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Is There a Term for Coinage That Costs More to Produce Than it is Worth?

Stacks of coins on a scale

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.

Quick Guides to Investing

Step 1:

Why Buy Physical Gold and Silver?

If you are concerned about the volatility of the stock market, you’re not alone. The extreme highs and lows of the stock market often lead investors towards safe-haven assets, like bullion. Historically, the Precious Metals market has an inverse relationship with the stock market, meaning that when stocks are up, bullion is down and vice versa.

Step 2:

How Much Gold and Silver Should You Have?

This question is one of the most important for investors to answer. After all, experts suggest limits on how much of any types of investments should go into a portfolio. After deciding to purchase and own Precious Metals and considering how much money to allocate, one can then think about how much and what to buy at any point in time.

Step 3:

Which Precious Metals Should I Buy?

With the frequent changes in the market and countless Precious Metal products available, choosing investments can be difficult. Some want Gold or Silver coins, rounds or bars while others want products that are valuable because of their design, mintage or other collectible qualities. Also, collectors may shop for unique sets and individual pieces for their collections.

Step 4:

When to Buy Gold & Silver

After considering why, how much, and what Precious Metals products to buy, an investor’s next step is when to buy them. This decision requires an understanding of market trends and the impact of economic factors on precious metal prices.

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