Bank of England: robbing the Treasury of the UK blind

To:  David Bholat and Robin Darbyshire

Subject: 

About seigniorage in Your paper No.604 - Accounting in central banks

 

Dear Sirs,

I just read in the above mentioned paper:
"We  underscore  that  seigniorage  is  income  actually  earned  on  the  assets  matching  the  note circulation.
  The  definition  of  seigniorage  as  the  difference  between  the  face  value  of  notes and  their  production  costs  is  not  used  by  central  banks.  This  definition  ignores  the  fact  that the note is a liability of the central bank. "

My opinion is that actually the right definition should be used by the central banks. Notes can be a liability after being an asset for the banks. Notes and electronic money created by banks should be recorded as an inflow in the cash flow account before being spent or lent.

In the case of BofE, newly created money can be considered a liability as "seignorage due to the Treasury" only if - and only when - it is considered as a correspondent asset in the books of the Treasury under the title "seigniorage received from the banking cartel on principal creation".

Else it is a fake liability because it would be in no way redeemable by the public or by the Treasury.

This view of an actually fake liability recorded in the books of central banks is also shared by Wilelm Buiter ( Seigniorage, 2007 www.nber.org/papers/w12919.pdf ) and the very few understanding how banking really work.
I wish You were among them.

The "fake liability option" is just a vulgar way to rob the Treasury of the UK blind.

Best regards,

Marco Saba

IASSEM

Istituto di Alti Studi sulla Sovranità Economica e Monetaria