Gesellian Monetary Policy

Gesellian Monetary policy is, basically, the idea that you tax money. Gesell himself suggested you stamp money. Not much fun for savers, you might say. But money is an illusory asset: it is not backed by any real asset. Keynes argued that because the supply of money could not increase when demand increased, the existence of money (especially inflexible money ie gold) caused recessions.
Keynes argued there were two ways out of this conundrum -- a flexible money supply (central banking), or gesell's idea of taxing money.

Keynes argued that there are two problems with Gesellian monetary policy. The first set are to do with practicalities - stamping money is costly and could be faked. The second is that another commodity (land, precious metals, foreign currency) would step in as a store of value, replicating the role of money and leaving us no better off.

But there are solutions to the practical problems. One which I read about was to perform a lottery on the serial codes of banknotes. Another would be to impose chips on coins and notes. All these I find unconvincing. There's a better way. Separate bank money and currency so there is a separate cash pound (the british pound) and a bank deposit pound (call this the british 'sterling'). Instigate a given but slowly changing exchange rate between the two. Then tax the deposit pound and slowly devalue the cash pound relative the deposit sterling.

What do you do with the taxed deposit sterling? If you destroy it, isn't this the same as doing nothing in pounds terms? (It depends what transactions are written in: pounds or sterling). If you reintroduce it, isn't this the same as printing money?

(In regard to the second set of problems, you could tax them too; at some points asset inflation might not be a bad thing.)

An interesting thought experiment.


Stephen Stretton said...

Of course, what has changed is that interest rates could be arbitrarily negative at least in sterling (if not pound) terms. People might keep contracts in pounds however which might defeat the point...

ornithosaurus_rex said...

Some news in this front.
I created a (potentially global) monetary infrastructure inspired by the ideas of Gesell and the work of Colin McKay of Deror... you can read about it here:

This currency, being virtual and controlled by several logical rules which ensure its relative superiority, can only be used within the framework provided by the beaverteams platform (it is non-convertible, for example).

(By the way, my system is fun for savers too, as Gesellian rot on money's value is not applied on the savings account).