Another big difference is the Cantillon effect. Monetary inflation tends to benefit those closer to money creation (financial institutions, large corporations) while disproportionately eroding everyone else's purchasing power. Whereas demurrage equally pressures every holder to spend, disproportionately eroding the purchasing power of those who hoard.
That's an important question. Fortunately, Gesell addresses it in his book. Here's what he says:
“All the commodities of the world are at the disposal of those who wish to save, so why should they make their savings in the form of money? Money was not made to be saved!”
In other words, there are a nearly infinite number of ways to accumulate wealth for the future. Buy stocks, invest in a business, buy gold, art, collectibles, oil, livestock, grow crops, etc. The ONLY thing that should not be used as a vehicle for long-term storage of wealth is the generally accepted, legal tender medium of exchange, which should be thought of as a public utility, not a form of private property. Allowing people to use money as a means to store wealth is like letting them park their cars in the middle of public roads.
Absolutely! Gesell agrees 100%. In fact, the first two sections of his book deal exclusively with the land question. He only gets to the monetary system in section three.
Gesell agrees with Henry George that private ownership of land is one of the primary drivers of poverty, wealth inequality and economic instability. However he proposes a more radical solution. George proposes to deal with the problem via land taxation. Gesell argues that a land tax won't fully solve the problem and that the only real solution is to nationalize all land and then have land use determined by competitive bidding for leases. (He doesn't call for expropriation of existing landowners, by the way. He proposes buying their land at market prices, financed by issuance of public debt. After the 20-30 years it would take to retire that debt, the state would own all of the land free & clear, and the revenue from land leases would be such a large source of public revenue that all other forms of taxation would likely be unnecessary.)
BTW, I will be teaching an online course on Gesell in January at The Henry George School. That will give me an opportunity to go into this subject in detail. I imagine there will be a spirited debate between the Georgists and the Gesellians!
good to hear you will be teaching via the HGS! Regarding how to implement LVT, there have been many advances since both Geselle and George considered how to do it. The chance of nationalizing the land is pretty much nil but it does not matter about the land title, it is the capture of the land rent for public goods that is the key and we can do that step by step. And along with monetary reform. Suggest you sign up for our IU newsletter (Intl Union for LVT) here. www.theIU.org
I am already on the distribution list for the IU newsletter. My friend and colleague, Carlos Louge, previously made an introduction with the IU.
Regarding your assertion that the chance of land nationalization is nil, I agree and disagree. I agree that it's not possible to accomplish in one fell swoop at the national level. That is why our organization is developing multiple models for local, community-level implementation of Gesellian principles. I believe that if we "go where they're not" and build an alternative model in places that are being ignored and left behind by the dominant economic system, that model could grow exponentially. If Gesell truly has a design for a superior economic engine, that could create the economic resources with which to purchase more and more land for conversion over to the Gesellian model. So that is my preferred approach. If you're interested, I wrote an article a while back on one of these models called "A Concrete Plan of Action". That idea has developed significantly since that article, but it will give you a general sense of the approach.
As I said, I expect to have a vigorous debate with the members of the HGS on the merits of land nationalization vs. land taxation, but at this point I'm quite firmly of the belief that land taxation is not the best solution. That is a very big subject and not one that we can really go into in depth here.
If it's on a local level, how will this local system interract with the state or world at large?
I mean they will still need to import many goods. Will this "outside" economics not affect local demurrage economics?
--
Another question concerning lending and borrowing. Why would someone lend money if they don't get interest for that? If I don't borrow from a friend or good-willed relative.
I'm trying to under Gesellism better. I am a Georgist: https://zerocontradictions.net/civilization/georgism-crash-course. Initially, I gave very uncharitable interpretations towards Georgism (which I now regret), so now I'm trying to understand Gesellism, with charitable interpretations.
Is this an accurate summary of your first argument?:
1. Inflation is defined as "a general rise in prices".
2. During recessions, prices tend to fall.
3. When prices fall and we can expect them to continue falling, commerce falls too. (because why would anyone buy something today when they will be able to buy it cheaper tomorrow?)
4. Recessions thus face a game theory problem: we want to increase commerce, but nobody wants to increase commerce if prices will continue to fall.
5. If prices are falling, then there is no inflation, by definition.
6. If there is no inflation, then there are no penalties for withholding money from circulation during a recession.
7. Thus, holders of money are rewarded for withholding their money from circulation during periods of falling prices. (because they are able to buy the same goods & services at lower prices in the future.)
8. This makes it difficult to increase circulation and end the recession.
9. Demurrage currency would encourage people to keep commerce going during recessions, unlike inflation.
Yes, all of those statements are accurate and consistent with Gesell's analysis. The only thing I would slightly quibble with is the description of the problem of recessions as one of game theory. While it's not necessarily wrong to describe it that way, I prefer to describe the problem as a result of an irrational decision to use a flawed form of currency as our medium of exchange. If it wasn't for that decision, the dynamic of falling prices leading to hoarding would be much less of a problem since virtually all forms of real, tangible wealth disincentivize hoarding by their physical nature. It is only because we created an artificial instrument that isn't subject to the laws of nature and rewards rather than penalizes hoarding that we experience the self-reinforcing dynamic of deflationary crises. So, yes, technically that could be viewed as a game theory question, but it's really just a reflection of bad human analysis and decision making causing an unnatural situation. If we eliminate the artificial hoardability of money, the problem would disappear, according to Gesell.
Another big difference is the Cantillon effect. Monetary inflation tends to benefit those closer to money creation (financial institutions, large corporations) while disproportionately eroding everyone else's purchasing power. Whereas demurrage equally pressures every holder to spend, disproportionately eroding the purchasing power of those who hoard.
My concern and question is about saving for a rainy day or saving for other purposes like buying a house. how can one save with demurrage?
That's an important question. Fortunately, Gesell addresses it in his book. Here's what he says:
“All the commodities of the world are at the disposal of those who wish to save, so why should they make their savings in the form of money? Money was not made to be saved!”
In other words, there are a nearly infinite number of ways to accumulate wealth for the future. Buy stocks, invest in a business, buy gold, art, collectibles, oil, livestock, grow crops, etc. The ONLY thing that should not be used as a vehicle for long-term storage of wealth is the generally accepted, legal tender medium of exchange, which should be thought of as a public utility, not a form of private property. Allowing people to use money as a means to store wealth is like letting them park their cars in the middle of public roads.
Thanks Josh. I would add that investing in real estate speculation and land hoarding is wrong. What does Gesell say about the Land Problem?
"allowing people to using LAND as means to store wealth is like letting the park their cars in the middle of public roads." - alanna hartzok
Absolutely! Gesell agrees 100%. In fact, the first two sections of his book deal exclusively with the land question. He only gets to the monetary system in section three.
Gesell agrees with Henry George that private ownership of land is one of the primary drivers of poverty, wealth inequality and economic instability. However he proposes a more radical solution. George proposes to deal with the problem via land taxation. Gesell argues that a land tax won't fully solve the problem and that the only real solution is to nationalize all land and then have land use determined by competitive bidding for leases. (He doesn't call for expropriation of existing landowners, by the way. He proposes buying their land at market prices, financed by issuance of public debt. After the 20-30 years it would take to retire that debt, the state would own all of the land free & clear, and the revenue from land leases would be such a large source of public revenue that all other forms of taxation would likely be unnecessary.)
BTW, I will be teaching an online course on Gesell in January at The Henry George School. That will give me an opportunity to go into this subject in detail. I imagine there will be a spirited debate between the Georgists and the Gesellians!
good to hear you will be teaching via the HGS! Regarding how to implement LVT, there have been many advances since both Geselle and George considered how to do it. The chance of nationalizing the land is pretty much nil but it does not matter about the land title, it is the capture of the land rent for public goods that is the key and we can do that step by step. And along with monetary reform. Suggest you sign up for our IU newsletter (Intl Union for LVT) here. www.theIU.org
I am already on the distribution list for the IU newsletter. My friend and colleague, Carlos Louge, previously made an introduction with the IU.
Regarding your assertion that the chance of land nationalization is nil, I agree and disagree. I agree that it's not possible to accomplish in one fell swoop at the national level. That is why our organization is developing multiple models for local, community-level implementation of Gesellian principles. I believe that if we "go where they're not" and build an alternative model in places that are being ignored and left behind by the dominant economic system, that model could grow exponentially. If Gesell truly has a design for a superior economic engine, that could create the economic resources with which to purchase more and more land for conversion over to the Gesellian model. So that is my preferred approach. If you're interested, I wrote an article a while back on one of these models called "A Concrete Plan of Action". That idea has developed significantly since that article, but it will give you a general sense of the approach.
As I said, I expect to have a vigorous debate with the members of the HGS on the merits of land nationalization vs. land taxation, but at this point I'm quite firmly of the belief that land taxation is not the best solution. That is a very big subject and not one that we can really go into in depth here.
If it's on a local level, how will this local system interract with the state or world at large?
I mean they will still need to import many goods. Will this "outside" economics not affect local demurrage economics?
--
Another question concerning lending and borrowing. Why would someone lend money if they don't get interest for that? If I don't borrow from a friend or good-willed relative.
This then sounds like a solution for a problem that doesn't exist. No one would recommend people keep their savings in liquid cash.
As an aside, it is quite ridiculous that we allow people to store their cars on public roads, even if it isn't the middle of the road.
If you'd like to understand why it's a very real problem with vast consequences, check out our video course, which can be found here:
https://silviogesell.com/video-course/
I'm trying to under Gesellism better. I am a Georgist: https://zerocontradictions.net/civilization/georgism-crash-course. Initially, I gave very uncharitable interpretations towards Georgism (which I now regret), so now I'm trying to understand Gesellism, with charitable interpretations.
Is this an accurate summary of your first argument?:
1. Inflation is defined as "a general rise in prices".
2. During recessions, prices tend to fall.
3. When prices fall and we can expect them to continue falling, commerce falls too. (because why would anyone buy something today when they will be able to buy it cheaper tomorrow?)
4. Recessions thus face a game theory problem: we want to increase commerce, but nobody wants to increase commerce if prices will continue to fall.
5. If prices are falling, then there is no inflation, by definition.
6. If there is no inflation, then there are no penalties for withholding money from circulation during a recession.
7. Thus, holders of money are rewarded for withholding their money from circulation during periods of falling prices. (because they are able to buy the same goods & services at lower prices in the future.)
8. This makes it difficult to increase circulation and end the recession.
9. Demurrage currency would encourage people to keep commerce going during recessions, unlike inflation.
Also, I will suggest the following essay, since it caused me to greatly improve my writing (and perhaps you as well?): https://dilbertblog.typepad.com/the_dilbert_blog/2007/06/the_day_you_bec.html
Yes, all of those statements are accurate and consistent with Gesell's analysis. The only thing I would slightly quibble with is the description of the problem of recessions as one of game theory. While it's not necessarily wrong to describe it that way, I prefer to describe the problem as a result of an irrational decision to use a flawed form of currency as our medium of exchange. If it wasn't for that decision, the dynamic of falling prices leading to hoarding would be much less of a problem since virtually all forms of real, tangible wealth disincentivize hoarding by their physical nature. It is only because we created an artificial instrument that isn't subject to the laws of nature and rewards rather than penalizes hoarding that we experience the self-reinforcing dynamic of deflationary crises. So, yes, technically that could be viewed as a game theory question, but it's really just a reflection of bad human analysis and decision making causing an unnatural situation. If we eliminate the artificial hoardability of money, the problem would disappear, according to Gesell.