The return of seigniorage, an old acquaintance

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The return of seigniorage, an old acquaintance

First week
October 2019

Seigniorage is the public sector’s financing source that derives from its ability to issue currency. In a way, it is becoming the center of attention once again, facing the closure of markets to place debt and the temptation of using it to cover for the fiscal deficit and thus avoiding the political cost of a greater fiscal adjustment. Although seigniorage, in other words, the financing via monetary emission, could grow next year, the Government to take office in December shall be very cautious. At the present conditions, abusing this source of financing could accelerate inflation dangerously.