Seigniorage. What's that?

According to a recent Economist article, the last Canadian penny was minted on May 4, 2012. Besides not being worth much, it cost more to produce than it was worth. The same situation exists for the U.S. penny (which costs 2.4 cents to make) and nickel (which costs 11.2 cents to produce). However, the losses on the low-denomination coins are offset by profits the government makes by producing other notes and coins for (in many cases, far) less than face value. Accordign the the Economist, "this profit, known as seigniorage, is one of the great hidden sources of government revenue." It was even been suggested as a way to solve the 2011 U.S. debt ceiling crisis (see Wikipedia entry).

united states coins

Photo Source: Wikimedia Commons

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scott [at] Nestler Analytics 2014