Sunday, January 13, 2013

Carlos (beowulf) Mucha — The Coin


Beowulf makes the Times! Congratulations are in order.

The New York Times | Opinion — Room for Debate
The Coin
Carlos Mucha
(h/t Michael Sankowski at Monetary Realism)

11 comments:

Ramanan said...
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Unknown said...
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Unknown said...

"Congress has delegated this power to create money to two agencies: the Federal Reserve and the U.S. Mint".

The Mint is part of the Treasury, as is the Bureau of Engraving and Printing, which prints Federal Reserve notes and all other US government securities. These notes are then sold to the Board of Governors of the Federal Reserve (at the discretion of the Secretary of the Treasury) which then issues them to the Federal Reserve Banks. All physical money is created by the Treasury, but Federal Reserve notes are issued into circulation by the Fed.

The Fed creates Federal Reserve Deposits (reserve balances).

Unknown said...

"Selling coinage is an asset sale"

Coins are still claims on the government, so they're either liabilities or equity.

mike norman said...

Nice work, Beo. Would love to have you as a contributor here, at MNE! :)

Tom Hickey said...

Coins are still claims on the government, so they're either liabilities or equity.

Anyone know how the Treasury books coinage? The obvious thing is face value of coin as asset, cost of minting is an expense, and seignorage is equity. So how does the coin itself get booked on the liability side?

Unknown said...

"face value of coin as asset"

asset to the Treasury? How's that?

According to that Chicago Plan paper by Benes&Kumhof coins are treated as 'equity'. I haven't emailed them to find out where to look that up.

Tom Hickey said...

Yes, but think about it as an ordinary transaction involving a product. You have a product (coin) that cost something to make , the expense increasing liabilities, and it is sold at a premium over cost thus adding to equity. The flow is sale of product (coin at face value) produces revenue, from which is deducted minting expense, which yields a profit (seigniorage).

This is the way I would conceptualized booking it. If that is not the way it is done because the coin itself has to be on the RHS, how does the accounting work?

Unknown said...

Tom,

the cost of production is a side issue I think.

If coins are equity, then they're like shareholders' equity in a company.

When the government issues or spends a coin it issues a "share". The person receiving the coin then owns a claim on the government.

That claim is a type of ownership share in the govt, the money system, or "the dollar", or something like that. (I'm guessing here)

Knapp described chartal money as the means of final payment established by law. So when you have a coin you own one of these legal instruments for settling all debts. As such you could be said to have a "share" in that legal system, perhaps.

In the State Theory of Money Knapp specifically says that chartal money is not a debt of the government, which seems to put him at odds with MMT.

Unknown said...

seigniorage is simply the difference between the cost of production and the face value.

Unknown said...

"spends a coin" i.e. sells a coin to the federal reserve