Whose Money Dilutes Whose Wealth?

Monetary expansion is a sovereign prerogative whose costs and benefits are structurally asymmetric. When a central bank expands the money supply, all holders of nominal claims bear the inflation cost, while asset holders capture a seigniorage premium—a windfall appreciation attributable to monetary policy rather than productive activity. This paper argues that this asymmetry constitutes a distributive injustice under the proportionality principle, and derives this conclusion independently from three ethical traditions: Aristotelian distributive justice, contractarian rationality, and left-libertarian common ownership. The argument proceeds in six steps. First, I establish the institutional mechanics of seigniorage—how central banks create base money at near-zero cost to acquire interest-bearing assets—and introduce a dual-parameter framework that separates the asset appreciation rate (πₐ) from the cash depreciation rate (πc), capturing the empirically documented divergence under quantitative easing. Second, I develop the proportionality principle through three independent ethical derivations, each yielding the conclusion that costs and benefits of sovereign monetary action must be allocated proportionally. Third, I defend the choice of proportionality against competing distributive principles—maximin, sufficientarianism, and luck egalitarianism—and establish its priority over Pareto efficiency as a criterion of distributive justice. Fourth, I address the strongest objections: the transfer problem, the Pareto defense, the general equilibrium objection, the voluntariness objection, the agency problem (whether structural injustice is possible without individual wrongdoing), and the scope problem (why monetary policy warrants correction when other policies with distributive consequences do not). Fifth, I propose the seigniorage dividend as a Pigouvian correction with a rule-based institutional design compatible with central bank independence, and demonstrate that it functions as an automatic demand stabilizer—transferring purchasing power from low-MPC asset holders to high-MPC cash-dependent households—providing an independent consequentialist justification that does not depend on the proportionality principle. Sixth, I articulate the structural conditions that distinguish monetary policy from other sovereign actions with distributive consequences, providing a principled stopping rule for the proportionality claim.