PSYCHOECONOMY
14Nov/110

Oxidizable money

In the feverish days of April 1919, while the former Soviet Republic of Bavaria was struggling to stay in power, an utopian negative interest currency system was expecting for its revolutionary banknotes to come out of the print house in order to be launched.


The brand new People's Finance Representative, Silvio Gesell's initiative was never to be implemented. First an internal coup d´etat led by Moscow and then the overwhelming attack of the Freikorps, the same militias that killed Rosa Luxembourg, ended with the Republic even before its new banknotes could even leave print house.

Gesell, a libertarian anarchist author of the book The Natural Economic Order, thought that money had had lost its usefulness as a tool of trade, becoming a commodity in itself, generating social inequalities due to usury and affecting real economy negatively. He thought that the solution to this situation was to create a new monetary system in which the currency would depreciate over time, thus preventing the possibility of being accumulated. According to Gesell, money should behave as goods do. Apples, a piece of furniture, a car, lose value over time. They rot, they wear out. In order for money not being something with which one could speculate and, for the contrary, being a simple tool of exchange, it should also be subject to this entropic process.

That´s why he proposed a kind of banknote to which after a certain period of time -one month for example-, you should enclose a postal stamp with the value “1%”. That is, its value should decrease 1% every month. To avoid this expense, he who received it, should rush to buy goods instead of keeping it.
What would have happened if this kind of currency has come into circulation in Soviet of Bavaria? We cannot know. But we can analyze what actually happened years later, in 1932 in Austria.
In the context of a depressed economy, and still suffering the effects of the 29 crisis, the experiment could be carried out, this time at the initiative of the Mayor of Wörgl, Michael Unterguggenberger. Inspired by Gesell´s ideas, he put into circulation the "Freigeld" (currency of free economy or currency of guaranteed circulation) ...

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