July 23, 2016
To: Hon Bill English, Minister of Finance of New Zealand
On seigniorage as liability of the Reserve Bank to the Treasury
Dear Hon Bill English,
the NZ Reserve Bank buys banknotes and pays the production cost
(including a margin) for each order of notes. Banknotes are
later sold to trading banks at their face value and in turn the
face value of currency in circulation becomes a liability of the
Reserve Bank toward the NZ Treasury (seigniorage on the principal).
In fact, the correct definition of seigniorage is the difference in
value from the cost of production of the monetary medium (coins,
banknotes, electronic currency a.k.a. deposits) and is face value. In
countries where banks are NOT sovereign, the seigniorage must be
returned to the body sovereign (local Treasury Department).
Questions:
- Do you have a recorded asset in the Treasury books matching the
Reserve Bank liability over currency in circulation ?
- If not, why ?
- If it is not the Treasury, who is the current net beneficiary of
this Reserve Bank's liability ?
- Is it a NZ entity or an alien body ?
- Do you believe in aliens ?
Thank You for Your kind attention and I look forward for Your answers.
Marco Saba
President at IASSEM, Italy
The answer:
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