Mohammad, my comments are interspersed.

Mohammad Gani wrote:
>Dear Pat,
>The two arms of the intermediation process are first the arbitrage 
>process to settle the prices and secondly the seigniorage process to 
>settle the correct kind of means of payment, including the 
>introduction of money especially. I agree that the prevailing use of 
>the term seigniorage does not refer to the action of the seigneur, 
>but the fee he charges, specifically the difference between the face 
>value and the intrinsic worth of the instrument that serves as 
>money. Perhaps seigneurship would be a more acceptable term.
In a quick search online, I find that the term "seigneur" refers to 
something very different from what you have in mind. A term that 
seems close to the concept you have in mind is "money-producer," 
although even that term is presumptuous in that a person who sets out 
to produce money for the first time cannot be certain that what he 
produces will turn out to be generally accepted in exchange.



>Apart from the term, the key problem is cognition. Despite Keynes, 
>it seems that most people do not see that equilibrium of exchange 
>requires  the presence of symmetry or reciprocity (which was called 
>double coincidence in olden language).  The buyer and none but the 
>buyer must pay the seller and the seller and none but the seller 
>must get the payment. Under indirect exchange, the buyer is unable 
>to pay with his real good because the seller wants some other kind 
>of good. The solution is for the buyer to pay with money rather than 
>with real good. However, the producer of a product cannot turn his 
>own product into money, because his supplier refuses to take it in 
>payment. Money must be issued by an outsider called seigneur (the 
>banker). The seigneurship is a necessary part of the market 
>equilibration process, especially since 99% of actual exchanges are 
>indirect and hence must be done with money as the necessary means of 
>payment. Without money, the invisible hand (of arbitrage alone) will 
>be visibly broken.
I agree with the cognition.

The problems with which you are concerned are as follows, as I see 
it. First, you want to identify the function of the producer (s) of 
what comes to function as money. What services does this producer 
provide and how does he go about causing them to be provided? Second, 
you want to determine whether there is an above-normal profit in this 
money-production business and, if so, how it is earned.

As you probably know, there is a wide literature on the subject, 
although much of it is confusing. You seem to be on the right track 
by focusing on the basic exchange. It is important, though, to 
specify the context of your investigation. Are you assuming a 
government and, if so,  free enterprise in the supply of potential 
money items? How large a player is the government as a user of the 
money? If you do not specify these things exactly, both your 
reasoning and your presentation are likely to get confused. So I 
would like to see a  more systematic exposition of assumptions. If 
you are in the mood for some reading, I would suggest W. G. 
Langworthy Taylor's "The Credit System" and perhaps Herbert 
Davenport's "Loan Fund Theory of Capital."


http://www.nomadpress.com/gunning/subjecti/oldsubje/taylor.htm
http://www.nomadpress.com/gunning/subjecti/workpape/loanfund.htm

Perhaps it would be best to deal with these more theoretical issues 
in private correspondence.


Pat Gunning