> 32,000 schillings were printed (in denominations of 5 and 10 sch.), but only 12,000 schillings were issued by the parish by paying its workers.
> The local currency was redeemable, on demand, for official currency, but there was a 2% fee on such redemption.
> For each schilling of local currency issued, one schilling of official currency was deposited (at interest) in a bank account to cover demands for redemption.
> The depreciation (demurrage) rate was 1% per month. This was called the ‘Relieftax.’
> In order for a note to maintain its full face value, it was necessary to affix a stamp at the end of each month. these stamps could be purchased at the parish office.
> The notes expired at the end of the year, but could be exchange, free of charge, for new ones, so long as all the necessary stamps had been affixed.
…
> Another major ‘gain,’ which von Muralt mentions in passing, is the windfall profit associated with the substantial amount of local currency which was never presented for redemption. He says, ‘However, of the 12,000 schillings worth of relief money issued, only about two-thirds is in circulation. The remainder has disappeared, having been annexed by souvenir hunters and collectors. That such substantial amounts of depreciating money should vanish in this way, contradicts the theoretical intention which aims at accelerating the circulation and not at hoarding. For the parish, however, the disappearance of notes is not unwelcome, since this represents for it a net gain.’ If the stated estimate is correct, this gain would amount to about 4,000 schillings.
So this is essentially about paying workers with a bond instead of with cash. It’s not something the workers would normally want to accept, but it’s better than nothing. (Presumably a worker who wanted to save would exchange their money for official currency?)
Although the circumstances are different and worse, it seems similar to how some local governments in Argentina were forced to pay their workers in script because they didn’t have the cash. [2]
If I build you a house for $10, then I pay my friend those $10 for a house, then he goes back to the original friend and paid them to build a house, we end up with $10 passed around and 3x magic value added to the economy (houses).
If I go to mars and become the first farmer, then pay 2 barrels of food for a house, then pay 1 barrel for a cobbler to make me shows, I’ve set the market price that a house is now worth 2 pairs of shoes.
I start a stock. I offer 1 million shares, I sell 50 shares to my friend for $10 each. The market cap is now 10 million.
What even is this fuzzy value thing we call currency? Seems like the only thing ascribing value is some powerful guy with a military behind them saying it has it.
Nothing fuzzy: money is debt. Ultimately modern money originates from a ledger entry which denotes an asset and a liability (a deposit and a loan; which is the asset and which is the liability depends on your perspective).
State issued currency is exactly the same. The liability from the perspective of the state is that central bank issued money can be used to satisfy a tax liability.
The relative value of things change even in the absence of money (e.g. in a barter economy, or for one person stuck alone on an island). Therefore the fuzziness cannot be attributed all to money.
You offer to sell me shares of your stock for $10 each. I am not your friend. I do not think your offering supports your valuation so I decline. I think your stock might be worth $2 a share, I convince your friend I am right. Your friend sees her investment tanking and agrees to sell her shares to me before they fall any further. Your market cap is now 2 million.
I go to mars and build a shoe factory. I produce and sell shoes for a fraction of a barrel of food. I buy your house for two pairs of shoes. Now you are homeless.
If money was perfectly efficient we wouldn't need it, its just a way to negotiate on stores of value without having to trade pigs around.
The military thing absolutely ascribes value, but so does every other human interaction with a thing, value is something we all hold in our minds, if you want it and I have it, it's valuable, if not, it's worthless. There's no magic regarding money in this equation.
Money has always been a tool of the state. Even if it was perfectly efficient, the state would still use money for its own ends.
Edit: moreover, most money is created to support activity in which the two sides cannot be matched at all, because one side doesn't exist yet, specifically loans. It's hard to see how some hypothetical perfect exchange mechanism would deal with disparities in time.
I was thinking about this the other day. They always confiscate prisoners’ cigarettes because they’re used as money. This actually makes the cigarettes more valuable if a prisoner can hold on to them. Imagine the look on the prisoners’ faces if the prison issued free and unlimited cigarettes to everyone. The entire economy would implode.
This seems to be a ledger, except that it's not written down! Oral history as money. (Is a community's collective memory transportable?)
> The ownership of a large stone, which would be too difficult to move, was established by its history as recorded in oral tradition rather than by its location. Appending a transfer to the oral history of the stone thus effected a change of ownership
And to show that memory and consensus are what's important, it doesn't even matter if you lose the stone:
> In one instance, a large rai being transported by canoe and outrigger was accidentally dropped and sank to the sea floor. Although it was never seen again, everyone agreed that the rai must still be there, so it continued to be transacted as any other stone.
It serves to competing uses. One it is a medium of exchange. The other is as a store of value. I feel it has more use as a medium of exchange. The fact that the interest isn't created creates economic pressure towards exploitive activities.
> Wörgl was the site of the "Miracle of Wörgl", beginning on 31 July, 1932 during the Great Depression.
> the "experiment" was ended by Austria's central bank Oesterreichische Nationalbank on 1 September 1933
So all the fancy demurrage stuff could not have had much effect at all. Sounds like they could have issued pretty much any kind of currency with the same end result. With that time period being economically tumultuous in general, drawing any sort of conclusions is pretty much impossible. Maybe the biggest learning here is that rallying local community around some stunt like this can provide genuine, if temporary, boost to the local economy; the exact details of the thing matter less if you just get community to buy into it.
“Now, money as we know it, was invented to accumulate in value.”
It was invented as a medium of exchange of value.
“For those of a religious bent, that is reflected in usury – the practice of lending money at unreasonably high rates of interest, so the money you give out comes back as more.”
Usury is any interest on a loan.
“That’s what caused Jesus to lose his cool at the Temple on the Mount.”
Can anybody explain to me like I'm five why this isn't just Keynesianism working as expected, as it did globally in 2008 (where the world didn't do enough of it in retrospect) and 2020-21 (where the world did a bit too much in retrospect)?
I don't get the part about the expiration date. Say, you got your free money from the town with an expiration date Dec 31. Awesome, you better spend it quickly, because it's already Dec 30 (say).
But then, who is going to accept your money? If you're the local baker, why would you take my money for the bread you made, knowing perfectly well that you're probably never going to get the chance to spend it?
Doing business on Dec 30 or even Dec 31 is the extreme case, but even before that it's an issue: the closer you get to the expiration date of the money, the higher the risk you're taking that you might not be able to spend it in time.
The answer is in the article although the author disparages it: People were able to pay their taxes in Worgl. In effect, people didn't have "free money" so much as they had a tax break. They collected Worgl to offset their taxes while hoarding real money. There is no miracle here.
Okay, thanks, I did read that but it slipped my mind. Still, though, that makes it a little less bad but doesn't invalidate my argument completely, does it?
I think demurrage works when money loses value gradually, everyone who accepts it should spend it before it loses value and it increases money velocity.
It is also why people don’t understand why mild inflation can be good
Neither inflation nor demurrage can stop people from saving. They can simply exchange their constantly shrinking money to some good of lasting value. If the problem is lack of liquidity, helicopter money will do, everything else is a needless complication.
"Good of lasting value" doesn't exist in reality. If you use gold then it doesn't change the fact that you are using it as a token representation for human labor. It's just a fancy way of representing a balance sheet.
If gold was a store of value, then it would allow you to travel backwards in time, since the gold used to buy and sell a car today, could be used to buy and sell a car during the time of the Roman empire. In fact the entire concept of time simply wouldn't exist.
All "store of value"s therefore are either the result of fair negotiations in which case their supply would be bounded or they are the result of artificial interventions which will collapse over the long term.
After all, feudalism didn't last forever, so using land as a store of value doesn't work either.
I must admit, I have trouble making any sense of your argument. Are you saying it is not possible to store value? If so, I would disagree. If you wish to go back to Roman times, perhaps look at the history of Roman coinage. One way people used to combat the Roman currency devaluation was to hoard the older coins. Were you to sumble upon a chest of gold from Roman times, you would be rich today, just as the person that buried it. Gold has evidently maintained value over thousands of years, whereas currency from 100 years ago has lost 99% of its purchasing power. In the long term, we are all dead.
Mild inflation is not good for anyone bar the central banks. Central banks profit from inflation (they can pocket this hidden tax) so they repeat the lie that it is good.
People still conduct business at 2,5% inflation. Why would they stop at 0%?
People conduct business in deflation too.
The US did something similar during Covid - many people not working, government printed money and handed it out, saving it earned no interest, and the money depreciated ~10% a year (“inflation”). It worked surprisingly well. And, like Wörgl, it was killed by Serious People.
Inflation was largely driven by companies utilizing price increases created by short term supply shocks, and making them permanent.
Pepsi controls 90% of the potato chip market.
6 companies provide ~80% of all products on the interior aisle shelves of your grocery store.
There is no universe where the quantity of money in pandemic stimulus even remotely approximates the total net price increase (inflation). Rather, the corporate net profit increase accounts for the vast majority of all inflationary pressures.
The same impact on the velocity of circulation can (and is) accomplished by steady inflation - hence the targeting inflation rates. Demurage (Worgl case) works like inflation… or am I missing something.
You can bring the money to the bank and lend it out and not pay the fee? Since money is now available for borrowing in a closed circuit you don't have to keep issuing an endless amount of money to keep the Ponzi scheme going.
It's not a stimulus or sugar rush at all. The effectiveness depends on how much the government is artificially constraining liquidity. If the government is massively intervening with austerity policies, then the effect will be large.
You should think of it more using the transaction cost based approach. Government money is artificially scarce, therefore it has high transaction costs, therefore it hinders trade instead of facilitating it.
The purpose of the scrip is to issue a money that isn't artificially scarce so it's transaction costs are low. In this way you don't get a stimulus, rather you are getting rid of dead weight loss. A guy pulling a rickshaw is naturally going to fall behind someone who can walk without baggage. The point isn't to make the runner faster or stimulate his performance via some sort of doping.
Wot? Not sure how to respond to something so silly. I hope you mistyped. From whence does one derive their "money supply"?
Scrip is a placeholder for value like any other printed currency. It works well in place of debased government fiat, at least in times of trouble, because the web of trust at the local level is strong enough to back individual transactions.
In the context of the system where the currency was used, financial investments were not safe. It was the Great Depression, the inflationary nature of currency at the time made the only long term non superficial things structures, land, and goods.
In the end, the things people do and build are what money is for. It’s a medium of exchange and a store of value. If it fails at these things, the making grain to feed people or housing them still has intrinsic value. You just need a working medium of exchange to avoid having to use barter for everything. If people trusted the town’s scrip more than the national currency, then they would use that.
Investment in such a system would be in real objects and the means to produce them. Assuming people still cooperate and will accept your weird scheduled devaluation currency, then industrial society could continue to function and may even thrive, given people are incentivized to spend money which is the definition of economic activity.
Also, other financial instruments might not be affected. Shares of stock, for example, would be worth what people would pay for them. It’s just big piles of literal dollars that you should get rid of expeditiously.
Criticising interest itself is kind of meaningless. I agree with that, but if you think about It the interest rate has a tendency to go to zero on its own. Positive interest indicates that that the future economy will be larger if money is invested in the present. If you have an aging economy you can't expect the interest rate to be positive. So the argument should be in favour of complete capital markets with positive and negative interest. During a boom you expect positive rates and during a bust the rates would be negative.
My mental model of historical/religious objections to usury (which in this context refers to _any_ interest at all), is it's the lack of shared downside that they hate. Presumably because without ways to escape the debt, interest turns into slavery [0]. Investment - in which the supplier of capital participates in the downside - has pretty much always been fine?
(Taleb's "Skin in the game" talks about this a lot. _Great_ book.)
The lack of shared downside is pretty much universally objectionable - nobody likes anybody getting something for nothing - and different societies deal with it differently. Some societies just flat out banned lending for interest. Most societies today allow lending, but have get-out clauses, like bankruptcy, to prevent de facto slavery. The US has particularly generous (to the debtor) bankruptcy laws, AIUI.
Aside: Europeans are often horrified at the US's putative bankruptcy system for surprise medical bills, because they imagine bankruptcy is like it is in their country - where you lose everything, including even your home, you have basically no way of starting over, you can't be e.g. a company director for potentially years, and you carry a stigma for life, and even your kids might carry the stigma. Yes, the US's medical bankruptcy thing is pretty horrible, but bankruptcy in the US isn't anywhere _near_ as terrible as it is in e.g. Ireland. You likely won't lose your house; you're not going to starve; you can totally start over, there needn't be _any_ shame involved. Most debts will be just ... written off, some will be "restructured". It's very pragmatic, AIUI. (ICBW about all this, and I've no doubt there are horror stories, but I suspect they are very much the exception. Counterpoints welcome!)
Still, most states in the US ban "usury" - "too much" interest.
[0] Even societies that tolerated slavery didn't want it for "people like them".
If you’re talking about usury, then you have confused investment with lending. Lending money is not investment. When a bank gives you a loan, they aren’t investing in your house. They’re supposed to be helping you buy a house. Interest on a loan is theft as no value is being provided by the bank in return for that interest (as opposed to service fees for the labor of issuing a loan, for example).
Some call capitalism state-sponsored usury. I’m not sure I’d go that far. But money is sterile, “barren metal”, as “The Merchant of Venice” calls it. It cannot multiply. Only labor multiplies value.
Wrt the article, while the author does seem naive and no systematic thinking is demonstrated, you could store away valuable commodities, like gold. But it won’t breed for free. For more gold, you must work, or steal.
I can use it for example to buy beer brewing equipment and a warehouse, which allows me to start a beer business which generates income.
Or I can lend it to someone. But then I can't do my beer business and am losing that potential income source.
If I don't get anything back from my lending, then clearly I'm losing out.
You seem to be thinking that the fact there is a bank involved somehow changes things. It doesn't, a bank is just another private entity, albeit operating within a regulated framework. It doesn't make money out of thin air. Money it gives to you for your house is money that cannot be invested in other opportunities.
The first sentence of that document makes reference to money creation happening by commercial banks making loans. It then goes on to explain much of the detail. The document is all about commercial banking.
Central banks operate exactly the same way as commercial banks, just the money they create flows in a different circuit.
The greatest evil that has ever been conceived is debt currency. Nothing has damaged humanity more, nothing has been the reason for more wars, suffering and serfdom.
Human productivity would easily double or triple without the need for any new technological invention, if we were freed from the shackles of the debt based currency system. But for that to happen, a radical change in how we as humans perceive the world and our own lives is needed. As long as the money masters have a tight grip on the souls of the majority, they can strike down any threats with ease.
afaik - i'm a software-developer, not an economist - it was an implementation of the following:
the english term
* https://en.wikipedia.org/wiki/Demurrage_(currency)
in german "schwundgeld"
* https://de.wikipedia.org/wiki/Umlaufgesichertes_Geld
ps. the submission caught my eye, because i live in the region:
* https://www.openstreetmap.org/relation/1016862
cheersv