Question

How can a government obtain revenue by printing money when someone else actually prints the money?

Info

People sometimes talk about profitable companies as having a “license to print money.” Well, the British firm De La Rue actually does. In 1930, De La Rue, printer of items such as postage stamps, expanded into the money-printing business, producing banknotes for the then-government of China. Today it is the largest manufacturer of banknotes, producing the currencies of about 150 countries, from the United Kingdom to Fiji.

De La Rue’s business received some unexpected attention in 2011 when Muammar Gaddafi, the dictator who had ruled Libya from 1969 until 2011, was fighting to suppress a fierce popular uprising. To finance his efforts, he turned to seignorage, ordering around $1.5 billion worth of Libyan dinars printed. But Libyan banknotes weren’t printed in Libya; they were printed in Britain at one of De La Rue’s facilities. The British government, an enemy of the Gaddafi regime, seized the new banknotes before they could be flown to Libya, refusing to release them until Gaddafi had been overthrown.

Why do so many countries turn to private companies like De La Rue and its main rivals, the German firm Giesecke & Devrient and the French firm Oberthur, to print their currencies? The short answer is that printing money isn’t as easy as it sounds—producing high-quality banknotes that are hard to counterfeit requires highly specialized equipment and expertise. This is particularly true now that many countries are turning to banknotes printed of polymer, which are more durable and harder to counterfeit than paper money. In 2014, De La Rue was chosen to produce the next generation of British banknotes, the first ones to be made of plastic.

Actually, De La Rue has had its own problems with quality control: a scandal erupted in 2010, when it emerged that one of its plants had been producing defective security paper and that employees had covered up the problems. Nonetheless, many countries will surely continue relying on expert private firms to produce their currencies.

Answer 1

ANSWER:

The government earns revenue when someone else is printing the money by virtue of inflation as when more money is printed and then it goes into the market , the money supply in the economy increases and this leads to increase in the aggregate level of price which dilutes the purchasing power parity of the common man and this dilution is similar to the inflation rate into money supply which causes inflation tax to increase and it goes into the accounts of the government revenues.