offered to convert merchants bullion
into authorised weights of gold suitable for trading. Since what
the merchants received was only something like 800f the gold they
paid in, the remainder constituted royal revenue - seigneurage.
The existence of this as a source of revenue was so well established
that under feudalism it was restricted to appropriate seigneurs.

> Given the interest that VISA charges, perhaps they are more aptly
> described as being engaged in "loansharking"? In this context, what
> be the difference between loansharking and seigneurage?
VISA here are just an extension of what the banking system normally does.
The loansharking element comes from them charging above average interest.
The seigneurage comes from the creation of money in the first place.
When the banks as a whole extend overdraft rights to customers, they
create money. The act of money creation is the seigneurage, the revenue
flow from interest depends upon the accumulated mass of credit money.

Let m' be the rate of creation of money per second

Let M(t) be the integral from time zero to t of m' = outstanding mass
of money created

then i(t) the interest flow per second at time t is given by

i(t) = r(r) M(t)

where r(t) is a number to dimension 1/t being the rate of interest

i(t) is what I mean by decapitalised seigneurage, where decapitalisation
is understood as the inverse function of the 'capitalisation' operator
used to convert revenue streams such as rent into sums of capital.