Minting small change was a big, expensive problem in the ancient world. This column argues that the ancient Lydian government and Greek city-states absorbed the cost of producing an extremely wide array of denominations of coins as a political strategy. Governments had much to gain from the spread of coinage in managing budgetary affairs. If it subsidised the mint, an ancient government would make savings in terms of transaction costs.
Most probably, early coins were only mildly profitable at best, and quite possibly were even subsidised by the state as part of a political strategy of encouraging their spread. The reason for this political strategy would be the considerable economies of transaction costs that the state could gain from the spread of coinage in its own revenue-seeking and spending activities. A proper analogy would be the interest that contemporary governments have to encourage popular reliance on computers, at public expense, in order to induce online declarations of taxes.
Research traces the beginning of coinage with increasing accuracy to around 630 BC in the Greek city-states in Ionia or in Lydia, or both, in the contemporary part of West Turkey east of the Aegean Sea. The earliest coins were made of electrum, a mix of gold and silver. The common view, even among knowledgeable scholars, is that early coinage was highly profitable, at least for the Lydian kings Alyattes (610-560 BC) and Croesus (560-547 BC). It is “usually understood [that] the electrum coins were highly overvalued”, say the archaeologists Cahill and Kroll (2004, p. 613, with minor rephrasing), by which they clearly mean highly profitable. In an influential book, Le Rider (2002, pp. 96-100) estimates a profit rate of about 15 to 20%. However, I argue that this position is very dubious (see Melitz 2015).…VOXEU
The profitability of early coinage
Jacques Melitz | Professor emeritus, Heriot-Watt University; and CEPR Research Fellow
7 comments:
So if you mine and mint your own metal coins, would mainstreamers (and Dan K) still think taxes "paid for" the spending?
If not then, why would computers and paper be any different?
The contradictions make my brain hurt
Same thing bullion. Who owns the bullion mined on its territory? The sovereign.
The notion of land title held by individuals is modern and even then originates with the state granting title to the original holder. In many places, land title doesn't include ownership of what lies under the surface.
Not much difference between the sovereign spending real assets like bullion and taxing them back, or coins, or paper, or accounting entries. From the point of view of users in the zone, these are all essentially tax credits that are used to transfers resources to the sovereign without the need for direct confiscation, which is also an option of the sovereign.
This is the reason that some advocate at a minimum recognition of individual sovereignty instead of state sovereignty and non-aggression (no use of violence other than in self-defense). It's anti-tax as much as anti-state.
Where I think it gets interesting is when the state doesn't have control of the mines. In Saxon England, at one stage, there are over 70 mints, to which people bring their bullion. To my mind it the liquidity service offered by the state chartal issue that allows it to be partially endogenised at the outset. If the bullion price in the 'new' numeraire exceeds that premium then coinage smelts out, or flows out of the zone automatically until the issue deflates sufficiently. Clearly if you have a monopoly on bullion, as in the Lydian or Athenian example in the paper, this would not hold true.
http://library.uniteddiversity.coop/Money_and_Economics/A_History_of_Money-From_Ancient_Times_to_the_Present_Day.pdf
The gold bugs want to change a system where banks and private sector endogenously expand/contract the money supply (including shadow money) and the government controls the currency to one where they control it through property over gold reserves and production.
So if you mine and mint your own metal coins, would mainstreamers (and Dan K) still think taxes "paid for" the spending?
It all depends who is doing the spending, and how the spending has been organized. If the minting authority is located in one part of the government and the spending authority in another part of government, and the spending authority has to spend the coins minted and loaned into the private sector by the minting authority, then yes, the spending authority will either have to collect coins via taxation, or borrow them from the private sector.
This wouldn't make much sense in a pre-modern agricultural society, since there are few, privately owned capital assets against which loans can be made.
"and quite possibly were even subsidised by the state "
subsidized with what? the whole thing here is written within the gold standard paradigm...
Here is Augustus himself on what he did:
"when the taxes fell short, I gave out contributions of grain and money from my granary and patrimony, sometimes to 100,000 men, sometimes to many more. "
http://classics.mit.edu/Augustus/deeds.html
He would just "deficit" spend out of his 'patrimony' which is the metonymy representing the pagan entity from which he gained his absolute authority... today, we have these weak libertarian pieces of human garbage running all around saying "we're out of money!!! we're out of money!!!!"
I'd have liked to see what would have happened to a second rate human POS garbage libertarian person who would have told him he had no authority to do so...
Well Dan we will see who is in charge here if they dont raise the rates soon...
They have 2.5T USTs already at zero and 1.7T of MBS plunging in YTM....
Dudley may see the headlight of the freight train:
http://www.reuters.com/article/2015/10/09/us-usa-fed-dudley-idUSKCN0S31WR20151009
"Based on my forecast, yes I am" expecting to raise rates this year, said Dudley, a close ally of Yellen who has a permanent vote on policy."
Yeah, and his "forecast" is he is quickly "running out of money!!!"
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