Uh, our money does already expire. It's called inflation.
In the first case, there is no incentive to use the money any faster, and as long as inflation isn't too high, there could be incentives to hoard/save it.
In the second case, each unit has an expiration, and like the game of hot potato, you want it out of your hands quickly. This should heat up the economy overall, while inflation is seen as the result of an overheated system.
The trick, as noted, is who is poised to benefit? The "new" dollars would be worth more, so the people at the top of the flow would have more advantages than those at the bottom.
In order for something like this to work, it would also need to recognize the creation of value, and not just the creation of the currency. The person who turns a pile of wood into a chair is creating value, but they are usually not able to capture the true value of their time and skill.
Overall, this is an interesting idea especially in that it changes the way we think about money.
Taken further, every day I could exchange all of my wealth which now has 364 days left for slightly less wealth with 365 days left.
That sure sounds like inflation.
Changing the way money enters the system is interesting for sure, but orthogonal to whether expiring money is just inflation by another name.
That's happening even now with inflation, even if the mechanism is less obvious.
It's called the Cantillon Effect.
Yes -- for a while. Not forever. This is a feature, not a bug. Hoarding/saving for short periods of time (relative to human life spans) is a good thing. It helps damp out transients. Hoarding/saving for long periods of time is bad because it discourages people from taking risks by putting resources to productive use.
I think that named a problem.
Think about something like "Measurement Importance" in terms of the "level of competence in the handling of the vehicle", so to speak ?
So how is your MI as high roller ? Think some people have not only accounts for that, but alghorithms, nor ? ^^
No. The opposite of saving is spending. You can spend on capital as well as consumption. Inflation only devalues cash, i.e. money you keep in your mattress. You can avoid inflation by either consuming or investing, both of which help keep the economy humming along.
The point is:
> The idea that people need to be encouraged to consume (consumption being the opposite of saving) I don't think is supported by economic theory.
People absolutely need to be encouraged to be productive. That's the whole point of an economy, to encourage people to produce things that others want in exchange for other people producing things that they want.
Honestly, how could anyone possibly not understand that?
The whole point of an economy is NOT to encourage people to produce things. The point of producing is to satisfy a demand for consumption, and individuals choose their level of consumption according to their preferences and budget constraints. They don't need to be encouraged to consume. That doesn't make any sense.
I guess we'll just have to agree to disagree about that. Maybe things are different where you are, but where I live most people expect to be compensated for their labor, and investors expect at least a shot at a positive ROI. But if you want to work for free, by no means allow me to discourage you.
> They don't need to be encouraged to consume. That doesn't make any sense.
You're right about that. But that was not what I said. I said that they needed to be encouraged to produce, not to consume.
> I understand it fine,
Manifestly not. You couldn't even write three sentences without losing the plot.
And later you added that by "saving" you meant specifically "not spending".
Then "taking risks by putting resources to productive use" is just a fancy way of saying "producing"
So, you're saying that people not spending is bad because it discourages people from producing.
In a market economy, the optimal level of production is the level that satisfies the desired level of consumption. If people want to save more, and therefore consume less, and as a result we also produce less, that's not bad. That's how the economy is supposed to work.
You're assuming that "the desired level of consumption" is a constant. It's not. It's a function that depends on circumstances. People discover new things, and some of those discoveries lead to desires that were previously unknown or even unimaginable. It would never even occur to our neolithic ancestors to want an iPhone or a Tesla. But some of our ancestors wanted to discover new things, and some of those discoveries naturally lead to discovering new things to want.
And that's not even mentioning the fact that one of the things that people naturally want is to have children, which leads to more people wanting things. So even if the things they want are the same old things, demand will naturally grow as the population increases.
Such a person may not need to produce because their savings exceeds their total expected lifetime demand. And even if they had 80% of their assets invested, thry still may want a 20% cash buffer in case their investments go belly-up. Most people call this an emergency fund.
The idea of expiring money is plain dumb. We don't need to artifically increase the velocity of money. We don't need to increase demand for assets because people have time-constrained purchase windows. All that would do is lead to a lot of poor decisions as people scramble to find the most efficient ways to convert the expiring money into convertable value stores. Of course this would just increase demand and make those value stores more expensive. Some will be able to arbitrage market inefficiencies. I bet a whole lot more would just lose.
How would you save up cash for a good investment opportunity if it just died? How would people save for house down payments or businesses? So dumb.
Before publishing thr above, I decided to try reading the article. This Gisell dude is an idiot. Here is an example, and where I stopped reading
> The faults of money go further, Gesell wrote. When small businesses take out loans from banks, they must pay the banks interest on those loans, which means they must raise prices or cut wages. Thus, interest is a private gain at a public cost.
There is no public cost! The private bank lent money to someone they expect to pay it back. They make money if they're paid back and lose money if they don't.
The business, which would not exist without the loan, opens and brings more supply to the market. Increasing supply lowers prices (public benefits). The business emoloyes people. Those people choose to be employed at a given rate, even if that rate is lower than it could be if the business, which would not exist without the loan, didn't have to pay interest on its loan. (job creation: public benefits). The alternative presented is raising costs of goods. Okay... Either they raise them too high and have no customers and then go out of business and all concerns are washed, or they have higher prices than otherwise. But otherwise means there's no business and nothing to buy anyway, so here again thr public clearly wins. The only maybe scenario for public loss is if thr bank makes a loan thay isn't repaid. But obviously this is expected to happen from time to time, so either the losses are absorbed by the other profitable loans or the bank eventually goes out of business. Big deal. That's part of choosing a bank for bank consumers.
That depends on how fast it died. Too much inflation is clearly bad, but so is none at all. And deflation is really, really bad. The last time the world saw deflation was during the Great Depression of the 1930s.
Empirically, 2% seems to lead to pretty good outcomes by my personal quality metric. That's a halving of value every 30 years or so, which seems about right to me.
(the later has an interesting side effect as it would incentive to make transactions legal)
"Ich möchte das nochmal klarstellen, ich redete (schon was her) nicht von 'Zinsfrei' in Umlauf gebrachten Geld, aber sehrwohl und im Interesse aller Beteiligten, von Schuldfrei (i think 'debt-free money' would be the word in english, and against debt driven creation of money) in Umlauf gebrachtem Geld."
And explicit nothing from the Muzzies "economical"-stuff!
- Mac McDonald, It's Always Sunny in Philadelphia
The main difference seems to be the current system runs on the Cantillion effect, where those in favoured positions (close to where the money is created) benefit from the inflation, while those farthest away bear the cost. In effect, it is the rich who are able to borrow direct from Central Banks and Government Treasuries get negative effective interest, and are able to parlay that into charging more interest to those farther down the chain, until you hit people paying 20+% on credit cards and payday loans.
But as far as the perishable money, there are currently places like Turkey and Argentina where inflation is far higher than Gesell's proposed 5% inflation. Are those countries flourishing as a result of local inflation? It doesn't seem that way.
"The 2 percent target widely adopted by central banks today originated from New Zealand, and surprisingly it came not from any academic study, but rather from an offhand comment during a television interview."
https://www.cfr.org/blog/history-and-future-federal-reserves...
Add: "Investment is the production of capital goods, and the production of capital goods involves consumption."
and: "Are those countries flourishing as a result of local inflation? It doesn't seem"...so
...Question I have: "This disinflation, i.e. near or almost deflation, been first contested - because some things actually became truly expensiver, but to determine inflation you did not need to calculate it as an average?", i want to ask.
*https://www.econ.iastate.edu/ask-an-economist/why-would-chin...