It was Steve Keen who (for me) pointed out that of the three uses of money viz: a unit of account, a means of payment and a store of value, the last two are in conflict.
He commented on the the inbuilt depreciation of the Wörgl local currency in that it expired by 1% monthly unless you affixed a stamp purchased in the national currency to the (local) note in order to retain the Wörgl currency’s full value. Effectively this 1% tax on the held money at the end of the month made any motivation to hold onto the money disappear. Rather, to avoid the monthly tax, the motivation became to spend the currency in as useful and rapid a manner as possible.
The stamps are shown in the image below:
What is interesting is that in ‘Job Guarantee’ terms Wörgl reduced unemployment from around 30% to around nil!
What is not to like?
Well the Austrian central bank didn’t like it and legally challenged it eventually establishing that it should be shut down. And in September 1933, just thirteen months after the scheme had started the central bank succeeded – they didn’t want the competition to their own authority …
Now this whole episode indicates that a depreciating currency encourages economic activity – and although this is almost a century ago I think we need to consider whether it has implications for local currency creation and for the concept of ‘growth’. No infinite growth but straightforward stability.
Doesn’t declining saved monetary value lead to a proper consideration of purpose? After all if money were lent at nil interest, which would give the banks their ‘margin’ if they were taxed at 1% on their reserves/cash holdings (in this era of ‘Quantitative Easing’), no additional monies would need to be created for the system to continue functioning. Unlike now, where growth of money supply is always required.
I have to wonder whether this would serve to damp down those widespread and ‘everlasting’ growth prospects?
Although nil or even negative interest rates are common, they are very unusual for borrowers.
I’m beginning to wonder if this could be key to reducing the continual demand for growth?