Given free coinage, a seigniorage charge increases the value of the coined metal by the amount of the seigniorage. The state either keeps a part of the bullion, which it does not coin, or it holds back a portion of the coined metal. So long as the public is willing to accept the coins as money, the value of coins differs from that of the bullion by the amount of the seigniorage.

The seigniorage might be taken out in four ways:

1. The coins might be of the same weight as formerly, but the government might not coin all the bullion presented; the toll of bullion is its seigniorage.

2. Keeping the coins of the same weight as formerly, the mint might coin all the bullion presented, but not deliver back all the coins; the toll of coins is its seigniorage.

3. The mint might decrease the amount of bullion put into the coins and not coin the amount of the bullion kept out.

4. It might decrease the amount of bullion put into the coins, and coin all the bullion, but hold hack part of the coins.

The first and third methods would not increase the number of coins in use; the second and fourth would both increase the number of coins and raise the price level.

But the entry of seigniorage, especially when large, into the coins of a country presupposes that the public has faith in the government. So long as the public allows the government to extract the seigniorage and continues to accept the coins generally as before, the light-weight coins will perform all the monetary functions as well as, or better than, the heavier coins. Assuming this public confidence, the determination of the amount of seigniorage is an arbitrary matter for the government. The percentage of seigniorage may range from 0 to 100 per cent. There is no essential reason why the amount of metal in, say, the dime might not be more or less than it is at present; that is, there is no essential reason why the government should not take more or less seigniorage than it now does, provided the public continues to accept the coins as before.