Sunday, March 9, 2008

Inflation-free money

I've stumbled across a page with a bunch of interesting money-related links - this one.

Quite interesting book there is about inflation-free money. Unfortunately, it's not available on amazon, so I could not get a paper copy, so will have to continue reading online. There are a few interesting thoughts about avoiding inflation, and community money. I'll include one interesting quote here:

Between 1932 and 1933, the small Austrian town of
Wörgl started an experiment which has been an
inspiration to all who have been concerned with the issue
of monetary reform up to this day. The town's mayor
convinced the business people and administrators that
they had a lot to gain and nothing to lose if they
conducted a monetary experiment in the way suggested
in Silvio Gesell's book "The Natural Economic Order".

People agreed and so the town council issued 32,000
"Work Certificates" or "Free Schillings" (i.e.,
interest-free Schillings), covered by the same amount of
ordinary Austrian Schillings in the bank. They built
bridges, improved roads and public services, and paid
salaries and materials with this money, which was
accepted by the butcher, the shoemaker, the baker.
The fee on the use of the money was 1% per month
or 12% per year. This fee had to be paid by the person
who had the banknote at the end of the month, in the
form of a stamp worth 1 % of the note and glued to its back.
Otherwise, the note was invalid. This small fee caused
everyone who got paid in Free Schillings to spend them
before they used their ordinary money. People even paid
their taxes in advance in order to avoid paying the small
fee. Within one year, the 32,000 Free Schillings
circulated 463 times, thus creating goods and services
worth over 14,816,000 Schillings. The ordinary
Schilling by contrast circulated only 21 times. (8)
At a time when most countries in Europe had severe
problems with decreasing numbers of jobs, Wörgl
reduced its unemployment rate by 25 % within this one
year. The fees collected by the town government which
caused the money to change hands so quickly amounted
to a total of 12% of 32,000 Free Schillings = 3,840
Schillings. This was used for public purposes.

So it looks like "decaying money" were very much stimulated to circulate - so they were a much more effective instrument of enabling the trade.

In my mental experiments I came to concepts that were similar, better yet, they did not require the any centralized authority to govern them - which is pretty cool, I think.

I'll write some more about that in a separate post, when I can crystallize it more.