Transcript Seigniorage - Conall Boyle

Seigniorage
Seigniorage,
(seignorage)
Entrepreneur,
arbitrage,
tranche
Prepared by Conall Boyle March 2007
1
(Bank of England)
^ Seigniorage?
2
Bank of England (BoE)
Annual Report and Accounts p91
Issue Department
Account for the period ended 28 February 2007
Note
Income and profits
Securities of, or guaranteed by, the British Government
Other securities and assets including those acquired under
reverse repurchase agreements
Expenses
2
Cost of production of Bank notes
Cost of issue, custody and payment of Bank notes
Other expenses
Payable to HM Treasury
2007
£m
2006
£m
628
619
1,082
1,710
1,124
1,743
36
17
4
57
1,653
28
14
3
45
1,698
3
( payment to GB: £1,653)
£38,449 - £36,920
difference = £ 1,569
4
Bank of England (BoE)
Annual Report and Accounts p91
Statement of balances: 28 February 2007
Note
Assets
Securities of, or guaranteed by, the British Government 3
Other securities and assets including those acquired under
reverse repurchase agreements
4
Total assets
Liabilities
Notes issued:
In circulation
5
In Banking Department
Total liabilities
( payment to GB: £1,653)
2007
£m
2006
£m
13,370 13,370
25,079 23,550
38,449 36,920
38,449 36,914
–
6
38,449 36,920
difference = £ 1,569
5
6
notes:
3 Securities of, or guaranteed by, the British Government
Ways and Means advance to the National Loans Fund
2007 2006
£m
£m
13,370 13,370
13,370 13,370
The Ways and Means advance earns interest at the Bank’s repo rate.
4 Other securities and assets including those acquired under
reverse repurchase agreements
Deposit with Banking Department
Short-term reverse repurchase agreements
Longer-term reverse repurchase agreements
2007
2006
£m
£m
49
53
10,030 17,497
15,000 6,000
25,079 23,550
5 Notes in circulation
£5
£10
£20
£50
Other notes(a)
2007 2006
£m £m
1,100
5,886
23,740
6,705
1,018
38,449
1,052
5,591
22,690
6,510
1,071
36,914
(a) Includes higher value notes used as cover for the note issues of banks in Scotland and Northern Ireland in
excess of their fiduciary issues
7
8
Profit to GB (seigniorage)
3000
2500
1500
1000
500
0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
£mn
2000
Years 1980-2007
Information from Bank of England Annual Reports. Only 2 years info per Report;
earlier Reports not on-line, were supplied to me directly.
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Note Issue
45000
40000
35000
25000
20000
15000
10000
5000
0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
£mn
30000
Years 1980-2007
From BoE Annual Report, but can also be
found as M0 elsewhere. Some discrepancies
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Change in Note Issue
£5,000
£4,000
£2,000
£1,000
£-
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
MN
£3,000
-£1,000
Years 1981-2007
Calculated by CB from the published figures
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Two versions of Change in Note Issue
£5,000
£4,000
£3,000
From Annual Reports
From Statistics (Yr End)
£2,000
£1,000
£-£1,000
Years 1980 to 2006
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Compare Profit & Note-Issue
£5,000
£4,000
£mn
£3,000
£2,000
£1,000
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
£-£1,000
Years 1981-2007
Change in Note Issue
Profit to GB
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Seigniorage?
3000
2500
Seigniorage?
Smoothed Change in
Note Issue
3000
2500
1000
Smoothed Change in
Note Issue
2000
£ mn
1500
Profit on Note Issue
1500
Profit on Note Issue
1000
500
0
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
500
0
Years
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
£ mn
2000
Years
14
The only clue to the
nominal rate of interest
‘earned’ on Note-issue?
15
18
16
14
12
10
8
6
4
2
0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
%
Bank Rate (avg)
Years 1980-2007
Source: BoE statistics publications.
Averages shown for previous year to roughly coincide with Report publication date.
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Report dateNotes in Circ
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
£9,775
£10,325
£10,775
£11,025
£11,470
£12,040
£12,320
£12,850
£13,310
£14,120
£15,030
£15,380
£16,130
£16,970
£17,170
£18,060
£19,660
£22,020
£23,548
£24,800
£25,140
£27,200
£29,390
£33,866
£36,016
£35,420
£36,920
£38,449
bank rate
Calculate
IUAABEDR
13.75
16.30
13.18
11.93
9.86
9.68
12.08
10.74
9.60
9.96
13.67
14.64
11.56
9.42
5.88
5.34
6.57
5.88
6.55
7.23
5.34
5.97
5.12
4.00
3.69
4.39
4.65
4.64
£1,344
£1,683
£1,420
£1,315
£1,131
£1,165
£1,488
£1,380
£1,278
£1,406
£2,055
£2,252
£1,865
£1,599
£1,010
£964
£1,292
£1,295
£1,542
£1,793
£1,342
£1,624
£1,505
£1,355
£1,329
£1,555
£1,717
£1,784
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Profit on Note Issue, TotNote Issue x Bank %
3000
2500
Profit on Note Issue
1500
Tot Note Issue X Bank%
1000
500
20
04
20
01
19
98
19
95
19
92
19
89
19
86
19
83
0
19
80
£ mn
2000
Years
18
Seigniorage
(Bank of England Style)
Seigniorage for the year
=
Total Note Issue
X
Average Bank Rate
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BoE uses the S. word!
Seigniorage by Willem H. Buiter Professor of
European Political Economy European Institute,
London School of Economics and Political
Science from LSE Economics website
Discussion Paper 2007-8 March 1, 2007.
Buiter was one of the MPC external appointments.
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Use cash – back Britain
Keep one of these in your
wallet/handbag; earn
25p for us.
Use a cheque or credit
card – Nil
USE CASH ONLY!
IT’S PATRIOTIC!
(and saves us paying tax)
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• Make ‘em pay!
– For their raw materials
M3/M4 - £1,550,000 mn
@ 5.50%
£85,000 mn
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