Seigniorage spelled seignorage or seigneurage, is the difference between the value of money and the cost to produce and distribute it. The term can be applied in two ways: Seigniorage derived from specie is a tax added to the total cost of a coin that a customer of the mint had to pay, and, sent to the sovereign of the political region. Seigniorage derived from notes is more indirect. Monetary seigniorage is sovereign revenue obtained through routine debt monetization, including expansion of the money supply during GDP growth and meeting yearly inflation targets. Seigniorage can be a convenient source of revenue for a government. By providing the government with increased purchasing power at the expense of public purchasing power, it imposes what is metaphorically known as an inflation tax on the public. A person has one ounce of gold, trades it for a government-issued gold certificate, keeps that certificate for a year, redeems it in gold; that person ends up with one ounce of gold, no seigniorage occurs.

In another scenario, instead of issuing gold certificates a government converts gold into currency at the market rate by printing paper notes. A person exchanges one ounce of gold for its value in currency, keeps the currency for one year, exchanges it for an amount of gold at the new market value. If the value of the currency relative to gold has changed in the interim, the second exchange will yield more than one ounce of gold. If the value of the currency relative to gold has decreased, the person receives less than one ounce of gold and seigniorage occurred. If the value of the currency relative to gold has increased, the person receives more than one ounce of gold. Seigniorage is the positive return, or carry, on issued coins. Demurrage, the opposite, is the cost of holding currency. Ordinarily, seigniorage is an interest-free loan to the issuer of the banknote; when the currency is worn out the issuer buys it back at face value, balancing the revenue received when it was put into circulation without any additional amount for the interest value of what the issuer received.

Seigniorage was the profit resulting from producing coins. Silver and gold were mixed with base metals to make durable coins; the British pound sterling was 92.5 percent silver. Before 1933, United States gold coins were 10 percent copper. To make up for the lack of gold, the coins were over-weighted. A one-ounce Gold American Eagle will have as much of the alloy as needed to contain a total of one ounce of gold. Seigniorage is earned by selling the coins above the melt value in exchange for guaranteeing the weight of the coin. Under the rules governing the monetary operations of major central banks, seigniorage on banknotes is the interest payments received by central banks on the total amount of currency issued; this takes the form of interest payments on treasury bonds purchased by central banks, putting more dollars into circulation. If the currency is collected, or is otherwise taken permanently out of circulation, the currency is never returned to the central bank; the solvency constraint of a standard central bank requires that the present discounted value of its net non-monetary liabilities be zero or negative in the long run.

Its monetary liabilities are liabilities in name only. The holder of base money cannot insist on the redemption of a given amount into anything other than the same amount of itself, unless the holder of the base money is another central bank reclaiming the value of its original interest-free loan. Economists regard seigniorage as a form of inflation tax, returning resources to the currency issuer. Issuing new currency, rather than collecting taxes paid with existing money, is considered a tax on holders of existing currency. Inflation of the money supply causes a general rise in prices, due to the currency's reduced purchasing power; this is a reason offered in support of free banking, a gold or silver standard, or the reduction of political control of central banks, which could ensure currency stability by controlling monetary expansion. Hard-money advocates argue. Economists counter that deflation is difficult to control once it sets in, its effects are more damaging than modest, consistent inflation.

Banks relying on seigniorage and fractional reserve sources of revenue may find them counterproductive. Rational expectations of inflation take into account a bank's seigniorage strategy, inflationary expectations can maintain high inflation. Instead of accruing seigniorage from fiat money and credit, most governments opt to raise revenue through formal taxation and other

Diminishing returns

In economics, diminishing returns is the decrease in the marginal output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant. The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant, will at some point yield lower incremental per-unit returns; the law of diminishing returns does not imply that adding more of a factor will decrease the total production, a condition known as negative returns, though in fact this is common. A common example is adding more people to a job, such as the assembly of a car on a factory floor. At some point, adding more workers causes problems such as workers getting in each other's way or finding themselves waiting for access to a part. In all of these processes, producing one more unit of output per unit of time will require more usage of the input, due to the input being used less effectively.

Another well-studied example is throwing more headcount at software development, yielding Brooks's law. The law of diminishing returns is a fundamental principle of economics, it plays a central role in production theory. The concept of diminishing returns can be traced back to the concerns of early economists such as Johann Heinrich von Thünen, Jacques Turgot, Adam Smith, James Steuart, Thomas Robert Malthus, David Ricardo. However, classical economists such as Malthus and Ricardo attributed the successive diminishment of output to the decreasing quality of the inputs. Neoclassical economists assume. Diminishing returns are due to the disruption of the entire productive process as additional units of labor are added to a fixed amount of capital; the law of diminishing returns remains an important consideration in farming. An example is a factory that has a fixed stock of capital, or tools and machines, a variable supply of labor; as the firm increases the number of workers, the total output of the firm grows but at an ever-decreasing rate.

This is because after a certain point, the factory becomes overcrowded and workers begin to form lines to use the machines. The long-run solution to this problem is to increase the stock of capital, that is, to buy more machines and to build more factories. There is an inverse relationship between returns of inputs and the cost of production, although other features such as input market conditions can affect production costs. Suppose that a kilogram of seed costs one dollar, this price does not change. Assume for simplicity that there are no fixed costs. One kilogram of seeds yields one ton of crop, so the first ton of the crop costs one dollar to produce; that is, for the first ton of output, the marginal cost as well as the average cost of the output is $1 per ton. If there are no other changes if the second kilogram of seeds applied to land produces only half the output of the first, the marginal cost would equal $1 per half ton of output, or $2 per ton, the average cost is $2 per 3/2 tons of output, or $4/3 per ton of output.

If the third kilogram of seeds yields only a quarter ton the marginal cost equals $1 per quarter ton or $4 per ton, the average cost is $3 per 7/4 tons, or $12/7 per ton of output. Thus, diminishing marginal returns imply increasing marginal costs and increasing average costs. Cost is measured in terms of opportunity cost. In this case the law applies to societies – the opportunity cost of producing a single unit of a good increases as a society attempts to produce more of that good; this explains the bowed-out shape of the production possibilities frontier. Diminishing marginal utility not to be mistaken for'diminishing returns' Diseconomies of scale, does not assume fixed inputs, considers costs, thus differing from'diminishing returns' Economies of scale Learning curve and Experience curve effects Liebig's Law of the minimum Marginal value theorem Opportunity cost Returns to scale Pareto principle Submodular set function Sunk-cost fallacy Tendency of the rate of profit to fall Analysis paralysis

1994 World Rally Championship

The 1994 World Rally Championship was the 22nd season of the FIA World Rally Championship. The season consisted of 10 rallies; the drivers' world championship was won by Didier Auriol in a Toyota Celica Turbo 4WD, ahead of Carlos Sainz and Juha Kankkunen. The manufacturers' title was won by Toyota, ahead of Ford. In 1994 started a system of rotation on the World Rally Championship; because of this, Sweden and Spain were dropped from the championship and instead were run as part of 1994 FIA 2-Litre World Rally Cup. This reduced number of full WRC events to ten, the lowest number since 1974-76. For the Drivers' Championship, points were awarded to the top 10 finishers. Points were awarded to the top 10 finishers, but only the best placed car of each registered manufacturer obtained points. FIA World Rally Championship 1994 at