Miracle of Wörgl
alexstonethinkingstrings.com
alexstonethinkingstrings.com
afaik - i'm a software-developer, not an economist - it was an implementation of the following:
the english term
* https://en.wikipedia.org/wiki/Demurrage_(currency)
in german "schwundgeld"
* https://de.wikipedia.org/wiki/Umlaufgesichertes_Geld
ps. the submission caught my eye, because i live in the region:
* https://www.openstreetmap.org/relation/1016862
cheersv
> 32,000 schillings were printed (in denominations of 5 and 10 sch.), but only 12,000 schillings were issued by the parish by paying its workers.
> The local currency was redeemable, on demand, for official currency, but there was a 2% fee on such redemption.
> For each schilling of local currency issued, one schilling of official currency was deposited (at interest) in a bank account to cover demands for redemption.
> The depreciation (demurrage) rate was 1% per month. This was called the ‘Relieftax.’
> In order for a note to maintain its full face value, it was necessary to affix a stamp at the end of each month. these stamps could be purchased at the parish office.
> The notes expired at the end of the year, but could be exchange, free of charge, for new ones, so long as all the necessary stamps had been affixed.
…
> Another major ‘gain,’ which von Muralt mentions in passing, is the windfall profit associated with the substantial amount of local currency which was never presented for redemption. He says, ‘However, of the 12,000 schillings worth of relief money issued, only about two-thirds is in circulation. The remainder has disappeared, having been annexed by souvenir hunters and collectors. That such substantial amounts of depreciating money should vanish in this way, contradicts the theoretical intention which aims at accelerating the circulation and not at hoarding. For the parish, however, the disappearance of notes is not unwelcome, since this represents for it a net gain.’ If the stated estimate is correct, this gain would amount to about 4,000 schillings.
So this is essentially about paying workers with a bond instead of with cash. It’s not something the workers would normally want to accept, but it’s better than nothing. (Presumably a worker who wanted to save would exchange their money for official currency?)
Although the circumstances are different and worse, it seems similar to how some local governments in Argentina were forced to pay their workers in script because they didn’t have the cash. [2]
If I build you a house for $10, then I pay my friend those $10 for a house, then he goes back to the original friend and paid them to build a house, we end up with $10 passed around and 3x magic value added to the economy (houses).
If I go to mars and become the first farmer, then pay 2 barrels of food for a house, then pay 1 barrel for a cobbler to make me shows, I’ve set the market price that a house is now worth 2 pairs of shoes.
I start a stock. I offer 1 million shares, I sell 50 shares to my friend for $10 each. The market cap is now 10 million.
What even is this fuzzy value thing we call currency? Seems like the only thing ascribing value is some powerful guy with a military behind them saying it has it.
State issued currency is exactly the same. The liability from the perspective of the state is that central bank issued money can be used to satisfy a tax liability.
It needs to be durable, transportable, divisible and difficult to counterfeit.
Famous example - cigarettes in a POW camp:
https://courses.cit.cornell.edu/econ4260/out/radford_pow.pdf
> The ownership of a large stone, which would be too difficult to move, was established by its history as recorded in oral tradition rather than by its location. Appending a transfer to the oral history of the stone thus effected a change of ownership
Compare with locations in a memory palace:
https://en.wikipedia.org/wiki/Method_of_loci
And to show that memory and consensus are what's important, it doesn't even matter if you lose the stone:
> In one instance, a large rai being transported by canoe and outrigger was accidentally dropped and sank to the sea floor. Although it was never seen again, everyone agreed that the rai must still be there, so it continued to be transacted as any other stone.
The military thing absolutely ascribes value, but so does every other human interaction with a thing, value is something we all hold in our minds, if you want it and I have it, it's valuable, if not, it's worthless. There's no magic regarding money in this equation.
Edit: moreover, most money is created to support activity in which the two sides cannot be matched at all, because one side doesn't exist yet, specifically loans. It's hard to see how some hypothetical perfect exchange mechanism would deal with disparities in time.
I go to mars and build a shoe factory. I produce and sell shoes for a fraction of a barrel of food. I buy your house for two pairs of shoes. Now you are homeless.
> Wörgl was the site of the "Miracle of Wörgl", beginning on 31 July, 1932 during the Great Depression.
> the "experiment" was ended by Austria's central bank Oesterreichische Nationalbank on 1 September 1933
So all the fancy demurrage stuff could not have had much effect at all. Sounds like they could have issued pretty much any kind of currency with the same end result. With that time period being economically tumultuous in general, drawing any sort of conclusions is pretty much impossible. Maybe the biggest learning here is that rallying local community around some stunt like this can provide genuine, if temporary, boost to the local economy; the exact details of the thing matter less if you just get community to buy into it.
It was invented as a medium of exchange of value.
“For those of a religious bent, that is reflected in usury – the practice of lending money at unreasonably high rates of interest, so the money you give out comes back as more.”
Usury is any interest on a loan.
“That’s what caused Jesus to lose his cool at the Temple on the Mount.”
https://catholicexchange.com/what-did-jesus-drive-out-the-mo...
It is Krugman's baby sitting co-op. https://slate.com/business/1998/08/baby-sitting-the-economy....
However, it is also different in the sense that it remains very close to classical economics in every aspect other than money.
But then, who is going to accept your money? If you're the local baker, why would you take my money for the bread you made, knowing perfectly well that you're probably never going to get the chance to spend it?
Doing business on Dec 30 or even Dec 31 is the extreme case, but even before that it's an issue: the closer you get to the expiration date of the money, the higher the risk you're taking that you might not be able to spend it in time.
It is also why people don’t understand why mild inflation can be good
If gold was a store of value, then it would allow you to travel backwards in time, since the gold used to buy and sell a car today, could be used to buy and sell a car during the time of the Roman empire. In fact the entire concept of time simply wouldn't exist.
All "store of value"s therefore are either the result of fair negotiations in which case their supply would be bounded or they are the result of artificial interventions which will collapse over the long term.
After all, feudalism didn't last forever, so using land as a store of value doesn't work either.
People still conduct business at 2,5% inflation. Why would they stop at 0%? People conduct business in deflation too.
What if money expired? - https://news.ycombinator.com/item?id=38294275 - Nov 2023 (185 comments)
Pepsi controls 90% of the potato chip market.
6 companies provide ~80% of all products on the interior aisle shelves of your grocery store.
There is no universe where the quantity of money in pandemic stimulus even remotely approximates the total net price increase (inflation). Rather, the corporate net profit increase accounts for the vast majority of all inflationary pressures.
So stop selling in December? Damn in November even? Or increase prices?
The miracle was that this money did not have hyperinflation.
When national currencies collapse, local communities that issue scrip to facilitate ongoing commerce fare well.
You should think of it more using the transaction cost based approach. Government money is artificially scarce, therefore it has high transaction costs, therefore it hinders trade instead of facilitating it.
The purpose of the scrip is to issue a money that isn't artificially scarce so it's transaction costs are low. In this way you don't get a stimulus, rather you are getting rid of dead weight loss. A guy pulling a rickshaw is naturally going to fall behind someone who can walk without baggage. The point isn't to make the runner faster or stimulate his performance via some sort of doping.
Wot? Not sure how to respond to something so silly. I hope you mistyped. From whence does one derive their "money supply"?
Scrip is a placeholder for value like any other printed currency. It works well in place of debased government fiat, at least in times of trouble, because the web of trust at the local level is strong enough to back individual transactions.
Without the notion of investment, then you're limited to short-term superficial things that you can do or build.
In the end, the things people do and build are what money is for. It’s a medium of exchange and a store of value. If it fails at these things, the making grain to feed people or housing them still has intrinsic value. You just need a working medium of exchange to avoid having to use barter for everything. If people trusted the town’s scrip more than the national currency, then they would use that.
Investment in such a system would be in real objects and the means to produce them. Assuming people still cooperate and will accept your weird scheduled devaluation currency, then industrial society could continue to function and may even thrive, given people are incentivized to spend money which is the definition of economic activity.
Also, other financial instruments might not be affected. Shares of stock, for example, would be worth what people would pay for them. It’s just big piles of literal dollars that you should get rid of expeditiously.
Some call capitalism state-sponsored usury. I’m not sure I’d go that far. But money is sterile, “barren metal”, as “The Merchant of Venice” calls it. It cannot multiply. Only labor multiplies value.
Wrt the article, while the author does seem naive and no systematic thinking is demonstrated, you could store away valuable commodities, like gold. But it won’t breed for free. For more gold, you must work, or steal.
There is a risk that the borrower won't repay the loan, and this is priced in to the interest rate being charged.
I can use it for example to buy beer brewing equipment and a warehouse, which allows me to start a beer business which generates income.
Or I can lend it to someone. But then I can't do my beer business and am losing that potential income source.
If I don't get anything back from my lending, then clearly I'm losing out.
You seem to be thinking that the fact there is a bank involved somehow changes things. It doesn't, a bank is just another private entity, albeit operating within a regulated framework. It doesn't make money out of thin air. Money it gives to you for your house is money that cannot be invested in other opportunities.
To such a bank, national tender is actually pretty much a bond, and therefore they can issue more of it.
No such bank sells mortgage products to retail customers.
Central banks operate exactly the same way as commercial banks, just the money they create flows in a different circuit.
(Taleb's "Skin in the game" talks about this a lot. _Great_ book.)
The lack of shared downside is pretty much universally objectionable - nobody likes anybody getting something for nothing - and different societies deal with it differently. Some societies just flat out banned lending for interest. Most societies today allow lending, but have get-out clauses, like bankruptcy, to prevent de facto slavery. The US has particularly generous (to the debtor) bankruptcy laws, AIUI.
Aside: Europeans are often horrified at the US's putative bankruptcy system for surprise medical bills, because they imagine bankruptcy is like it is in their country - where you lose everything, including even your home, you have basically no way of starting over, you can't be e.g. a company director for potentially years, and you carry a stigma for life, and even your kids might carry the stigma. Yes, the US's medical bankruptcy thing is pretty horrible, but bankruptcy in the US isn't anywhere _near_ as terrible as it is in e.g. Ireland. You likely won't lose your house; you're not going to starve; you can totally start over, there needn't be _any_ shame involved. Most debts will be just ... written off, some will be "restructured". It's very pragmatic, AIUI. (ICBW about all this, and I've no doubt there are horror stories, but I suspect they are very much the exception. Counterpoints welcome!)
Still, most states in the US ban "usury" - "too much" interest.
[0] Even societies that tolerated slavery didn't want it for "people like them".
The movie references the book Silvio Gesell - The Natural Economic Order - https://en.wikipedia.org/wiki/The_Natural_Economic_Order
Human productivity would easily double or triple without the need for any new technological invention, if we were freed from the shackles of the debt based currency system. But for that to happen, a radical change in how we as humans perceive the world and our own lives is needed. As long as the money masters have a tight grip on the souls of the majority, they can strike down any threats with ease.