The issue of seigniorage and its management in Italy

 

The question of seigniorage and its management in Italy

The issue of seigniorage and its management in Italy raises important legal and political questions, especially in relation to monetary sovereignty and the role of financial institutions. 

Analysis of the critical issues related to the decision of the Court of Cassation regarding seigniorage.

Critical Issues of the Court of Cassation's Decision 

You see:

• Cassation ruling pdf  54.3 KBPublication Date::May 09, 2007

Monetary Sovereignty: 

The Italian Constitution establishes that sovereignty belongs to the people, but the management of monetary creation is delegated to institutions such as the Bank of Italy and the European Central Bank (ECB). This raises questions about how the people can exercise their sovereign right in a system in which monetary decisions are taken by technical and not democratically elected bodies
1
3 .

Lack of Regulatory Clarity: 

Unlike the United States, where responsibility for money creation is explicitly attributed to Congress, in Italy there is no clear constitutional indication of who holds the power to issue money. This leads to a situation in which monetary choices can appear detached from popular will, creating frustration among citizens regarding the transparency and accountability of institutions
1
4 .

Limited Jurisdiction: 

The Court of Cassation has ruled that citizens' claims to obtain a share of seigniorage income are outside its jurisdiction, stating that such matters fall within the prerogatives of the State. This can be seen as a way of limiting democratic control over monetary policies, preventing citizens from challenging decisions that directly affect their economic life
2
3 .

Conflict of Interest: 

The management of seigniorage by the Bank of Italy, which operates under the umbrella of the Eurosystem, raises concerns about conflicts of interest. The Italian government must issue government bonds to obtain money from the Bank of Italy, creating a dependency that can lead to unsustainable fiscal policies and greater vulnerability to economic shocks
4 .

Social and Economic Impact: 

The centralization of monetary power in the hands of central banks can have negative effects on wealth distribution and social policies. If seigniorage income is not redistributed equitably, it can contribute to growing economic inequalities and a perception of alienation among citizens from financial institutions
1 3 .

Conclusions

The issue of seigniorage in Italy highlights tensions between popular sovereignty and banking technocracy. The decisions of the Court of Cassation reflect a limited vision of the role of citizens in monetary matters, underlining the need for greater transparency and accountability in economic policies. To address these critical issues, a broader public debate on the reform of monetary institutions and their relationship with popular sovereignty may be necessary.

Let us now establish how much this per capita share of seigniorage that is taken away from the citizen by commercial banks would be by establishing a simple formula such as: total annual creation of money by the banking system divided by the number of citizens equals the annual share to be distributed.

Using the figure of 1,000 billion euros as annual money creation by commercial banks in Italy in 2016 (Banca d'Italia, 2016), we can recalculate the per capita share of seigniorage.

Formula

The formula is:

Per capita rate = Total annual money creation / Number of citizens

Data used

Annual money creation: 1,000 billion euros (1,000,000,000,000 euros in 2016)

Population: 58,990,000 citizens (data updated to 1 January 2024)

Calculation 

Using the data provided:
Annual per capita quota = 1,000,000,000,000 / 58,990,000  ≈ 16,949.20 euros

Monthly per capita quota =  1,412.43 euros

Monthly quota for a family of three people consisting of a couple and a child:  € 4,237.30

Result

Thus, the annual share of seigniorage that could be distributed to each Italian citizen is approximately 16,949.20 euros. This amount highlights how, if redistributed equally, seigniorage income could have a significant impact on the economic well-being of citizens.