The term can be applied in two ways: "Monetary seigniorage" is where sovereign-issued securities are exchanged for newly printed banknotes by a central bank, allowing the sovereign to "borrow" without needing to repay.
[3] Monetary seigniorage is sovereign revenue obtained through routine debt monetization, including expansion of the money supply during GDP growth and meeting yearly inflation targets.
This usually takes the form of interest payments on treasury bonds purchased by central banks, putting more money into circulation.
[5] Inflation of the money supply causes a general rise in prices, due to the currency's reduced purchasing power.
Orthodox economists counter that deflation is difficult to control once it sets in, and its effects are more damaging than modest, consistent inflation.
Banks (or governments) relying heavily on seigniorage and fractional reserve sources of revenue may find them counterproductive.
The U.S. government thought that many people, collecting each new quarter as it rolled out of the United States Mint, would remove the coins from circulation.
Since it costs the mint about five cents to produce one quarter, the government made a profit when someone collected a coin.
Although the cost of printing banknotes is minimal, the foreign entity must provide goods and services at the note's face value.
In a New York Federal Reserve publication, Goldberg[18] writes that "about 65 percent ($580 billion) of all banknotes are in circulation outside of the country".
These figures are largely contradicted by Federal Reserve Board of Governors Flow of Funds statistics,[19][20] which indicate that $313 billion (36.7 percent) of U.S. currency was held abroad at the end of March 2009.
One million dollars in $100 bills weighs 22 pounds (10 kg), and it is difficult to carry this much money without a briefcase and physical security.
The same amount in €500 notes would weigh less than three pounds (1.4 kg), which could be dispersed in clothing and luggage without attracting attention or alerting security devices.
[citation needed] Governments vary in their issuance of large banknotes; in August 2009, the number of Fr.
The British government has been wary of large banknotes since the counterfeiting Operation Bernhard during World War II, which caused the Bank of England to withdraw all notes larger than £5 from circulation.