Do hell with Goverment's seigniorage?

[BTCIndia]

Years ago, while I was in my college, I was amazed to learn that in some poor countries whose governments collected very little revenue, not much more than import or export taxes, 'seigniorage' financed a large part of public outlays. In poor countries a chunk of public revenue comes from the government monopoly on printing bank notes. As a consequence, inflation in those countries runs relatively high with government always strugging not to keep more then 2% theoretically. In fact, countries inflation rates can be interpreted as a monetary tax levied by the government on the whole economy. I learned that income from seigniorage, though it still exists, represents a considerable amount of public revenues for goverment.

It is obvious that fiat money leads to seigniorage income for the sovereign, but I think decentralized Bitcoin would not give chance to poor-less technological countries earn seignorage income.Thinking about Bitcoin design, it allows only those with enough computing power(developed countries) to extract two forms of seigniorage income:

a. In the early years(2009-2016) of Bitcoin, computing power allows the mining of new bitcoins. This is pure seigniorage for them(almost 100% of market value considering it took little resource to mine earlier coin during initial years and recently mined coined would earn them Market Value minus cost of mining a coin i.e $900-$20 approximately). Right now, we're paying seigniorage to government. If we(poor countries) adopt Bitcoin, we'll be paying to same to 'computing countries'. Dicussion needed!

b. When most of the coins have been mined, computing power is going to be used to charge transaction fees on every bitcoin transaction irrespective of border. This is also seigniorage income in the form of an all encompassing Tobin tax beyond the wildest dreams of the proponents of that tax and Bitcoin enthusiast. What if poor countries aren't able to catch on arms race of mining(i.e. future payment processor)?

Is this a design flaw or is it a necessary feature? A monetary system can be sustained only if there are people with the incentive to invest in the maintenance of the system. In the case of fiat money, the sovereign expends considerable effort in preventing counterfeiting. One might think that commodity money like gold does not require such effort. But the historical evidence suggests otherwise:

1. After the collapse of the Roman empire, “within a generation, by about A.D. 435, coin ceased to be used [in Britain] as a medium of exchange ... although many survived as jewellery, or were used for gifts or for compensation.” (Christine Desan, “Coin Reconsidered: The Political Alchemy of Commodity Money”, quoting Peter Spufford.) With nobody having enough seigniorage income to try and maintain the system, commodity money was simply re-purposed to non monetary uses, and Britain relapsed into a barter economy.

2. Christine Desan also points out that a monetary system based on silver was reestablished centuries later by sovereigns who extracted seignorage income by charging a 5-10% spread between the mint and melting points of the metal.

3. On the other hand, Luther and White have several papers showing that after the collapse of the Somalian government, the old currency continued to circulate and local warlords maintained the money supply by counterfeiting the old currency notes to earn seigniorage income.

All this suggests that any form of money (whether fiat, commodity or a decentralized open source money like Bitcoin) needs some form of seigniorage to sustain it.
 How are government in poor countries going to face this challenge?

Basics
Seigniorage is part of public finance and government's meagre earning source like income tax and VAT. If we have to define seigniorage, we can say, it is earning of government for monopoly issuing new notes.

Example:
Suppose Goverment issued 100000 euro new notes and it was given for purchasing Gold of any other company. After one year, goverment sells this Gold and receives 200000 euro due to inflation and increasing the price of gold. Then 100000 euro is seigniorage. In seigniorage, govt. receives profit due to decreasing the value of currency.

Formula of Calculating Seigniorage
Seigniorage= Net profit on producing of new notes and coins

Suppose goverment produced 100 Euro one note and its cost for printing was just 200 Euro If goverment pays 500 Euro for repayment of his loan, then 400 Euro net profit on producing of new note will be the seigniorage of goverment.

Any thoughts my fellow enthusiast with flag of revolution in hand?

[1715453648]

1715453648

[1715453648]

1715453648

[1715453648]

1715453648

[1715453648]

1715453648

[BTCIndia]

Reserved!

[Siegfried]

Not even a single comment?

Mercy comment. I would ask people from poor countries with your concern whether they would prefer to use their current fiat currency, where something that costs 100 today will cost 120, 150, 200, or 500 a year from now, or use bitcoin, where something that costs 100 today will cost 50, 20, or 10 a year from now. The issue you are talking about is abstract and really has no effect on people's lives.

[BTCIndia]

Not even a single comment?

Mercy comment. I would ask people from poor countries with your concern whether they would prefer to use their current fiat currency, where something that costs 100 today will cost 120, 150, 200, or 500 a year from now, or use bitcoin, where something that costs 100 today will cost 50, 20, or 10 a year from now. The issue you are talking about is abstract and really has no effect on people's lives.

Thank for mercy comment! That was least helpful in discussion. So, you mean to say people from poor country should import and use 1 currency for $1000 dollar? And next currency for $1001..and next for $1002 dollar and so on..until they're exhausted with resource.