Seigniorage is the amount of resources accruing to the state in a given period by virtue of its monopoly on the issue of money. There are various ways of computing seigniorage, the most popular being the real value of the increase in the money supply over that period. This is no small matter, for in a modern economy it amounts to at least 1-2 per cent of GDP.
This benefit accrues, in the first instance, most usually to the Central Bank, or to any other institution issuing the currency. Countries have different ways of handling it but in one way or another it ultimately benefits the government budget, into which it flows wholly or partly as a specific transfer (as in the US, where the Fed pours tens of billions of dollars into the federal budget every year), or as a tax on Central Bank profits (as in Poland), or as an increase in the value of Central Bank assets if owned by the state (as in the European Central Bank where states are shareholders, though they can't sell the shares and cash in the seigniorage unless they withdraw from the common currency). When the Central Bank is wholly or partly in private hands (as in Italy) seigniorage sits in the Bank, even if kept off balance sheet, instead of being paid out to private shareholders.
The arrangements in Scotland are more like a Currency Board, with the private banks of issue having to back Scottish banknotes with pound sterling deposits on a 1 to 1 basis, though only for three days a week. Thus seigniorage accrues to the banks of issue only in the proportion of 4/7. It is not clear who is the ultimate beneficiary of Scottish seigniorage but presumably the Scottish government by one of the mechanisms described.
What is clear is that the Treasury attempt to grab those 4/7ths of Scottish seigniorage (under the pretence of extending protective measures against bank failures equally throughout the UK) robs the Scottish beneficiary or beneficiaries - whether private or public - of their due.
Scotland would be better off in this at least, were it to join the euro, in which case it would retain a claim to a share of euro-seigniorage as a European Central Bank shareholder.
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Alan Greenspan would most probably agree with you.
You are right, anon, Alan Greenspan would most probably agree with me. He has ceded enough billions of dollars to the federal budget in seigniorage and it must have hurt.
But what he says about the gold standard - right or wrong - doesn't address the point I'm making. Even on the gold standard the issue of gold-backed paper generates seigniorage; this is what Brown is proposing to remove from its legitimate Scottish recipients. And lying about, and downplaying, what he is doing, as usual.
The man is a miser as well as all the rest He actually loves gathering in other people's money for its own sake.
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