Printing and Minting Money is not Free
The term is Seigniorage! Seigniorage is the difference between the face value of money, such as a $10 bill or a quarter coin, and the cost to make it. In other words, is it the cost (or profit) of producing a currency within a given country.
Seigniorage is the difference between the face value of coins or currency and the government’s production cost. Seigniorage is not an inherently negative term. It can refer to a country’s government earning or losing value through the difference between production costs and face value.
Money’s Value – Cost of Production = Seigniorage
If the seigniorage is lower than the actual exchange value, it is profitable to mint the coins. Cents are not profitable as it costs almost .03 to strike a penny. Nickels are not profitable either. They cost about $.08 to make. Dimes, quarters, and half dollars are profitable as their cost is less than their face value.
Where does this word come from? Seigniorage comes from the Old French seigneuriage, or “right of the lord (seigneur) to mint money.”
Does seigniorage cause inflation?
Many factors can cause inflation, like an unexpected spike in demand.
Producing currency rapidly contributes to inflation: When a currency is produced faster than the supply of services and goods, it can create inflation, where consumers are willing to spend more money on goods than they would otherwise.
Some economists consider seigniorage a kind of inflation tax, where the resources return to the currency issuer.
