SEIGNIORAGE

Vahe H. Apelian

 

According to Wikipedia, seigniorage is the “the profit made by a government by issuing currency, especially the difference between the face value of coins and their production costs.”

But not all currencies make a profit to the government.

According to an article in the Smithsonian Magazine, dated May 18, 2016 by Mitchell Z. Donahue, it cost 1.66 cents in 2014 to mint that “Lowly penny, the one-cent coin graced by Lincoln face: fountain fodder, lounge chair lint, tollbooth reject and city litter. Kids love to fill their piggy banks with them, and untold billions are parked in collection jars and other dark, forgotten places.”

According to a more recent report in Coinnews.net, dated February 7, 2020 by Mike Unser, “in FY 2019 the price of producing U.S. coins for circulation climbed again last year, the U.S. Mint disclosed in its 2019 report…..in FY 2019 the to make, administer and distribute the 1-cent coin eased to 1.99 cents form 2.06 cents.”

There is also not profit from seigniorage of 5-cents. But the same report noted that the U.S. Mint realized $138.8 million for minting the dime and $285.2 million form minting the quarter. It turns out that the U.S. Mint transfers seigniorage to a Treasury General Fund that helps finance the national debt. I wonder if the same fund subsidizes the mining of the penny. FY is the acronym for fiscal year.

Other interesting tid-bits about the penny:

- Lincoln cents are composed of 2.5% copper. The rest is zinc.

- Pennies have an estimated 25-year life span.

- Coistar, the green-and-white coin collecting kiosk in supermarkets has processed18.5 million pennies in 2015.

Obviously the cost of minting penny varies depending on the cost of the metals involved. Copper is pretty much sought metal. Along with the cost, there is also the impact on the environment. No wonder, our northern neighbor Canada ceased minting penny in 2019. Bills have been introduced in the U.S. congress to phase out minting the costly penny to no avail thus far.

Let us face it. The “lowly penny” evokes sentimental feeling. I bet many of us have picked a penny somewhere and have set aside pennies in a jar. I have. Penny has its honored place in our language. There are so many saying referencing penny, such as “penny saved is penny earned”, “penny-wise, pound-foolish”, and many more. It appears that the costly penny will remain with us for the foreseeable future.

Learning about seigniorage, I was remined of the fate of the early 50 Lebanese piasters, i.e. the Lebanese “50-cents”. Sometimes in the 1960’s the 50 piasters disappeared from circulation in Lebanon. It turned out that tis silver content was for more valuable than its trading face value. Surely there remained 50 piasters already in circulation.

Lebanon being Lebanon, it would not surprise me a bit if those in the higher up bought all the available piasters from the banks at their face value and had them processed for their silver content. It even would not surprise me, Lebanese officials being Lebanese officials, had the government continue on minting the silver containing piasters while they hoarded the mint, until legislation was passed banning the minting of silver containing 50 piaster and have its composition changed to what it is now.

After the news, or should I say after the rumors became widely known, I too kept the few silver-containing 50 piasters I laid my hands on. They surely felt different in the pocket. They were heavier than the 50 piasters that replaced them.

I do not know what happened to my few silver-containing 50 piasters. Recently I checked on line about them and found out that they are available for purchase by those interested, especially for those to whom the silver-containing 50 piasters evoke memories of the bygone days in Lebanon.

It turns out that in good condition each is retailed up to $38 U.S. dollars. The current official exchange rate is 1512.92 Lebanese liras for a dollar. Consequently, $38 is worth 57,491 liras at the listed official exchange rate. I was told that the banks in Lebanon are exchanging the $ for more than liras knowing full well that even at the higher than the official listed exchange rate, the real value of the lira is further de-valued on the market where it is being traded 5 to 6 times its official exchange rate.  

The 50 Lebanese piasters are now worthless. There as a time when a 50-piaster coin is all you needed to secure a seating in the circulating taxicabs in the city or have a tasty manaesh from the baker across the American University of Beirut.

It is very likely that 50-piaster coins are not minted in Lebanon any more.