"The arms that you wield now are not such as your forefathers wielded; but they are infinitely more effective, and infinitely more irresistable" ~ Cymru Fydd leaflet, 1890

Saturday 19 January 2013


At first glance it may sound like a really mad Spaniard. But seigniorage is the difference between the cost of making money and the value of the money. And it's something that came to mind when I heard Plaid Cymru proposing the introduction of a Welsh Bank.
Mock up from Welsh Icons April 1st 2012 post

Seigniorage is a bit of a money maker for many countries around the world. One way this happens is via tourists who come to that country and return home with the money from that country. In some cases the money is so small it's not worth changing back. But nevertheless this money was usually made for an amount that is worth less than its current value. Each time money is taken out of circulation it benefits that countries economy providing its value is less than its manufacturing cost. It's like giving someone a cheque that they never cash.

My own experience of planned seigniorage was when I visited Florida in 2006. I noticed that there was often a different picture on each quarter, a different one for each state. This was the US Mints 50 state program, started back when Clinton was in office. Each year they introduced new quarters to the program in order of that state becoming part of the union. Each state has two versions, they are both identical apart from a small D or P on the coin that represents either the mints of Denver or Philadelphia. That makes 100 coins in total, the program has since continued beyond the 50 states to their dependencies and 55 new designs to celebrate their national parks and other historic sites. That's well over 200 coins in total. And with half the population of the USA (and foreigners like myself) collecting these coins, either seriously or casually that adds up to billions of coins taken out of circulation. Considering it only costs around five cents to make each quarter, that's a profit of 20 cents each time someone "buys" a quarter.

So why can't we replicate this?

Well the obvious reason is that we lack our own bank, Scotland and Northern Ireland have their own banks and they issue their own notes. Provided Wales can have its own bank then there is no reason why we cannot have our own bank notes and even our own coins. Perhaps a full set are not needed, but our own versions of the already popular commemorative 50p coins are a good way of raising some extra pocket money for our country.

We could start with coins of the nine preserved counties. The 13 historic counties, the 22 current local authorities, places of natural beauty, towns and cities, historical figures. In fact the list is endless. Each new coin could be put out to the people of those areas to design. And if they were backed up by history lessons in school and online it would provide a great way of teaching our children and adults about their country.

If it can pay it's way, give tourists something extra to take home, educate children and adults and encourage people to save then as far as I'm concerned it's a no brainer. Providing of course that we are allowed to have our own Welsh Bank. There's plenty of better reasons to have a Welsh Bank, but since seigniorage occurs naturally then only a fool wouldn't make the most of it.

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1 comment:

  1. Exactly! Local currencies keep the money within the area, stimulate consumption if the right economic levers are pulled and support local business. I might sound like an anorak for saying this, but one of the prospects that really excites me about an independent Wales is of a Welsh currency. That mean that Wales can apply economic policies devised by and for Wales, and this will help our economy and self-sufficiency. We're already seing across Europe the horrific consequences of a centralised monetary union, and by extension a centralised economic policy; and we can see the same here in Cymru. A Welsh currency (or local currencies) is the only policy that makes sense!
    p.s. We could call the Ceredigion bank Banc Y Ddafad Ddu. In fact, looking at http://cy.wikipedia.org/wiki/Banciau_Cymru there have been lots of Welsh local banks in the past.