Gisel­lian demur­rage cur­rency

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Dr. Keen,

I am won­der­ing if you have ever seri­ously con­sid­ered issuance of Gisel­lian cur­rency for coun­tries fac­ing unplayable debt (all of them, as far as I know).

The scheme I am imag­in­ing would have these govts pay­ing off bonds due with G-cur­rency. Bond­hold­ers would then, ASAP, spend it on real items in the econ­omy, where it would even­tu­ally end up as wages, where work­ers would spend it, ASAP, on taxes and con­sumer goods.

The demur­rage, say 12%/year (= 12 x 1% stamps)  would give this cur­rency an annual veloc­ity of at least 12 since any holder of the cur­rency would want to spend it before each month-end tax stamp would be due.

Of course, any debt financed cur­rency would have a veloc­ity of less than 1, since that is the money def­i­n­i­tion of debt.

Yours,

War­ren Raft­shol

About Warren Raftshol

winemaker, running for Michigan governor 2010 on Greenback Labor ticket, Bay Bucks promoter, MS Civil Engineering Northwestern 1982, BSCE Michigan Tech 1978
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  • Rob

    Gesel­lian, not Gisel­lian.

    The most famous real world Gesell exper­i­ment was in Wörgl (1932), known as “Das Wun­der von Wörgl”. How­ever, one can­not clearly say whether its suc­cess was due to the fact that the Wörgl cur­rency was a local cur­rency, or because it was a stamp scrip cur­rency.

    I think that both fac­tors apply.

    A few years ago, some peo­ple thought that cross­ing the zero lower bound would effec­tively con­sti­tute demur­rage. It pointed out not to be true. Of course, par­tially because no com­mer­cial bank dared to extract neg­a­tive inter­est from stan­dard bank accounts. But the main rea­son is — to my opin­ion — the lack of steep­ness of the yield curve around zero.
    In nor­mal times, infla­tion does about the same as demur­rage, but of course only, when the infla­tion rate is sig­nif­i­cantly higher than the inter­est rate.