The herald. [microfilm reel] (Los Angeles [Calif.]) 1893-1900, 1897-07-18
SEIGNIORAGE

That very crude ideas are entertained
by some persons on the simplest ques-
tions connected with coinage is evil
dent from the many erroneous and mis-
leading statements published by the
public press. AS a sample of this kind
of literature clip from the Silver Souve-
mir edition of the Labor World of July
LIST, the following paragraph:
'How is the seigniorage accumulated?"
The seigniorage is really the charge
made for coinage. Then as a certain
amount of the base metal has to be added
to gold and silver to make the coins hard
enough for use, the actual charge was
abolished. and the difference between
the actual amount of the precious
metal received and that used was
considered as the seigniorage. Suppose
man bought 25S grains Of gold to the mint,
he would receive $l0 while the mint would
add 1888 grains of silver and copper and
coin Sill out of the combination. When
the question of silver coinage came up
third meaning was given to the woro sels-
niorage; it was taken to mean the diner-
ence between the price paid Tor silver
bullion and the number OF silver dollars
that could be coined from 1t, Thus man
brought 4l2h grains of silver to the treas
ury mot to the mint and received, say, ~
cents for 1t, it's bullion value, and the gov
eminent credited itself with 81, because
that is what it would coin out OF that
amount of silver. While the Sherman act
was In force, requiring the purchase of so
much silver bullion every month, the seig-
niorage accumulated every time bullion
purchase was made.
This paragraph contains about as
many errors as can be crowded into
so small O. space. When the writer got
the idea that the government took 258
grains Of pure gold from a depositor for
$40, and coined Sill out of 1t, thus taking
a royalty or seigniorage Of 81 out of each
ounce of gold at the mint, Is past my
comprehension.
An ounce of pure gold Is worth $40. 81
at the mint of any nation that has free
and unlimited coinage Of gold; the coin
age value and the bullion value Of either
gold or silver is exactly the same in any
country that has free and unlimited
coinage of both metals; and II any
country should demand a royalty or
seigniorage of one-tenth. or 50 per ounce
on gold at the present time, that nation
would get no gold bullion for coinage
purposes.
Any person bringing 25S grains of pure
gold to the United States mint receives
Sill in gold coin for it. If he brings
25S grains of standard gold, nine-tenths
fine, he receives $40 for 1t.
The coinage of gold in the United
States Is free and unlimited, and 1t nee
essarily follows that the value of gold
bullion Is precisely equal to the value Of
the gold coin it will make.
Seigniorage was originallyaroyal pre-
rogativeand was peculiarly applicable to
the profit made in coming money. The
right of coinage was royal preroga-
oh fnr cro c.
called seigniorage and belonged to the
sovereign. The seigniorage was, of
course, exactly equal to the difference
between the value of the bullion and
the value Of the money coined from it.
Under free and unlimited coinage there
is no difference between the value of the
bullion and hevalue Of the money coined
out of the bullion. and consequently
there is no seignioraga
The meaning Of the word seigniorage
has been somewhat extended in modern
times, and Is now applied to any profit
on coinage, or to any profit arising in
any manner through the operation of
the mint; the difference between the
cost of the bullion purchased by the
government under the provisions of the
acts of 1878 and 1890 and it's coinage
value is now called seigniorage-
If bullion presented at the mint is
coined into money without charge to the
owner Of the bullion, the expense of
coinage must be borne by the govern
ment. Until about two hundred years
ago most of the nations charged
seigniorage for coming money, in some
instances only sufficient to pay the ex-
penseo of coinage; and in some cases
seignioragc was charged for the express
purpose Of creating revenue for the
sovereign. In 1866, however, England
provided for gratuitous coinage of all
gold and silver brought to the mint,
and has adhered to this policy ever since.
OF course it is considerable expense
to the government to support the mint,
but the benefits arising from free coin
age have been found to more than bal
ance the expense incurred. Under free
coinage the bullion is worth as much
as the money that can be coined from
it, and the incentive to counterfeit the
coin is removed. Where a royalty or
seigniorage is charged the bullion will,
of necessity, be worth less than the
coin; and where more than the actual
cost OF coinage is charged such charge
creates an incentive to the owner of the
bullion to coin it himself; or, in other
words, to counterfeit the government
coin ard thus save the segniorage.
Again, if some nations charge
seigniorage for coming and other nations
have free coinage, all the bullion will go
to those nations where coinage is free,
and the nations charging a seigiorage
will get no bullion for coinage purposes.
In 1892, when the United States adopt
ed its first coinage law it provided for
the free and unlimited coinage of both
gold ard silver. Section IA of the act of
1892 is in the following words:
'Section IA. And be it further enacted,
That 1t shall be lawful for any person
or persons to bring to the said mint gold
and silver bullion, in order to their being
coined; and that the bullion so brought
shall be there assayed and coined as speed
lily as may be after the receipt thereof, and
that free of expense to the person or per-
sons by whom the same shall have been
brought. And as soon as the said bullion
shall have been coined, the person or per-
sons by whom the same shall have been
delivered, shall upon demand receive In lieu
thereof coins of the same species of bullion
which shall have been so delivered, weight
Tor weight. of the pure gold or pure silver
therein contained; provided, nevertheless,
1hat 1t Shall be at the mutual option of the
party or parties bringing such bullion, and
OF the direction of the mint to make n i'm