When a government does not control the minting of coins and other forms of currency, how does the business of private minting function? And how has it functioned throughout history? (any links to books or documents online one can provide would be greatly appreciated)
Did the private minter merely transform a miners gold or farmers traded for raw gold to coins for his ease and remint or reform worn coins for a living? How exactly did this business turn profits and effectively provide a system of currency?
The state is a disease and Liberty is the both the victim and the only means to a lasting cure.
Well it is quite simple except the price of the product is 1 by definition, so it is the price of the inputs (primarily raw bullion) that determines the profit margin and therefore the rate at which it is profitable to produce the product. Bullion is not money and therefore has a money price that is variable.
Under the traditional English monetary law, undermass coin is not legal tender and has no legal value, and is therefore valued at scrap value. Debtors will therefore need to exchange their undermass coin for not undermass coin in order to discharge their debts, giving a profit opportunity to those who scrap and re-mint coin. Of course undermass coin can still function as money, so long as the profit margin on the transaction makes up for the loss of the seller of goods or services when he banks the coin at a discount or exchanges it at a discount elsewhere.
I have heard that other monetary laws (American?) make coin legal tender not by tale but by mass, so that the coins are never without a legal value, but this means they have to be valued for each transaction (generally, unless the recipient will take the risk of accepting it as if it is full value).
George Selgin has a book about private minting coming out next year. It documents vast private markets during the 19th century, and it all worked well. I'm exciting about the book.
I can recall the first time I read Rothbard's comments in What has Government Done to Our Money on private coinage. It was one of the moments that sort of challenges everything you think and leaves you intellectually changed.
Publisher, Laissez-Faire Books
David Hillary: Well it is quite simple except the price of the product is 1 by definition, so it is the price of the inputs (primarily raw bullion) that determines the profit margin and therefore the rate at which it is profitable to produce the product. Bullion is not money and therefore has a money price that is variable. Under the traditional English monetary law, undermass coin is not legal tender and has no legal value, and is therefore valued at scrap value. Debtors will therefore need to exchange their undermass coin for not undermass coin in order to discharge their debts, giving a profit opportunity to those who scrap and re-mint coin. Of course undermass coin can still function as money, so long as the profit margin on the transaction makes up for the loss of the seller of goods or services when he banks the coin at a discount or exchanges it at a discount elsewhere. I have heard that other monetary laws (American?) make coin legal tender not by tale but by mass, so that the coins are never without a legal value, but this means they have to be valued for each transaction (generally, unless the recipient will take the risk of accepting it as if it is full value).
I must admit that the difference between bullion and money, gold as nuggets raw etc vs gold as in shape of coin, is something I do not quite understand. The coins value is tied to the value of the gold bullion it is constructed of is it not? If the minter is merely transforming bullion into coin, then wont their profits be the same regardless the spot price of gold? This process hardly changes because the value of gold may change slightly.
I suppose I am asking mainly how private minters make money other than supplying/converting bullion to coin or otherwise and refurbishing old coins. How also does private mintig affect the supply of money and does this matter so long as it is constructed/backed by an actual commodity with actual worth? I cant just create a ton of coins if there isnt actually that amount of gold available.
I am tired. I think I will stop before I ramble on too much. ha.
Under privately minted commodity money and 100% reserve requirements, say, will not the bank owners have to physically transport gold from the vaults of their banks to other banks and vice versa every day as people deposit cash into their banks? Is not that kind of dangerous?
dchernik: Under privately minted commodity money and 100% reserve requirements, say, will not the bank owners have to physically transport gold from the vaults of their banks to other banks and vice versa every day as people deposit cash into their banks? Is not that kind of dangerous?
dchernik:Under privately minted commodity money and 100% reserve requirements, say, will not the bank owners have to physically transport gold from the vaults of their banks to other banks and vice versa every day as people deposit cash into their banks? Is not that kind of dangerous?
Banks can still clear inter-bank payments by transferring title to coin either in their respective vaults or in a third party vault, and taking physical delivery as and when needed under the system you have described.
Under fractional reserve banking, banks can buy and sell financial assets such as securities exchange listed bonds and bills, and/or use such assets as collateral to secure inter-bank borrowing and lending to avoid a) having surpluses or shortfalls of coin beyond their preferred holdings and b) having to physically deliver coin in gross settlement of their inter-bank obligations.
ThorsMitersaw: David Hillary: Well it is quite simple except the price of the product is 1 by definition, so it is the price of the inputs (primarily raw bullion) that determines the profit margin and therefore the rate at which it is profitable to produce the product. Bullion is not money and therefore has a money price that is variable. Under the traditional English monetary law, undermass coin is not legal tender and has no legal value, and is therefore valued at scrap value. Debtors will therefore need to exchange their undermass coin for not undermass coin in order to discharge their debts, giving a profit opportunity to those who scrap and re-mint coin. Of course undermass coin can still function as money, so long as the profit margin on the transaction makes up for the loss of the seller of goods or services when he banks the coin at a discount or exchanges it at a discount elsewhere. I have heard that other monetary laws (American?) make coin legal tender not by tale but by mass, so that the coins are never without a legal value, but this means they have to be valued for each transaction (generally, unless the recipient will take the risk of accepting it as if it is full value). I must admit that the difference between bullion and money, gold as nuggets raw etc vs gold as in shape of coin, is something I do not quite understand. The coins value is tied to the value of the gold bullion it is constructed of is it not? If the minter is merely transforming bullion into coin, then wont their profits be the same regardless the spot price of gold? This process hardly changes because the value of gold may change slightly. I suppose I am asking mainly how private minters make money other than supplying/converting bullion to coin or otherwise and refurbishing old coins. How also does private mintig affect the supply of money and does this matter so long as it is constructed/backed by an actual commodity with actual worth? I cant just create a ton of coins if there isnt actually that amount of gold available. I am tired. I think I will stop before I ramble on too much. ha.
If gold coin is the legal standard of money, then there is no 'spot price' of gold, instead there is a 'spot price' of gold bullion in terms of money i.e. in terms of gold coin. Thus a small change in the bullion price makes a big difference to the profits of manufacturing bullion into coins. The cost of minting a 10g gold coin is probably about 0.01g, i.e. about 0.1%. Thus if the bullion price is 0.998 manufacturing coin will be very profitable but if the price rises to 0.999 then it is only break-even.
The value of gold coin is at a premium to its metallic content except when the gold coin becomes under-mass, when it falls to discount to its metallic content, due to re-minting costs. However the coin premium appears as a bullion discount, since by convention everything is priced in terms of gold coin, thus tying gold coin prices to unity.