This type of idea is never popular with the people that have large stores of the prior government backed currency. The rich never want to have their wealth in any way threatened, and they have the reach and influence to make the government protect their assets, even if it comes at the cost of causing misery to pretty much everyone else.
There ought to be a better balance, and the US found it in the period between the end of WWII and the 1970s. High marginal taxes on extreme wealth, high inheritance taxes and zealous antitrust and anti-monopoly enforcement all kept people's wealth and power disparity somewhat in check.
The rich do not, in general, possess Scrooge McDuck vaults full of "prior government backed currency". The assets of the wealthy are generally real assets and business investments.
Cash is such a poor investment that the word "investment" typically means trying to find something more productive than holding cash. Neither do alternatives to cash have a reliable history of benefitting the poor. In the US there's been lots of attempts at local currencies; they tend to fail naturally without government interference. Recently, cryptographic alternatives to cash have mostly served to benefit crypto barons and scammers.
Eroding them is beneficial to other groups of society, not the rich.
It's like with corporations. Corporations love complex legal systems, as they are the only ones with money to deal with them. Simplification actually benefits smaller enterprises.
Yeah, it seems like most people assume there is a reach and scope of taxation that isn't really possible. Wealth can be expatriated, it can be in non-fungible objects (paintings, &c), it can be in goods held in common such that no transfers occur (for example, a house that people live in together and jointly own).
There isn't anywhere an index or lookup table of all legal rights a particular person has to wealth (or, in truth, to "things", since anything can be worth something and contribute to wealth). There are things they may have a right to that they don't even know about.
Money is important as a vector for power. It doesn't matter that much whether a person has a bunch of paintings in a Swiss vault when they're an institutional investor directing a substantial sector of the economy. And that industrial power is relatively easy to divest them of, as compared to vault paintings.
That's true, but most of those can be cracked down on simply by saying that any undeclared wealth is forfeit. Also, the great proportion of most rich people's actual wealth is in forms that are easier to trace (e.g., shares of corporations, real estate).
Generally, there are no systems that are 100% bulletproof. This applies to everything. So, the more power you have, the more likely you are to exploit the existing loops.
Who is actually affected? Those less powerful. Progressive tax system hits the middle class (actual middle class, la petite bourgeoisie, not the modern bullshit redefinition of the term) hardest, making it harder for them to make it rich and compete with actual rich people.
As the effect, rich protect inheritance by trusts and avoid taxes by not having income (plenty of tricks available with borrowing), while people like doctors, lawyers, small business owners fund the state and hit hard limits on what can they make.
Don't believe me? Check how much of the tax income comes from top brackets. You may be surprised. Pro tip: system is very skewed to the top.
If the problem is that the system is very skewed to the top, then isn't the solution to be found in addressing that skew? In closing those particular loopholes?
Shouldn't everyone pay their fair share of taxes? Warren Buffett and others seem to think that they should.
> the US found it in the period between the end of WWII and the 1970s. High marginal taxes on extreme wealth, high inheritance taxes and zealous antitrust and anti-monopoly enforcement all kept people's wealth and power disparity somewhat in check.
This.
People like to say Capitalism won the cold war, but in reality it was the welfare state with its massive redistribution and limits on concentration of power that won.
The current economic and social model isn't even desirable enough to prevent people from fantasizing Putin's Russia, it would have stood no chance against the USSR in the 50s.
Social welfare spending only goes up as percentage of GDP. https://ourworldindata.org/grapher/social-spending-oecd-long.... What data do you use to distinguish the "current economic system"? Notably of course, assuming the variations of the US system even mattered, the USSR collapsed after the 80ies (deregulation and liberalization having started even earlier under Carter, not after post war US economy stagnated in the 60ies-70ies.
Not everything that count can be counted, and not everything that can be counted counts. Metrics like these are meaningless when the working class' living condition keeps deteriorating.
> What data do you use to distinguish the "current economic system"?
Pick your favorite:
- wealth concentration (what share of wealth does the top, say 0.1% for instance but pick whatever you like best, of wealth distribution)
- media concentration
- number of years of average income spent in a political campaign
- effective tax rates on the wealthiest people
> Notably of course, assuming the variations of the US system even mattered, the USSR collapsed after the 80ies
The soviet union collapsed from their own issues (which were numerous, and growing), that doesn't change anything to my argument comparing today's West with peak USSR.
That sounds like what Varoufakis planned to implement in Greece in case of a default in 2015.
” What we planned to do was this. There's the tax office website, as in Britain and everywhere else, where citizens (taxpayers accessing the website) use their tax identification number and transfer money from their bank account to their tax identification number via online banking to pay VAT, income tax, and so on. We were planning to surreptitiously create reserve accounts linked to each tax identification number without notifying anyone, simply so that this system would operate in secret. With the push of a button, we could assign PIN numbers to the holders of the tax identification numbers (taxpayers). For example, in a case where the state owed a pharmaceutical company one million euros for medicines purchased on behalf of the National Health Service, we could immediately make a transfer to the reserve account corresponding to the pharmaceutical company's tax identification number and provide them with a PIN number. They could use it as a kind of parallel payment mechanism to transfer any portion of those digital funds they wanted to any tax identification number they owed money to. Or even to use it to make tax payments.”
> While unemployment in Austria increased by 19% in the period of the free money campaign, it fell by 16% in Wörgl
The details of words like from/to/by matter a lot, but assuming translation is correct, maybe the confusion here is about absolute vs relative changes.
Guessing the "over 30%" claim comes from the idea that if Worgl was performing normally unemployment would have also increased 19%, instead it fell 16%, i.e. performed 35% better than baseline, assuming it started in a place around average and could have been expected to be average. A different stat than 0% unemployment, but interesting
The fact is, from Berkshares to Disney Dollars, local currencies are not only possible, but they nudge everyone to buy local and hire local, strengthening the economy. The miracles have very good explanations :)
> Fortunately, complementary currencies are now legal in just about every country, as evidenced by the popularity of cryptocurrencies, one form of a complementary currency.
In many countries, cryptocurrency is considered a commodity - not money - and therefore disposals (where a cryptocurrency is given up in exchange for something else) are taxable events.
This is quite inconvenient and complex compared to money, and only less so if you are fortunate enough to be using a cryptocurrency that is pegged to your local currency (eg USDC or mUSD in place of
USD).
Furthermore, if I understand it correctly, the purpose of complementary currencies is to act as a form of capital outflow restriction: you have a limited amount of capital in your town, and you want it to remain in your town alone. A complementary currency, which can only be spent locally, restricts the outflows of capital and allows it to remain local and do useful work multiple times within your town rather than potentially enriching other towns.
Cryptocurrency doesn’t intrinsically do that at all, although there are certainly some tokens designs that can replicate it eg LP emissions on decentralized exchanges.
All of that said the most interesting experiments in currency/tokenization/etc are happening on the blockchain. Are they successful? It's mixed but I think blockchain allows people to easily try new things and it's been fascinating to see. For example (and I'll do my best to explain in a sentence or two):
- Bread Cooperative (https://breadchain.xyz/) - Active project. Creates a "vault" for your stablecoins where accumulated lending yield is distributed to non-profits based on a weighted vote.
- Circles UBI (https://circles.garden/) - Active project. Creates a network of wallets where a wallet's humanity is proven through economic means. Each network participant starts receiving a token of the Circle's native "currency" effectively creating a network of humans in which money creation is evenly democratized.
- Reflexer RAI (https://reflexer.finance/) - More inactive. Created a "un-pegged" stablecoin. Meaning something that is not a dollar but is stable. It's been described as "capital inefficient" meaning you gotta put a lot of collateral in to get mint RAI, which appears to be a fatal flaw. But I love all experiments in unpegged stable coins.
And in general the ecosystem is full of all sorts of communities with their little currencies that have all sorts of properties like stability, minting mechanisms, distribution, voting power, you name it. It is not all good but I think it's fascinating.
Addendum: Yannis Varoufakis (economist, author and briefly Greece's Minister of Finance) has a book in which he outlines an example of a utopian economic system. (Great book). While being generally anti-crypto he bases the central bank around a transparent blockchain "smart contract". Any money printing by this contract is easily trackable and obvious to others and the yield generated from central-bank lending is distributed to all citizens. He has recently pursued this as an actual goal, albeit in a different form (I have yet to get into the details): https://monetarycommons.com/
Right, not intrinsically. Sometime tokens are IOUs e.g. redeemable stablecoins, where the issuer promises to swap the token for bank money. But for tax purposes most jurisdictions still treat them as commodities AFAIK, to my point earlier.
And fiat isn’t that different either: central bank currency are technically liabilities, but there’s nothing concrete you can redeem them for beyond more of the same money…
This is what a lot of people get wrong. Money doesn’t have to have liabilities, only fiat currencies do. Commodity money eg gold or silver are valuable in and of themselves, for instance. The government sues signiorage there.
However, individual liabilities are a great way to introduce currencies into circulation. Start with eg loyalty points at a restaurant or credits redeemable aboard a ship etc. We are working on that: https://community.intercoin.app/t/local-community-currencies...
All money ever has had an associated liability. Commodity money absolutely relied on the face value as the basis of the commodity value. Any metal/face value disparity could lead to cross border arbitrage (making use of counterfeiting), but intrinsic to the process is the associated liability of the issuer. Otherwise you're just trading assets.
Seigniorage absolutely relies on the fact that money redemption value is different to the value of metal (or whatever). That difference is the liability.
This article fails to mention why the currency circulated so fast. It was depreciating: it was defined as gradually losing value, so hoarding didn't work, and the people with money had a strong incentive to spend it. The article makes it sound like these currencies worked because they were local. They worked because they depreciated, and it's possible to do this on a national level.
Modern inflation punishes wage earners much more than capital earners, as the second category is closer to the money printing machine, and benefit better from it.
A deflationary policy would hit capitalists a lot more than wage earners, since it's basically a wealth tax.
I don't understand how deflationary policy is a wealth tax. The wealthy wouldn't lose anything, would they?
Inflation + capital gains tax is effectively a wealth tax, but deferred until the gains are realized. And it's possible to avoid realizing gains, e.g. by dying.
> I don't understand how deflationary policy is a wealth tax. The wealthy wouldn't lose anything, would they?
Wage earners would always receive "fresh" money, so their relative purchasing power grows compared to someone that just sits on their shrinking money. The money supply is a zero-sum pie. You actually can get richer if you're income stays the same but others have their net worth shrinking.
Free geld is a deflatory value, if you don't produce 1% of all value monthly there is less currency available, which means less currency has to cover same assets.
But each month you are being taxed, on your liquid assets.
In the neighboring Germany during 1920s the inflation went into triple digits, if not more. Did it help Germany restore faster? In Zimbabwe about 30 years ago, the inflation figures were ridiculously high, and daily expenses required banknotes denominated in billions. Did that help? A few other things must be present to make money circulation go brrr in a beneficial way.
Seriously though, i doubt that "the rich across the globe" conspired to ban emergency currencies. I'd be curious to see a more in depth analysis of what are factors driving such local economies vs centralized currencies.
Is it precisely that the currency could not be exported outside the local region - that made it a barter tool vs an investment tool - that made it less affected by such external events as great depression?
What was the central government fearing? I'm sure there's a reason why it might be a less than ideal situation. Maybe because it is effectively a financial pyramid (more so than the primary currency) - a bunch of local govt making their local currencies with unclear unregulated printing schedule could result in many people not assessing their real purchasing power adequately?
I don’t trust ideas from people who avoid thinking carefully about them.
But unbridled passion and conviction is quite appealing to some, certainly more appealing than hearing from Debbie Downers who fail to believe in free lunch.
They work quite well for a short time, perhaps a few years. Jujuy (north west) and other provinces started with the bonds a few years earlier. The first 1 or 2 year the exchange rate was "1 bono (bond) = 1 peso", and everyone accepted them at face value.
Then you couldn't buy fuel or meat with bonds, only with real pesos. And if you have to send money to a family member (like a son/daughter studding in other province) you have to exchange them with a cut.
During the final year, the shops accepted them with a 30% cut, so it was like "1 bono = 0.70 pesos", and still were not able to use them to buy fuel, meat and other things.
---
I think the last bond was the Patacón https://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) by the province of Buenos Aires, that is big enough and it was too close to the general collapse that it never lost the 1 to 1 parity with pesos.
The article mentions cathedral projects that issued their own local currencies. I guess they must have backed it with gold or silver, or some collection of valuable things donated to fund the cathedral?
The article really is light on technical details that would help one to understand how these local currencies worked.
Careful, that's dangerously close to concluding that money, businesses(, ownership) are just tools we made for our own benefit. Which is of course socialism.
With the amount of money which is created and transferred today it would be a task for one day to lift a whole country out of poverty. 1 million into an savings account with 4% return would be roughly 3k per month.
Money is a public good, its value is a social construct and its supply should be managed in the interests of society at large. The current private debt-money system is the core political and economic problem facing us.
The social credit movement (completely different than the Chinese concept) is interesting in this regard:
It's an example of what a responsible local government working in the interest of the local community could achieve.
No wonder that the federal government did all they could to shut down this experiment. It was too dangerous to have an example of actually functional governance.
You are inventing a meaninglessly broad definition of currency.
Gift cards are a credit system (a proxy) for existing currency.
No one trades credit scores for goods.
The next three function are bribing a socially powerful person, because they don't work in reverse - Kim Kardashian is never going to do me a favor in exchange for mentioning her on my IG.
Trading cards are scarcity trading, not fungible proxies for wealth. I've gotten a reduction in price for an antique via a cold Coke, during a hot outdoor antique show, but that doesn't make cold pop cans currency - I wouldn't have gotten twice the discount for two of them.
To the point where I'm approaching a need for a "mint for loyalty points" because of how in the dark they accumulate and expire. Where is my dashboard to track all points everywhere, (and trade, sell, exchange them, which I do know has been attempted before.)
That was, of course, another time. Doing what Worgl did today would trigger a con artist paradise. Just like everything else in this modern corrupt world.
It seems like the article is missing the central point -- namely that the currency was depreciating monthly, providing an incentive to spend it as quickly as possible.
IANAE, but besides things like the threatened oligarchs and taxes and government-monopoly on the legal use of force.. raw materials and imports/exports would seem to be an even more basic problem for an optimist that thinks the first big 3 issues can be worked around. That's why I think the dutch circular economy[1] is so interesting. Hopefully someone much more informed could opine?
It's definitely got a "degrowth" aspect involved and the captains of industry will not appreciate it. On the other hand, it's much less threatening to entrenched interests compared to a large group of people who are explicitly trying to just opt out of a system you're deeply invested in.
Imagine if Bitcoin had an incentive to spend instead of hodl. For example, if mining new coins also invalidated some existing coins. This could also provide an infinite supply of coins and a steady mining rate.
Turns out made-up money is as good as real money at motivating people to do things, and people who aren’t living hand-to-mouth are naturally interested in longer term investments.
For those interested, this is a generally and expression of Modern Monetary Theory (MMT).
The essential conclusion is that most places with hyperinflation (Weimar Germany, Zimbabwe, etc.) where really suffering supply shocks (reparations, farming collapse) and so you actually can just print money, as long as you're using it to get people working and those working people produce greater value through their work than they are paid in printed money.
Classical and neoclassical economics tells us that people always spend their entire paycheck on consumer goods (consumption) or claims to future consumer goods (savings). There is no money left over at the end of the month. Producers are notified in advance what to produce. If a worker happens to have $5 left at the end of the month and he wants to buy a car, he will use those $5 towards a non-refundable deposit, even if the car costs tens of thousands of dollars, and contractually obligate himself to spend the remaining money. No money is ever carried over from one period to another, since money is neutral and just a veil.
Meanwhile the observation in the real world is that people often hold onto enough money to make the full purchase. From a theoretical perspective it means they have found a third option: delay making decisions, which is neither saving nor consumption. This means producers are not notified of what to produce until the very moment of the purchase, which means producers have to engage in speculative production ahead of time with no guarantee of a sale. They have to hold inventories and possibly throw away unsold inventories (because no seller wants them). This holding of inventories can manifest itself in the form of idle capital and unemployment as well.
What Silvio Gesell discovered on his farming venture that this delayed decision making is incredibly wasteful, because most products (especially produce) are perishable/non-durable at long time scales, this means that waiting produces waste per unit of time on part of the speculative producers and give the seller of perishables a weaker negotiation position compared to the buyer, who is an implicit seller of money, a non-perishable good. This means buyers or generally people with money are structurally advantaged compared to those who don't. This leads to the conclusion that either money should perish as well, or a more modern interpretation: negative interest is a reflection of rising entropy.
I've seen neoclassicals reject this theory with pretty flismy reasoning, mostly based around the idea that people don't hold cash or positive balances on their account.
Now this theory isn't perfect by any means, but it is pretty interesting and the more you dig, the more it feels like it is pointing towards the correct direction. Meanwhile Keynes proposed a different theory, which is based on the liquidity of assets rather than its durability. Money is more liquid, because everyone wants money. This means you can take money and walk to any seller and buy their goods. Meanwhile as a seller, you must have the particular good that the buyer wants. This is a more general theory since it isn't biased exclusively towards money, because there is sort of a hierarchy of liquidity. Bank account deposits are as liquid or perhaps even more liquid than cash. This means bank account balances can be used for payment instead of cash. Bonds are essentially money with a duration that binds their use, which makes their market value and their nominal value diverge. Stocks are on the extreme end of liquid assets, with wild fluctuations. Meanwhile things like apples are on the lower end of illiquid assets. There is a limit to how many apples a person accepts as "payment" for parting with money.
If you end up owing a foreign entity vast war debts, war debts that destroy your economy by demanding that every economic transaction in the sovereign currency be heavily taxed and ship its value abroad? You can limit the damage by just not doing that. Don't call it a transaction, don't use the sovereign currency. Call it a barter, and make up barter tokens, and you're in the free and clear. For a certain value of %taxrate, you're producing such an unambiguously beneficial increase in production and reduction in deadweight losses, escaping the austerity trap, that tax collection actually goes up in the long run as you shift off of the barter tokens and back to the pool of sovereign currency backing them.
This type of idea is never popular with the people that have large stores of the prior government backed currency. The rich never want to have their wealth in any way threatened, and they have the reach and influence to make the government protect their assets, even if it comes at the cost of causing misery to pretty much everyone else.
There ought to be a better balance, and the US found it in the period between the end of WWII and the 1970s. High marginal taxes on extreme wealth, high inheritance taxes and zealous antitrust and anti-monopoly enforcement all kept people's wealth and power disparity somewhat in check.
The rich do not, in general, possess Scrooge McDuck vaults full of "prior government backed currency". The assets of the wealthy are generally real assets and business investments.
Cash is such a poor investment that the word "investment" typically means trying to find something more productive than holding cash. Neither do alternatives to cash have a reliable history of benefitting the poor. In the US there's been lots of attempts at local currencies; they tend to fail naturally without government interference. Recently, cryptographic alternatives to cash have mostly served to benefit crypto barons and scammers.
What most people dont get: Cash is not for saving or investing - its for spending in the daily life, for transactions, but not for long term storage.
Not if you make it deflationary, like some crypto "cash" :)
Common misconception IMO.
High marginal taxes and high inheritance taxes do not affect the rich - they eliminate competition for them.
I do agree on antitrust and antimonopoly though.
If they don't affect the rich, why have the rock didn't so much time, effort, and money eroding such taxes over decades?
Eroding them is beneficial to other groups of society, not the rich.
It's like with corporations. Corporations love complex legal systems, as they are the only ones with money to deal with them. Simplification actually benefits smaller enterprises.
How is high marginal taxes and high inheritance taxes not simple?
If complexity is the problem then close the loopholes that let people get out of this.
America was not supposed to be a country of monarchs and wealthy dynasties, and high inheritance taxes helped towards that goal.
Because only poor people need income. If you have enough assets, income is optional.
How come they eliminate competition? What if inheritance taxes are progressive?
Yeah, it seems like most people assume there is a reach and scope of taxation that isn't really possible. Wealth can be expatriated, it can be in non-fungible objects (paintings, &c), it can be in goods held in common such that no transfers occur (for example, a house that people live in together and jointly own).
There isn't anywhere an index or lookup table of all legal rights a particular person has to wealth (or, in truth, to "things", since anything can be worth something and contribute to wealth). There are things they may have a right to that they don't even know about.
They can hide wealth (at their own risk) but it prevent them from extracting money from the country:
The cannot own houses, factories, monopolistic contracts o media. It makes harder to influence politics ( in a legal way).
The housing issue is specially important because city space is limited and the demand is very inelastic
Money is important as a vector for power. It doesn't matter that much whether a person has a bunch of paintings in a Swiss vault when they're an institutional investor directing a substantial sector of the economy. And that industrial power is relatively easy to divest them of, as compared to vault paintings.
That's true, but most of those can be cracked down on simply by saying that any undeclared wealth is forfeit. Also, the great proportion of most rich people's actual wealth is in forms that are easier to trace (e.g., shares of corporations, real estate).
Problem does not lay in not declaring wealth.
I'd be curious to know more, this is quite unintuitive
Generally, there are no systems that are 100% bulletproof. This applies to everything. So, the more power you have, the more likely you are to exploit the existing loops.
Who is actually affected? Those less powerful. Progressive tax system hits the middle class (actual middle class, la petite bourgeoisie, not the modern bullshit redefinition of the term) hardest, making it harder for them to make it rich and compete with actual rich people.
As the effect, rich protect inheritance by trusts and avoid taxes by not having income (plenty of tricks available with borrowing), while people like doctors, lawyers, small business owners fund the state and hit hard limits on what can they make.
Don't believe me? Check how much of the tax income comes from top brackets. You may be surprised. Pro tip: system is very skewed to the top.
If the problem is that the system is very skewed to the top, then isn't the solution to be found in addressing that skew? In closing those particular loopholes?
Shouldn't everyone pay their fair share of taxes? Warren Buffett and others seem to think that they should.
You don’t get it. Tax system is already very skewed to the top, as in majority of the income comes from a few.
The problem is that the top paying those taxes are not the rich people.
Exactly. Income taxes hit those with high income like baseball players and doctors and such.
Super-wealthy can take the time to figure out ways to have no income.
And if you do inheritance taxes and similar things, you get more “universities” and other non-profit “finagling”.
IKEA is an example.
> the US found it in the period between the end of WWII and the 1970s. High marginal taxes on extreme wealth, high inheritance taxes and zealous antitrust and anti-monopoly enforcement all kept people's wealth and power disparity somewhat in check.
This.
People like to say Capitalism won the cold war, but in reality it was the welfare state with its massive redistribution and limits on concentration of power that won.
The current economic and social model isn't even desirable enough to prevent people from fantasizing Putin's Russia, it would have stood no chance against the USSR in the 50s.
Social welfare spending only goes up as percentage of GDP. https://ourworldindata.org/grapher/social-spending-oecd-long.... What data do you use to distinguish the "current economic system"? Notably of course, assuming the variations of the US system even mattered, the USSR collapsed after the 80ies (deregulation and liberalization having started even earlier under Carter, not after post war US economy stagnated in the 60ies-70ies.
https://www.wealtheconomics.org/wp-content/uploads/2023/03/S...
> Social welfare spending only goes up as percentage of GDP. https://ourworldindata.org/grapher/social-spending-oecd-long....
Not everything that count can be counted, and not everything that can be counted counts. Metrics like these are meaningless when the working class' living condition keeps deteriorating.
> What data do you use to distinguish the "current economic system"?
Pick your favorite:
- wealth concentration (what share of wealth does the top, say 0.1% for instance but pick whatever you like best, of wealth distribution)
- media concentration
- number of years of average income spent in a political campaign
- effective tax rates on the wealthiest people
> Notably of course, assuming the variations of the US system even mattered, the USSR collapsed after the 80ies
The soviet union collapsed from their own issues (which were numerous, and growing), that doesn't change anything to my argument comparing today's West with peak USSR.
That sounds like what Varoufakis planned to implement in Greece in case of a default in 2015.
” What we planned to do was this. There's the tax office website, as in Britain and everywhere else, where citizens (taxpayers accessing the website) use their tax identification number and transfer money from their bank account to their tax identification number via online banking to pay VAT, income tax, and so on. We were planning to surreptitiously create reserve accounts linked to each tax identification number without notifying anyone, simply so that this system would operate in secret. With the push of a button, we could assign PIN numbers to the holders of the tax identification numbers (taxpayers). For example, in a case where the state owed a pharmaceutical company one million euros for medicines purchased on behalf of the National Health Service, we could immediately make a transfer to the reserve account corresponding to the pharmaceutical company's tax identification number and provide them with a PIN number. They could use it as a kind of parallel payment mechanism to transfer any portion of those digital funds they wanted to any tax identification number they owed money to. Or even to use it to make tax payments.”
https://cemi.ehess.fr/docannexe/file/2911/sapir.6.nov.pdf
"the town and the community quickly went from an unemployment rate of over 30% to near zero"
According to Wikipedia the unemployment rate sank from 21% to 15%. -- https://de.wikipedia.org/wiki/W%C3%B6rgler_Schwundgeld#Auswi... (in German)
I chased down the wiki citation https://heimat.woergl.at/verschiedenes/freigeld-woergl which appears to be an official museum? Translated source says:
> While unemployment in Austria increased by 19% in the period of the free money campaign, it fell by 16% in Wörgl
The details of words like from/to/by matter a lot, but assuming translation is correct, maybe the confusion here is about absolute vs relative changes.
Guessing the "over 30%" claim comes from the idea that if Worgl was performing normally unemployment would have also increased 19%, instead it fell 16%, i.e. performed 35% better than baseline, assuming it started in a place around average and could have been expected to be average. A different stat than 0% unemployment, but interesting
Still pretty good.
less of a "miracle", as the title claims, though
Countries will need local currencies during recessions and depressions. Here are just a few examples we track on our site: https://community.intercoin.app/t/currency-crises-around-the...
Here is a history of banking snd new forms of money in the USA: https://community.intercoin.app/t/history-of-us-banking-and-...
The fact is, from Berkshares to Disney Dollars, local currencies are not only possible, but they nudge everyone to buy local and hire local, strengthening the economy. The miracles have very good explanations :)
Also, it cured baldness.
> Fortunately, complementary currencies are now legal in just about every country, as evidenced by the popularity of cryptocurrencies, one form of a complementary currency.
In many countries, cryptocurrency is considered a commodity - not money - and therefore disposals (where a cryptocurrency is given up in exchange for something else) are taxable events.
This is quite inconvenient and complex compared to money, and only less so if you are fortunate enough to be using a cryptocurrency that is pegged to your local currency (eg USDC or mUSD in place of USD).
Furthermore, if I understand it correctly, the purpose of complementary currencies is to act as a form of capital outflow restriction: you have a limited amount of capital in your town, and you want it to remain in your town alone. A complementary currency, which can only be spent locally, restricts the outflows of capital and allows it to remain local and do useful work multiple times within your town rather than potentially enriching other towns.
Cryptocurrency doesn’t intrinsically do that at all, although there are certainly some tokens designs that can replicate it eg LP emissions on decentralized exchanges.
All of that said the most interesting experiments in currency/tokenization/etc are happening on the blockchain. Are they successful? It's mixed but I think blockchain allows people to easily try new things and it's been fascinating to see. For example (and I'll do my best to explain in a sentence or two):
- Bread Cooperative (https://breadchain.xyz/) - Active project. Creates a "vault" for your stablecoins where accumulated lending yield is distributed to non-profits based on a weighted vote.
- Circles UBI (https://circles.garden/) - Active project. Creates a network of wallets where a wallet's humanity is proven through economic means. Each network participant starts receiving a token of the Circle's native "currency" effectively creating a network of humans in which money creation is evenly democratized.
- Reflexer RAI (https://reflexer.finance/) - More inactive. Created a "un-pegged" stablecoin. Meaning something that is not a dollar but is stable. It's been described as "capital inefficient" meaning you gotta put a lot of collateral in to get mint RAI, which appears to be a fatal flaw. But I love all experiments in unpegged stable coins.
And in general the ecosystem is full of all sorts of communities with their little currencies that have all sorts of properties like stability, minting mechanisms, distribution, voting power, you name it. It is not all good but I think it's fascinating.
Addendum: Yannis Varoufakis (economist, author and briefly Greece's Minister of Finance) has a book in which he outlines an example of a utopian economic system. (Great book). While being generally anti-crypto he bases the central bank around a transparent blockchain "smart contract". Any money printing by this contract is easily trackable and obvious to others and the yield generated from central-bank lending is distributed to all citizens. He has recently pursued this as an actual goal, albeit in a different form (I have yet to get into the details): https://monetarycommons.com/
It's not money because there's no associated liability.
Right, not intrinsically. Sometime tokens are IOUs e.g. redeemable stablecoins, where the issuer promises to swap the token for bank money. But for tax purposes most jurisdictions still treat them as commodities AFAIK, to my point earlier.
And fiat isn’t that different either: central bank currency are technically liabilities, but there’s nothing concrete you can redeem them for beyond more of the same money…
This is what a lot of people get wrong. Money doesn’t have to have liabilities, only fiat currencies do. Commodity money eg gold or silver are valuable in and of themselves, for instance. The government sues signiorage there.
However, individual liabilities are a great way to introduce currencies into circulation. Start with eg loyalty points at a restaurant or credits redeemable aboard a ship etc. We are working on that: https://community.intercoin.app/t/local-community-currencies...
A city can skip all that and just issue a UBI to all its citizens in its own currency, and start accepting taxes and fees in that currency. Read this: https://community.intercoin.app/t/rolling-out-voluntary-basi...
All money ever has had an associated liability. Commodity money absolutely relied on the face value as the basis of the commodity value. Any metal/face value disparity could lead to cross border arbitrage (making use of counterfeiting), but intrinsic to the process is the associated liability of the issuer. Otherwise you're just trading assets.
Seigniorage doesnt create liability
But commodity money doesn’t require seigniorage
Seigniorage absolutely relies on the fact that money redemption value is different to the value of metal (or whatever). That difference is the liability.
This article fails to mention why the currency circulated so fast. It was depreciating: it was defined as gradually losing value, so hoarding didn't work, and the people with money had a strong incentive to spend it. The article makes it sound like these currencies worked because they were local. They worked because they depreciated, and it's possible to do this on a national level.
Other writings about this: A book chapter, The Currency of Cooperation: https://ascentofhumanity.com/text/chapter-7-02/
And a short piece about Brakteaten money: https://wiki.p2pfoundation.net/Brakteaten_Money
it was defined as gradually losing value
isn't that the same as a high inflation rate?
Modern inflation punishes wage earners much more than capital earners, as the second category is closer to the money printing machine, and benefit better from it.
A deflationary policy would hit capitalists a lot more than wage earners, since it's basically a wealth tax.
I don't understand how deflationary policy is a wealth tax. The wealthy wouldn't lose anything, would they?
Inflation + capital gains tax is effectively a wealth tax, but deferred until the gains are realized. And it's possible to avoid realizing gains, e.g. by dying.
> I don't understand how deflationary policy is a wealth tax. The wealthy wouldn't lose anything, would they?
Wage earners would always receive "fresh" money, so their relative purchasing power grows compared to someone that just sits on their shrinking money. The money supply is a zero-sum pie. You actually can get richer if you're income stays the same but others have their net worth shrinking.
Free geld is a deflatory value, if you don't produce 1% of all value monthly there is less currency available, which means less currency has to cover same assets.
But each month you are being taxed, on your liquid assets.
> They worked because they depreciated, and it's possible to do this on a national level.
It's quite easy. Hi from Argentina!
Now the inflation is only 3% mom, but 2 years ago it used to be 10% mom.
In the neighboring Germany during 1920s the inflation went into triple digits, if not more. Did it help Germany restore faster? In Zimbabwe about 30 years ago, the inflation figures were ridiculously high, and daily expenses required banknotes denominated in billions. Did that help? A few other things must be present to make money circulation go brrr in a beneficial way.
Seriously though, i doubt that "the rich across the globe" conspired to ban emergency currencies. I'd be curious to see a more in depth analysis of what are factors driving such local economies vs centralized currencies.
Is it precisely that the currency could not be exported outside the local region - that made it a barter tool vs an investment tool - that made it less affected by such external events as great depression?
What was the central government fearing? I'm sure there's a reason why it might be a less than ideal situation. Maybe because it is effectively a financial pyramid (more so than the primary currency) - a bunch of local govt making their local currencies with unclear unregulated printing schedule could result in many people not assessing their real purchasing power adequately?
This is relevant to understand this experiment:
https://en.wikipedia.org/wiki/Demurrage_currency#Other_diffe...
That is a fascinating history, and a fun read.
It would be even better if the author addressed drawbacks of 'complementary currencies.' On that subject the author seems to have no curiosity.
I don’t trust ideas from people who avoid thinking carefully about them.
But unbridled passion and conviction is quite appealing to some, certainly more appealing than hearing from Debbie Downers who fail to believe in free lunch.
This has been done many times in many places.
Argentina did it last in 2001 or so (several parallel currencies were issued by different provinces: https://es.wikipedia.org/wiki/Cuasimonedas -Spanish only-).
When the central government fails, in many cases local governments attempt anything to keep functioning.
It does work, but the cleanup is messy.
They work quite well for a short time, perhaps a few years. Jujuy (north west) and other provinces started with the bonds a few years earlier. The first 1 or 2 year the exchange rate was "1 bono (bond) = 1 peso", and everyone accepted them at face value.
Then you couldn't buy fuel or meat with bonds, only with real pesos. And if you have to send money to a family member (like a son/daughter studding in other province) you have to exchange them with a cut.
During the final year, the shops accepted them with a 30% cut, so it was like "1 bono = 0.70 pesos", and still were not able to use them to buy fuel, meat and other things.
---
I think the last bond was the Patacón https://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) by the province of Buenos Aires, that is big enough and it was too close to the general collapse that it never lost the 1 to 1 parity with pesos.
Since the author brought up Nazi Germany... they did it too, same Great Depression. It's how they restarted factories and secretly rearmed.
https://en.wikipedia.org/wiki/Mefo_bills
This article is one of those things that just keeps circulating despite how silly it is.
In the same category as claims the income tax is illegal, the moon landings were a hoax, and you can use water as a fuel.
There is a movie by the name Shilling From Heaven around this, you can find a link in our blog post https://grassecon.substack.com/p/worglhtml. Our initial work at Grassroots Economics was inspired by this. We even have a smart contract that implements this idea (demurrage/Gesell tax) in it https://github.com/grassrootseconomics/erc20-demurrage-token.
It was ended by force in Tirol in 1933 though:
https://de.wikipedia.org/wiki/W%C3%B6rgler_Schwundgeld#Proze...
States are very brutal even when you show them alternatives.
> States are very brutal even when you show them alternatives.
States are monopolies in most of what they do, and that enjoy the added benefit of defending said monopolies with actual guns.
Ultimately all monopolies are defended with guns.
Thus, we want to put the guns into the hands of responsible people.
The article mentions cathedral projects that issued their own local currencies. I guess they must have backed it with gold or silver, or some collection of valuable things donated to fund the cathedral?
The article really is light on technical details that would help one to understand how these local currencies worked.
This only shows, at the end, money is just a tool to move people.
Careful, that's dangerously close to concluding that money, businesses(, ownership) are just tools we made for our own benefit. Which is of course socialism.
I'm from Europe, we invented socialism. I'm fine with thinking about it.
With the amount of money which is created and transferred today it would be a task for one day to lift a whole country out of poverty. 1 million into an savings account with 4% return would be roughly 3k per month.
Money is a public good, its value is a social construct and its supply should be managed in the interests of society at large. The current private debt-money system is the core political and economic problem facing us.
The social credit movement (completely different than the Chinese concept) is interesting in this regard:
https://en.wikipedia.org/wiki/Social_credit
It's an example of what a responsible local government working in the interest of the local community could achieve.
No wonder that the federal government did all they could to shut down this experiment. It was too dangerous to have an example of actually functional governance.
We have all kinds of currencies today -- gift cards, credit scores, loyalty points, forum reputation, follower counts, Pokemon/Magic cards, etc.
Some are easier to spend, but all can be traded for other goods even if they can't directly be used to pay your taxes.
You are inventing a meaninglessly broad definition of currency.
Gift cards are a credit system (a proxy) for existing currency.
No one trades credit scores for goods.
The next three function are bribing a socially powerful person, because they don't work in reverse - Kim Kardashian is never going to do me a favor in exchange for mentioning her on my IG.
Trading cards are scarcity trading, not fungible proxies for wealth. I've gotten a reduction in price for an antique via a cold Coke, during a hot outdoor antique show, but that doesn't make cold pop cans currency - I wouldn't have gotten twice the discount for two of them.
Wrote about it here: https://community.intercoin.app/t/local-community-currencies...
The key is to take all the gift cards and loyalty points and make them interoperable with each other. That’s part of our Intercoin project
To the point where I'm approaching a need for a "mint for loyalty points" because of how in the dark they accumulate and expire. Where is my dashboard to track all points everywhere, (and trade, sell, exchange them, which I do know has been attempted before.)
That was, of course, another time. Doing what Worgl did today would trigger a con artist paradise. Just like everything else in this modern corrupt world.
It seems like the article is missing the central point -- namely that the currency was depreciating monthly, providing an incentive to spend it as quickly as possible.
IANAE, but besides things like the threatened oligarchs and taxes and government-monopoly on the legal use of force.. raw materials and imports/exports would seem to be an even more basic problem for an optimist that thinks the first big 3 issues can be worked around. That's why I think the dutch circular economy[1] is so interesting. Hopefully someone much more informed could opine?
It's definitely got a "degrowth" aspect involved and the captains of industry will not appreciate it. On the other hand, it's much less threatening to entrenched interests compared to a large group of people who are explicitly trying to just opt out of a system you're deeply invested in.
[1] https://www.government.nl/topics/circular-economy/circular-d...
Imagine if Bitcoin had an incentive to spend instead of hodl. For example, if mining new coins also invalidated some existing coins. This could also provide an infinite supply of coins and a steady mining rate.
MMT
> At this point, the central bank panicked, and decided to assert its monopoly rights by banning complimentary currencies.
Who was running that central bank?
Turns out made-up money is as good as real money at motivating people to do things, and people who aren’t living hand-to-mouth are naturally interested in longer term investments.
…what’s that? All money these days is made up?!
That is the definition of fiat currency, yes.
For those interested, this is a generally and expression of Modern Monetary Theory (MMT).
The essential conclusion is that most places with hyperinflation (Weimar Germany, Zimbabwe, etc.) where really suffering supply shocks (reparations, farming collapse) and so you actually can just print money, as long as you're using it to get people working and those working people produce greater value through their work than they are paid in printed money.
Here is the basic theory:
Classical and neoclassical economics tells us that people always spend their entire paycheck on consumer goods (consumption) or claims to future consumer goods (savings). There is no money left over at the end of the month. Producers are notified in advance what to produce. If a worker happens to have $5 left at the end of the month and he wants to buy a car, he will use those $5 towards a non-refundable deposit, even if the car costs tens of thousands of dollars, and contractually obligate himself to spend the remaining money. No money is ever carried over from one period to another, since money is neutral and just a veil.
Meanwhile the observation in the real world is that people often hold onto enough money to make the full purchase. From a theoretical perspective it means they have found a third option: delay making decisions, which is neither saving nor consumption. This means producers are not notified of what to produce until the very moment of the purchase, which means producers have to engage in speculative production ahead of time with no guarantee of a sale. They have to hold inventories and possibly throw away unsold inventories (because no seller wants them). This holding of inventories can manifest itself in the form of idle capital and unemployment as well.
What Silvio Gesell discovered on his farming venture that this delayed decision making is incredibly wasteful, because most products (especially produce) are perishable/non-durable at long time scales, this means that waiting produces waste per unit of time on part of the speculative producers and give the seller of perishables a weaker negotiation position compared to the buyer, who is an implicit seller of money, a non-perishable good. This means buyers or generally people with money are structurally advantaged compared to those who don't. This leads to the conclusion that either money should perish as well, or a more modern interpretation: negative interest is a reflection of rising entropy.
I've seen neoclassicals reject this theory with pretty flismy reasoning, mostly based around the idea that people don't hold cash or positive balances on their account.
Now this theory isn't perfect by any means, but it is pretty interesting and the more you dig, the more it feels like it is pointing towards the correct direction. Meanwhile Keynes proposed a different theory, which is based on the liquidity of assets rather than its durability. Money is more liquid, because everyone wants money. This means you can take money and walk to any seller and buy their goods. Meanwhile as a seller, you must have the particular good that the buyer wants. This is a more general theory since it isn't biased exclusively towards money, because there is sort of a hierarchy of liquidity. Bank account deposits are as liquid or perhaps even more liquid than cash. This means bank account balances can be used for payment instead of cash. Bonds are essentially money with a duration that binds their use, which makes their market value and their nominal value diverge. Stocks are on the extreme end of liquid assets, with wild fluctuations. Meanwhile things like apples are on the lower end of illiquid assets. There is a limit to how many apples a person accepts as "payment" for parting with money.
Why can't delayed spending be categorized as a claim to future goods (savings)?
I have an alternate theory:
If you end up owing a foreign entity vast war debts, war debts that destroy your economy by demanding that every economic transaction in the sovereign currency be heavily taxed and ship its value abroad? You can limit the damage by just not doing that. Don't call it a transaction, don't use the sovereign currency. Call it a barter, and make up barter tokens, and you're in the free and clear. For a certain value of %taxrate, you're producing such an unambiguously beneficial increase in production and reduction in deadweight losses, escaping the austerity trap, that tax collection actually goes up in the long run as you shift off of the barter tokens and back to the pool of sovereign currency backing them.