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Seignorage 2

I realized that my last post on seigniorage is a bit 'messy and difficult to understand because of language used in quotes, maybe a bit' too technical.
For the last time, permanently and, hopefully, clear, I want to refute the hoax that the seigniorage income is calculated as the difference between cost of production / distribution and value of the note. The seigniorage

say:

1. The Central Bank lends notes to the State.
2. The Central Bank is a public limited company, so all the collection is a loss for the state.
   

As discussed in my previous post these premises are at least inaccurate, if not wrong:
The ECB's capital is composed exclusively of money from the Bank of Central European countries and the Bank of Italy is a Institute of Public Law (ie non-HBS), also notes will be invested in public debt then the interest rate is much lower than a loan.

But even if the correct assumptions used by the seignorage, they still come to the wrong conclusion because it is the same logic with which the reasoning is being carried out to be wrong (do not know whether ignorance or willful misconduct). Here's why:

To simplify the accounts, we assume that print and distribute money it costs nothing to the Bank (then earn even more).

Step 1: The State called on the Bank € 100. The Bank lends them and prints them to the state with a annual interest rate 10% (very high). Revenue for the State
: 100 € (loans ranging in revenue, is the law)
Net for the State : +100 €
outputs for the Bank : 0 € (we said that printing costs nothing )

Step 2: The state invests the money. How? In public works (roads, railways), in salaries for civil servants, etc ... (This is the way that paper money comes into circulation)
assume that the state invests the entire loan:
outputs for the state : 100 €
Net for the State : 0 €

Step 3: How earns the state? With taxes and indirect taxes, natural return on investment in services.
Many European countries have a budget surplus, or enter more money in taxes than is spent on services. In Italy no. Whether it is a country of criminals (who escapes a payment, while using the services related to such payment, is not a thief) and for the enormous waste policy and administration.
The famous "balanced budget", which hopes to soon Tremonti is simply this: to ensure that investments in services are at least equal to the return in taxes.
In our example, let's pretend that everyone pays taxes: State income
: 150 € (for example, earning € 50, but the amount is irrelevant)
Net for the State : +150 €

Step 4: It's been 2 years and the state returns the € 100 banknote, the Bank , which destroys it:
outputs for the state : € 120 (€ 100 banknote plus interest of 10% for 2 years) for the State Net
: +30 € [1] Revenue for the Bank
: 20 € [2]
Net Bank : +20 €

So the profit is equal to the interest of the Bank investment, cvd
Oh, yes! Why the Bank with € 100 can not do anything because she was in print. That bill is not worth anything once out of the movement, because it is paper! And then destroys it, because being old and worn should print a new bill, rather than reintroduce in this movement.
Just as a check as soon as two clients of the same bank exchange a check, the bank does not earn the amount of the check when it collects, unlike the case in which the two are clients of different banks. Behold, the euro checks are nothing more than all of the Bank itself, and sooner or later must return to the bank that issued them (The ECB).

Finally, removing also the scene of seigniorage, the only differences are:

1. If the bank invests in the printed public debt rather than lend to the State's interest is much lower, then the gain is less.
2. The Bank, they are not private, transforms the interest earned (adjusted for operating expenses) in revenue for the state itself, as witnessed on that page Bank of Canada from which I got the citation in the previous post (unfortunately I could not find a similar testimony to the Bank of Italy or the ECB)

If you still had not been clear enough or if you wish further clarification, you can come to the forum discuterene WebArchive , from where it started my interest in the topic.

[1] : Net profit of the State, of course, depends on many factors and more can also be zero (balanced budget) or negative (increasing the debt), but in our example is not important.
[2] : If to the Bank the € 100 had a gain, why bother trying to lend to the state? He could print hundreds of millions and spend it to buy gold, diamonds, yachts for a CEO, a lollipop with his son the CEO, etc ... still get the inclusion banknotes in circulation. Herein lies the absurdity and inherent illogic of those who argue against the conspiracy of monetary sovereignty, the buffalo. I challenge anyone to prove otherwise.

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the buffalo's solution to a problem only Casta Italian

The problem and there is a serious problem: every democracy must ensure the separation of powers and independence.
In Italy the powers in the game now are only two: the judicial and the political, the latter seen as a merger of the executive and the legislature, both in hand, by law, the same coalition (as it was in the 1st Republic ).

As the political power should not affect the judiciary, the judiciary should not interfere politically.
policy in fact can not decide who is right and who's not processing, blocking and moving jobs to law courts or entire processes, and this independence is to ensure that the body which has the final say on disciplinary proceedings and judges pm CSM is: self-government and appointment, in part, independent of politics.
And justice can not decide who should govern or make laws and, therefore, also in Italy, you need permission to move Parliament to process any Mr . Which should be used only in exceptional cases, namely when there is a suspicion that the investigation has purposes other than the simple finding of criminal liability of 'Mr concerned.

course the judiciary is, of necessity, in part subject to the legislature, because everyone must obey the same laws. Reason why it should be effective and not merely nominal, the third separation, between the legislative and executive power.

From these premises it would appear that the provision for the immunity of high office is not only right but a duty to respect the rules of democracy.
pity that this conclusion, although implicitly propinataci any form of information both Wrong. Dramatically wrong. The error is
nell'anomalia Italy: the only Western country where Democrats can stand for election to a convict.

If the politician was already under investigation first who stand for elections, is no longer a problem but simply DETACHED between branches of law: if one is guilty not only would be unfair to stop its institutional activity, but necessary for the of public good (perhaps there is always some partisan attached), other than "complete the mandate given by the citizens." Also, if he wins the election, the convict, acquires a power over the judges that he had not before then, if anything, the problem independence is reversed.

But why in Italy we have this anomaly? We may not have been able to give ourselves the time necessary laws to keep criminals out of politics.
No. Why are not laws. No democratic country has them. But in other democratic countries there is a fourth power independent of the other three (political, executive, judicial): the power of information. In other democratic countries
any stain on the criminal record makes you unpresentable any election, even to the President of the Association for bowling: for the office of Premier enough much less (Bill Clinton risked dismissal for a fling, remember).
In Italy no. The fourth estate, the most important one, because that is what transfers the power directly to citizens, is in the hands of political power, in chastity.
So we can not do anything but resign ourselves to the latter also changing hands: with the unification of the judiciary on the other three, which will finalize with a previously-announced reform of the CSM, the transformation from dictatorship to democracy sondaggistica-media, will be complete.

rejoice However, do not realize it at all: the transition will be for all of us and nothing will change, we will continue to go shopping at the supermarket with our SUV, watching television and Maria de Filippi to go to vote, and happy. Maybe someone will
thinking, but then passes.

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Seignorage

The way in which I dealt with and explained the theme Mrs. GGIO in my previous post , proved incorrect and inappropriate.
In my defense I can bring that, incorrect and inappropriate, it was the way in which that theme is explained on the majority of websites that talk about it (one of them also mentioned in my post).

The correct definition of seigniorage is as follows:

"In principle, the creation of base money in a monopoly situation gives the possibility the central bank to obtain income (called seigniorage) as the difference between the revenues derived from the investment in financial and real assets and the (negligible) cost of production. Since these revenues are derived from the condition of privilege granted by the State, the profits are generally forfeited principally on the latter, in the form of taxes. One limitation to production, potentially unlimited monetary base is set by the objective of maintaining a relatively stable price level, given the direct relationship that historically was observed between inflation and money supply. "

Bagliano and Marotta, Economics Monetary
Il Mulino, p.. 18

Ultimately it false claim that the seigniorage is the difference between the nominal value of the note and the costs of production, as suggested by the seigniorage as shown in the picture and description of this post to post (top right).
Here is an actual example described by the Bank of Canada, where it discriminates between coin (minted by the state):

"The Ministry of Finance pays the Royal Canadian Mint that produces and distributes all the coins (metal) in Canada. The cost to produce a Canadian dollar is about 12 cents. Consequently, it produces a seigniorage income of about 88 cents to the Canadian government, for every dollar given to financial institutions at face value. "

and paper money (printed by the Bank of Canada itself):

" Seigniorage is the difference between the interest derived from the portfolio of government securities and the cost to produce and distribute notes. Unlike the seigniorage on coins, banknotes generate seignorage for some years.
Take, for example, a $ 20 bill, which is the most widespread. At an average interest rate of 5%, a 20 bill in circulation generates revenue for about $ 1 a year. The cost of production amounts to 6 cents for a period of about three years, which means a cost of 2 cents a year.
If you add the average cost of distribution of about 2 cents, the result is an average annual cost of about 4 cents to put in circulation and replace the worn bill.
The Bank of Canada will therefore receive a net income of about 96 cents for every $ 20 bill in circulation. "That is the

Bank invests the money printed in the state's debt and does exactly what we do all of us when we buy BOT : as long as the money used to purchase food remains in the hands of the state, generates interest, then there will be credited when we collect the money.

Finally false to say that central banks are
SpA do not know how it works in America or Canada but in Europe certainly does not.
do not know exactly the articles of association of the ECB, but the shares have only been members of the Central Bank and the Bank of Italy is not a SpA:

1. Just read the Statute of the Bank of Italy to find it is an "Institute of Public law "
2. What SpA would choose their president by the Government of a State? Nobody remembers the dismissal of Fazio and his replacement with dragons? Yeah, because the choice of the President (in office for seven years, I believe) is incumbent upon the Government ... SpA strange, no?

Who want to know more, please read this pdf that I found online, with quotations from authoritative sources and (And not "undefined MBA degree with a thesis on seigniorage," which swarm sites seigniorage).

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arrests us all a hoax. Disobeying about testing techniques

banner I added the very important "arrests us all " in the column on the right (section On The Wall):

If you do not know what it is you have to see this video.

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"Berlusconi has of course an ongoing process in Naples, on the preliminary hearing for corruption along with his friend Sacca, Director of Rai Fiction suspended, why? Why promised on the phone, bag, helps to his private business in exchange for the intake of girls that interested [...] in part to Berlusconi and partly to a mysterious senator Union a year ago, in exchange for the placement of the girls at RAI Fiction, at our expense , would have brought down the Prodi government.
It seems like yesterday wrote Republic (8.6 ed.), There are other calls on this even more delicious real criminal use of television paid for with public money. So what? We must ensure that they are out with a law that will save thousands of criminals to save one or two suspects. "

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original post.