Money with an Expiration Date
And now, for something completely radical:
This essay blew my mind. Some guy I had never heard of, Silvio Gesell, came up with this idea that money should have an expiration date. Can you imagine if Jeff Bezos was forced to recirculate about $10 billion worth of his personal wealth every year before it rotted on the vine? Thats a lot of additional economic stimulation, which might not be happening now when his dollars just sit in his bank account. It’s radical, probably a bit socialist, but maybe , just maybe… No, I won’t even go there.
One reason I like this article so much is it finally explained to me why many central banks around the world, including Europe and Japan are now installing negative interest rates. If you deposit $1, in a year they will return 99 cents to you (not quite accurate calculation, but you get the idea). We have gotten used to the idea that banks pay us to keep our own hard earned money, but maybe that is about to change. I could never understand why anybody would agree to deposits with negative interest. Why shouldn't we just stash our cash in the mattress and be assured to getting $1 back for every $1 we “deposited” in the mattress? Gesell thought that too, so he came up with a solution—all money expires. So, you have to use it, circulate it, invest it, blow it—whatever. While this certainly introduces additional risks to the equation of making and keeping money, it might also stimulate our economy in ways we never imagined.
Frankly, I would not advocate this on a large scale. But what about on a micro-scale? Say shopping centers offer employees additional salary, perhaps $2/hour on top of whatever their employer pays them. But they have to SPEND that additional salary at the shopping center within one month, or it melts away. I bet you can think of other ways this concept could apply as well.
You gotta admit, its radical… and it just might work.
—Ray Brimble
The 'Strange, Unduly Neglected Prophet'
by Greg Rosalsky, originally published on NPR.org | August 27, 2019
Silvio Gesell hated money. A German entrepreneur who moved to Argentina for business in the late 19th century, he witnessed a massive financial crash in 1890 that convinced him that money was behind the world's economic problems: poverty, inequality, unemployment, stagnation.
The problem, Gesell believed, was that money served two roles that often came into conflict: It was a way for people to store wealth, and it was the thing everybody needed to conduct business. The fact that money could store wealth meant its holders had a reason to cling to it, especially in crises like the one he saw in Argentina, when opportunities to safely put that money elsewhere looked grim. It was a typical story. When people got scared, they hoarded cash and brought business to a standstill. It led, Gesell said, to a situation of "poverty amid plenty."
Gesell wanted to create a new kind of money — a money that would "rot like potatoes" and "rust like iron" so no one would want to hoard it, a money that was "an instrument of exchange and nothing else." And the crazy part is that he did create it. Through a series of pamphlets, articles and books, Gesell inspired a worldwide movement that introduced a completely new form of money. It's one of the most fascinating, and largely forgotten, stories in economic history.
But after 70 years of obscurity, Gesell is making a comeback. All of a sudden, this obscure radical from another age has his name and ideas popping up in unlikely places — like speeches of leaders at the U.S. Federal Reserve, research papers of the International Monetary Fund and the pages of the Financial Times. As the industrialized world grapples with stagnation and as markets signal another recession, policymakers are struggling to figure out what to do. Could Gesell provide an answer?