Table of contents English 3

1) Picture of Silvio Gesell

2) Rusting money!

3) Possible Y2K problems in small towns.

4) The do and do not's of (alternative) money.

5) US Debts

6) Alternative Currency

7) The costs of a money with demurrage.

8) The horror of compound interest.

9) A new law for all money issuing banks, also a bylaw for local alternative money

.10) How much does Free money cost?

11) How should Freigeld be introduced as alternative local currency and who should manage it?

12) Why was such a simple solution to our economic ills not introduced a long time ago?

13) Some additional thoughts about an alternative local medium of exchange.

14) What to use as store of value instead of the unsuitable Grand Fork Credit Bonds!

15) The two absolutely necessary attributes of alternative money (or all money if it is to be honest measure).

16) Some practical questions and answers about alternative mediums of exchange.

17) The curse of money.

18) The power of money.

19) What determines the price of a good and what determines the price or worth of the measuring stick for goods, money?

20) The power of alternative money with demurrage.

21) The value of money!

22) How to measure the value of money.

23) Ersatz for money, barter or book keeping of credit?

24) The forgotten third man!

25) Where Arthur O. Dahlberg sees it wrong!

26) The quantity theory of money!

27) How safe is your money in the banks after Y2K?

28) Again the law of supply and demand!

29) Demurrage 3% or 104% a year?

30) How much?

31) What costs are involved with Free Money?

32) The basics of alternative money

.33) Successful Freemoney in history

36) A serious Question

37) 48% Demurrage Fee

Silvio Gesell noticed that money with a stable or rising value lost its ability as a medium of exchange and was not invested if the promised interest of available safe assets sunk below 3 %. The only way to have a stable currency without inflation and still keep the money in circulation he found, was to introduce a charge on idle money. He called this money Freigeld which translates as Free Money. The charge was applied directly to money and the original idea was to do it in form of stamp scrip.

This forces the money into investment even if the interest falls below 3 %. It is the crux of the matter and it is understandable that all who believe that they are profiting from high interest rates are against such a reform. They would gladly accept a stable currency and would like falling prices even better but never at the cost of falling interest rates.

The people who have to pay the interest rarely realize how much they have to pay because the never consider the interest they have to pay hidden in the prices of all goods. This makes it easy for the real beneficiaries and their paid servants to keep the mass of people from this knowledge and they can prolong their stay on the fountainhead of eternally flowing income without work for ever. If only people would realize that they do not need the money which gives this tiny minority the power to charge interest the power of money would be only a memory in a few short years.

It is so simple that a child can understand it. The money of today and all the money in history with a few short exceptions always had a predominance over the goods and services it was supposed to help exchanging. Contrary to goods it does not rust or get moldy or out of fashion and contrary to a service provider it does not have to eat. This superiority can ask for a price. In trade money can demand a price reduction and when lent out it can ask for interest.

Interest and especially compound interest in the hands of people who have so much money that they cannot spend even part of their interest income any more acts like a powerful pump sucking money away from people who need it and would spend it to people who are only interested to find profitable assets, where other people work hard to pay them interest.

As long as they can find such people and assets, they will invest. There is only one problem. For these assets to be profitable the goods which are produced with their help must be sold with a profit high enough to pay this interest. If the people who have the money are not buying, who is? A temporary solution to the problem was found when they invented consumer credit but this only added to the interest income for the rich and more pressure to find suitable assets.

The different and ever increasing assets are in competition with each other and this pushes the interest rate down. If the rate reaches the ominous 3 % barrier money gets leery because there is not much room left for errors in judgement whether an asset will really make enough profit to pay interest at all.. These people know from history and experience that in such a case it is better to withhold investing because the following money squeeze will increase the worth of their held back money by more than they could have gotten from interest. (From 1930 to 1936 during the great depression the worth of money rose by 10% each year and some assets lost more than that)

The system works like that since the invention of money even if sometimes slow inflation supplies an incentive to keep money in circulation. In this case money is not stupid enough not to realize what is happening and its owners simply charge an additional inflation premium on top of the usual interest Only if inflation gets out of hand (which did not happen with a working gold standard) money loses its ability as medium of exchange and therefore its power. By this time big money will be safe in real assets.

Before they let inflation go out of bounds they try some other policies but even a 5 % inflation cannot force money into investing if there are no assets around which are profitable enough. This is called stagflation and in such a case money goes to ever more risky investments and by doing that drives their prices up and up as can be seen in the stock exchanges now. Here also you can count on it, that the big players will have left when the bubble bursts.

First, as long as small towns are not close to mayor cities, they will probably escape the worst. If interruptions occur, they will not cause real hardship as long as people are prepared. They do not have to go overboard, stocking up on freeze-dried food for years, including water , weapons and bomb-shelters but a few basic precautions would not be amiss.

The three basic needs, water, food and shelter should be secured for at least three months. By then most problems should be solved and it will be business as usual.

This does not mean that there will not be severe, maybe life-threatening, problems for people with special needs and they will have to prepare even better.

There are many things one has to consider.

You might think , for instance, that you have more than enough food in your deep-freezer, but what will happen if the electricity is not there anymore? You might think, that you have plenty of money on your account and the bank computers wont work. How much cash do you have for this contingency? ( Mind that in case that the money in your pocket gets worth less with possible inflation so does the money on your account) Is it worth the quarter per cent the banks pay now on a savings account to take the chance?

Or is it better to have at least a three to six months supply at hand?

I know that this might cause some problems for the banks, but if they cannot handle it, the small towns will have to issue their own local money, as they did in Europe under the same circumstances. There is no need for huge amounts of money. The best documented experiment, the so called miracle of Woergl, a small town in the Austrian Alps had on the average only 5,293 Schillings in circulation, which was only about one Schilling for each inhabitant.

The buying power of the Schilling at the time (1932) was about the buying power of a Canadian Dollar of 1980 or of nearly two Dollars now.

This small amount of circulating money moved nearly three millions worth of goods and services, reduced unemployment by 25% and financed 160,000 Schillings worth of public works in one year.

Considering this numbers and applying them to Grand Forks, which has nearly the same number of inhabitants as Woergl had, 10,000 Dollars worth of local money, could do the same and because it would be local money the business and the profits would stay in the community.

It could be backed by the slag heaps and should have a few other small attributes to keep it in circulation, such as guaranteed purchasing power and an expiration date at which date one could exchange it for new money for a fee of 5%. This fee is necessary to keep the money in circulation and would amount to only 500 Dollars worth, against a possible 5 Millions worth of business. These are the numbers from Woergl! They could easily be surpassed, but not with a money like Irving Fishers stamp script with 104% yearly demurrage. They could be surpassed by a money with less demurrage than the money of Woergl which had 12%.

The smaller the demurrage the easier the money will be accepted, but there has to be some to keep it in steady circulation and only steady circulation will make it possible to adjust the amount of money in a way that it can keep its worth without inflation nor deflation. I have a reason to suggest 5% which could in time be reduced to 3% and it is not, that the originator of this idea proposed 5.2% but it would be much to technical, to explain it here.

There are not very many people alive today, who remember what happens, when money gets worth more, as it does with deflation. The last depression is more than 60 years in the past. Therefore I have to show, what will happen.

If people will keep money at home, it will be missed on the market and when you know that all the cash in circulation is only about a months worth of business, you will realize that the Y2K scare could suck all the money out of the market in no time at all. The banks are used to it, that money comes back to them and do not keep much cash on hand. So now they have to look elsewhere for the missing money, because less money on the market would mean deflation and nobody wants that.

There is only one place where they can get additional money and that is the National bank or the Fed in the states. They can print it, hut they are reluctant to do it, because they know that this causes inflation. Reluctant or not, they will have to let additional money via the commercial banks into the market and once it is there, it is out of their control.

Fact is, they have already printed a lot for that purpose and they will be forced to release it. Now, if the scare is over, or even before, People will notice that there is too much money around and too much money means, as we know only too well - inflation.

Now the fat is really in the fire and it would be nice to have a local money at hand, which is managed so, that it keeps its worth and buying power. The Government money, which disappeared from the market at first, threatening or even causing a deflation is now over-issued, which might end up in hyper-inflation.

This is a free translation of some work that was done by a few German scholars and should ideally apply to all money not only alternative one.

1) Money should keep its value or purchasing power indefinitely. The value should not be tied to a single commodity but measured by an index like a cost of living index or an index of wholesale prices.

2) Money should have some moving force applied to it to keep it in circulation. This cannot be done by moderate inflation, because this destroys purpose number one.

These two simple statements describe the crux of the matter and while the first is self explanatory the second one needs some clarification and some practical way to apply the moving force.

Since World War 2 the moving force was always moderate inflation in nearly all countries of the first world and high inflation only hit the countries of the second and third world. Even a country like Switzerland with the most stable currency of the world experienced a loss of three quarters of the value of the Swiss Franc since then. As long as the moving force is not applied in some other way this is the best they can do and the worst is that either inflation goes out of hand or deflation kills the economy.

This other way was stamp scrip in Woergl or periodic re-minting during the times of the Gothic and there was also some demurrage on the old clay tablets that were used as currency in ancient Egypt.

In Woergl this demurrage (one could also call it a tax on idle money) was applied by a monthly stamp worth 1% of the face value that had to be affixed to the bills. It worked marvelously. Irving Fisher made the mistake of propagating 2% weekly, a whopping 104% a year and this, of course, could not work.

Now, mainly though the work of the above mentioned scholars, a much simpler way to apply the moving force that is also suitable for alternative money like in Woergl, was developed.

In short, it is the idea of expiry dates on the bills, which have to be exchanged at this dates for new ones. At this time the moving force in form of a 5% discount is applied. This prevents excessive use of money as a store of value while still allowing it to be used as medium of exchange nearly free of cost. In fact the cost is much less than any other means like credit cards or bank transfers.

The moving force is with this method applied directly to the bills and not like with inflation only to their value. Therefore the value of the bills can be kept stable and money could keep its worth indefinitely.

It would also find its way of being invested into assets, even when they do not promise high profits any more. It is better to invest even at 0% interest than loosing 5% a year by keeping money idle.

This shows the real debts of the richest country in the world and even if politicians ooze confidence and start dividing up the budget surplus there is no question of paying back some of this debts.

So far the creditors accept even the interest payments by extending more credit because they do not want to topple the giant with the feet of clay. By trying to collect some of the outstanding debt, they would do that and then all the IOUs would be worth very little. It is the same as if somebody has borrowed recklessly to a bad risk and then tries to collect. Trying too hard might force the debtor in bankruptcy and the debts go up in smoke.

The reason, I put this on the page about Y2K and alternative local money, is, to show that not even the states have spare cash to tide people over the possible problems. It is up to everyone to prepare himself and help his neighbors to be prepared also and not to expect any help from the government. It will have enough troubles of its own and I doubt if many governments will even survive.

Most currencies of the world are far from stable and even the more stable ones lost 80 to 90% of their purchasing power since World War II. Specially the American Dollar, which lost 90%, is heavily over issued and avoids inflation only though the fact that it is used as the worlds reserve currency and the poor countries sell cheap goods to the American market, which keeps the prices in the US down.

The drawback of this system is the mounting trade deficit and the slow destruction of the American agricultural and industrial infra structure. The reason for this is, that they cannot compete with factories which pay their workers only peanuts. Therefore nearly all multinational companies transfer their production more and more to such countries.

On the other side, if the US would close their market, thereby throwing this cheap workers out of work, who could prevent them from moving by any means available into the rich promised land. Germany and to a lesser extend Canada are facing this problem now. This is the curse of globalization.

But we were talking about currencies. See, in order to avoid an collapse of some countries, the IMF has to back them up and, as happened just now, sometimes debts have to be forgiven. So, what happens then? Having gotten rid of the debts, this countries can make new ones. Fine! And they buy now again goods from the countries who forgave the debts - on credit! The question now is - who pays for this in the end?

To ask this question is to answer it. The taxpayers of the richer countries! So far so good, as long as they can afford it, a few warlords in some third world countries, will get richer and will spend some of the money for luxury goods and weapons in the richer countries. Their poor people will not see much if it and sooner or later they will revolt and it will not take long, if they are successful against the modern weapons the former leaders and their henchmen can muster against them and the new leaders will play the same game. As long as there is some leftover value in the factories or farms of the former owners they can pay their own henchmen and can therefore stay in power for quite a while.

But everybody seems to forget the people who are paying for all of this. Who are these taxpayers? One thing is sure. It is not the multi-national companies. They are asking for tax breaks, these corporate welfare bums. It cannot be the homeless and the unemployed in the richer countries and for sure it is not the super rich in their tax heavens. Who is it then?

Yes! Take a mirror and look at the fool. As long as you still have a job and earn some money, you probably do not lose much sleep thinking about it, but you should at least remember that your job is only safe, if whatever you produce for your employer is worth more on the free market as what you cost him on wages. Enough more to allow him some profit or else he will let you go.

If you are self-employed the same holds true. You have to be able to sell your wares or services on the market, not only covering your costs but also make a profit and pay taxes. As you all know, this is not always easy and it is no secret that most new enterprises fold within a couple of years and the entrepreneurs and their employees join the ranks if the unemployed.

If you are paid by the state in one way or another, you might have a job, which is a little bit safer, but you see, the state has to collect what it pays you in taxes including the taxes you have to give back in turn. Therefore you are sitting in the same sinking boat and if the government runs out of money, it will dump you too.

But what else is there? Diamonds? Precious metals? Artworks? Yes!! They have their use if the troubles are localized and one has time to flee with them to a safer place. In the troubled land they are more of a danger than they are worth. Food, shelter, warm clothing and good neighbors are worth more and a functioning trading or barter system would be a good thing which could keep the division of labor on which our civilizations depends humming along at least locally and even when inflation or deflation destroys the currency system of the world.

We wanted to talk about an alternative local currency which would take over if the other currency goes unstable and cannot serve as medium of exchange any more, as happened during the big depression though deflation and in many countries through the opposite - galloping inflation.

The first thing which this local currency must have to work for any length of time is a exchange-rate, because otherwise it would follow willy-nilly the way of the other currency.

Secondly it would have to be managed so that it would keep its purchasing power, neither losing or gaining in value. One is a betrayal of the lenders and the other one would ruin the debtors and makes trade impossible.

The third necessity is some means to keep this currency in circulation, because without inflation it would stop circulating just as it does during a deflation.There is no way around this.

Without some kind of demurrage on money only inflation or high interest keep it circulating. We want neither of them. We want zero inflation and, if possible, zero interest.

Zero inflation is no problem for the relatively small sums of local money necessary. The issuing agency can hold any exchange rate it desires by the price it pays and charges for the currency and can therefore hold the price which the index indicates for a stable money.

There is only one way to keep money in circulation, if inflation is not doing it and interest bearing assets which pay more than 3% are not available any more. It is the use of non-hoardable money as Silvio Gesell proposed more then 100 years ago and as was used during the Gothic times. More recently such a money was used in a small town in the Austrian alps 1931/2. It is well documented and every community which would like to introduce such a money is well advised to study the example of what was called the miracle of Woergl.

In the middle of the severe depression at that time and with only an average of 5,300 Schillings worth of the alternative currency they generated business of nearly 3 millions including about 200,000 worth if public work and reduced their unemployment by 25%. After 14 months the powerful Austrian National Bank succeeded to have it forbidden. They were afraid that 5000 Schillings worth of alternative money would show up their feet of clay.

In our proposal for alternative money, we remarked that each money where inflation does not supply the driving force some kind of tax on idle money must be introduced, because only then can the circulation and the stable value be guaranteed.

We suggested 5% per year.

How much would this cost an average citizen, who earns 50,000 Dollar and saves 10% of it? First, his costs do not depend on his income, only on the amount of cash, he keeps on hand. If he keeps 1000 Dollars as cash it will cost him exactly 50 Dollars, if he keeps 100, it will cost him 5.

If he should decide to keep all his savings of 5,000 Dollars as cash, he will have to pay 250, but this would be a silly thing to do. Just as today, he can bring this money to the bank and while they might not pay him much interest, they will lend it out to somebody, who in turn takes over the payment of the demurrage as long as he keeps it as cash and so on and so on.

On the 45,000 Dollar of his income which he uses to pay his bills there is no costs at all. In other words, it could cost him as little as 5 Dollars for 45,000 worth of turnover and as the same applies to all citizens the costs of this miracle money are very low.

It is, as Jesus said: (Matthew 11:30) .. the yoke I will give you is easy, and the load I will put on you is light.
Only about 0.1% of your income, to be exact.

Now you might think 3 to 7% interest is peanuts, but with compound interest money doubles every 20 years with 3.6% interest and doubles every ten years with 7.2%. This means that on the other hand debts, where the interest is paid only by new debts also double within the same times.

And this is not all. Because money only gets invested into interest bearing assets all capital goods in this world must bear the same interest and labor has to pay interest to them as well. The owners of money and capital goods collect so (7.2% interest assumed) within ten years all the riches of this world once again on the work of their interest slaves. I know this sounds unbelievable, but I challenge you to use a calculator and do some compound interest calculations. You will be tempted after that to quit work for good or, hopefully, try to find out more about the man Silvio Gesell who showed us the way to overcome this interest slavery.

Of course, you can also, without a calculator, dismiss it as nonsense and keep paying, because I do not think that you belong to the less than 1% of people in these world who really profit from the system. Or just think that ignorance is bliss and in the end we are all dead as I am sometimes tempted to do.

Somewhere else on these pages I have a letter to Milton Friedman, where I tried to show how compound interest works, and he sent it back with the remark- nonsense, so, I guess, he did not use a calculator. Yet, and I say this without sarcasm, is he one of most brilliant minds in the economic field. If even he is blind to the problem one does not have to wonder about the shape the worlds economy is in.

Money is not invested in assets which do not promise at least a return of 3% and if the work of the people produces so many capital assets that the competition among them forces the profit which can be earned with them down under this level, money goes on strike.

Now the only way to get it back into the market is to print extra money thereby causing a slight inflation. (I say printing, to simplify understanding. Expanding of credit by the money issuing bank (the Fed) is the same). This does nothing to break the power of money. It simply demands an additional inflation premium on top of the normal interest rate, so it still gets the real 3% interest. As long as there are people willing and able to pay this interest, money gets invested and gets added with compound interest to big money while the debtors get squeezed within an inch of their lives.

Now, if big money runs out of people able to pay interest they start to fight amongst themselves and the only way they can do this, is by destroying the capital assets of the competitor and the horror of compound interest ends in the horror of first economic and later shooting war. The economic fight goes on forever and it is not the fault of the actors that the forces of money wreck the economy every few years. Take a trader, and everybody is one even if it is not so clear-cut to see, who buys and sells goods. He is at on time the temporary owner of money and can use the power of money to blackmail a cheap price from his supplier,(he has to do it, or he will never be able to sell the goods, he bought, with a profit.) but once having done this he is at the mercy of other people with the power of money to sell them the goods before the spoil, go out of fashion or meet with cheaper competition. The only people who seem to be above this problem are the traders in money, the banks.

One might think, that they can use the power of money always.

This is only partially true. They are dependent on people who are willing and able to pay interest and eventually pay back the loans. In some countries they have run out of them already and if they have to write of bad debts and people do not trust them any more as now is the case in Japan they get into troubles fast.. The National bank can only bail them out in a limited way if they do not want to risk inflation.

I also do not think that banks can last long with a system where they pay only 0.25% in savings accounts while charging 18+% on creditcard credits. A monopoly who does that calls for competition. There is also the fact that they trade in a potentially unstable good, where all the money in the accounts including the compound interest can go up in smoke, as it did in many countries in the past already.

Now we are on the verge of a global blowup like this and I wonder how the economists of this world will afterwards explain why they did not realize it ahead of time. I also wonder, if the people who do know, will be able to introduce a stable medium of exchange in time, following the blowup before deflation and depression and world wide unemployment flare up into yet another world war.

The institution which has the privilege of supplying a community with the medium of exchange has the sacred duty to do it in such a way that this currency shall keep its value measured with an agreed upon index of prices.

Any unavoidable change of the value has to be acted upon in a way to bring the average price level back to normal. This does not mean that every price in the basket of prices used in the index has to stay the same. All these prices are allowed to fluctuate as the law of supply and demand indicates. Only the average price level, which measures the value if a currency must stay the same and may not be allowed to fluctuate more than 1% either way during a year.

If necessary adjustments are done fast there can never be a run away inflation nor a run away deflation, but, of course, without demurrage on cash to keep it in circulation it will not be possible.

We have on this pages written about the benefits which Free money (or Freigeld as Silvio Gesell called it) will bring. An end to unemployment and an end to interest slavery and even an end to the possibility of governments to make war just to name a few of them.

We also know that it would cost 5 to 6% to keep money idle for a year, but we have not looked at what it would cost an average person, who earns and spends, lets say, 50,000 Dollar a year. The answer is simple. Nothing, if he does not keep any cash around. But, with demurrage, the banks will not carry daily accounts free of charge, as they do now because the demurrage on the necessary cash reserves they need for them will cost them money and banks are not known to do something at a loss.

The question is now. Pay some fees to the bank or pay some fee in the form of demurrage for the cash one needs to buy the daily necessities.

We leave the banks for the time being out of the picture, because their role in the only well documented experiment with a money which used demurrage was minimal. During this experiment money changed hands about 500 times a year, which means that on the average our average person would only have 100 dollars cash in his pocket. Therefore all the demurrage he has to pay is five dollars or 0.1% of his income.

Of course, people usually get their income monthly or at the most weekly. Therefore our average guy has sometimes more than 100 dollars either in his pocket or in a checking account. The solution to this is simple. He can pre-pay his purchases and every business man will be glad to take the money or he can use it to buy wholesale and keep his own monthly necessities stored, which would save him a bundle and not only the demurrage.

See, this is the secret. With demurrage money is not a better store of value any more as are goods and will therefor be used for what it was intended - as medium of exchange. Our average guy has to do this now also and therefore he does not realize that for other people money is power and not a medium of exchange. They are not telling him either.

At first, let it be clear that a market economy cannot function without a medium of exchange. (We call it money!) Without money an economic division of labor is nearly impossible. The government supplies this money through the emitting bank. (It is the Fed in the states).

I am sorry to say that they do this in a very slip-shoed manner sometimes with over-issue and therefore inflation or in other times with a policy of tight money which brings deflation.

The periodic breakdowns of the economy and with it of society can solely be put on the doorsteps of these financial institutions. We are now on the verge of a crash caused by the inaptitude of these institutions and their advisors and it is therefore advisable, to find out, what we can do to weather the storm.

To anybody, who has only a slight understanding of economic forces it is clear that our reserve currency, the American dollar, is grossly over issued and has kept its purchasing power only because nobody puts it to a test and want to exchange it for real goods. Nobody even wants to buy American overpriced goods and no country wants to sell its reserve currency because it could not do it at once and it would not like to see the rest of its holdings become worth a lot less.

The only thing, so far, what people and companies can do is playing on the stock exchange and bidding there the prices up. Once this speculation bubble bursts, and burst it will, it will be as deep a fall for the dollar as it was for the tiger states of Asia. To shore up the worth of the dollar, the Fed will have to raise interest rates to unbelievable heights and in the panic stock prices will fall so fast that stop loss orders will be useless. Companies will go bankrupt left and right and hardly a government will survive.

It is no question that the dollar will lose most if its worth, because it has already lost it, only people have not realized it until more of them will try to buy something with it. This is the main reason that the Fed keeps feeding the stock market with easy money to keep the bull market going as long as possible. It keeps the money there, but there is the end to this policy already looming on the horizon.

The money, once issued, is not in the hands of the Fed or any government. The money is already out there and it is over issued and with the Y2K scare there will be even more put into circulation. The amount of money issued by the US increased since 1945 20 times which caused among other things that the dollar now buys only what 10 Cents bought then. This slow erosion will speed up in the near future.

So, what can anybody or any community do, to escape the worst of this calamity? If you think to go deeply into debt and then pay it back with a worthless dollar, think twice, because that would not work. Your creditor would for close so fast on you that you could not even raise the worthless dollars to pay your debts. You could not earn them either. Remember, your employer may be bankrupt.

And then there is the government.. It either issues even more money as they did in many countries of the world thus making money completely worthless or it tries to reduce the money in circulation which would cause a deflation. Either way is a catastrophe. What can one do?

We will divide the answer into two parts. First what one can do for himself and his family and then devote the larger part to what can be done in a local or regional community. I will use in both parts my personal situation and experience and everybody will have to adjust this to theirs. Consideration for the second part will also have to be made for existing laws in different countries in case there is even a law left..

Part 1.

When the economy breaks down either through hyper inflation or though deflation ( note that I say when and not if) there is a few things one should have prepared for to survive a lengthy time of troubles and the simplest way to explain this, will be to tell what I have done.

I paid all of my debts, secured a modest shelter in a small town with moderate climate with enough garden to supply me and my wife with all of our food in a clinch and that is it.. Everything else like a fence to keep raiding deer out of the garden and a moderate amount of food, wine and cooking oil in storage and the fact that the small town is far from dangerous population centers and that most of my neighbors are as moderately well of as I am are just additional safeguards. More by accident I also acquired some skills, which might be saleable, like being able to patch a leaking roof, built a fence or a brick-oven for baking bread and I even am able to drive a stage-coach with six horses and lots more like this.

I do not believe it is necessary to build a bomb shelter and hide in the woods, because if it comes to this, I would not care to live such a life.

Part 2.

As we said before, trade above primitive barter of surplus goods between self sufficient hunters, farmers or herders cannot work without a functioning money and do not ever think this is granted. My parents and I lived through four such times when money was not functioning any more and there were many such times in history. Using Cigarettes or booze as medium of exchange is not really a good alternative. The next time in which money will lose its functionality will be upon us soon and this time it will be world wide as it was in the thirties.

Once the speculation bubble bursts and the over issued money now in the stock exchanges will want to go into real assets inflation will be the result. The government will then tighten the money supply and the economy will collapse as it did in the great depression.

What can a town or region do which is hit by such a collapse of the currency? Simple enough. Print their own and better currency, preferably before the collapse happens.

In the following chapters I will explain exactly how this should be done for a small town like Grand Forks and the sunshine valley in order to avoid pitfalls like over issue and how the purchasing power of this alternative money can be guaranteed and the money be kept in circulation. The example could, of course, also be used by other regions with some modifications in the sums of money issued. As long as they use the same methods to keep the purchasing power stable, they could even have a stable exchange rate or even peg them to a common value. I am quite sure that the example of Grand Forks or any other town or region which starts a properly designed alternative currency will persuade other regions and towns to follow as close as possible and they will try to keep their moneys value at par to the original GRAND FORKS CREDITS.

Now, let us get down to the nitty gritty. How many G-Credits will be needed? It will surprise you, but 10,000 Can$ (1999 value) will be plenty for a beginning. Under similar circumstances 1932 in a Austrian town about the size of Grand Forks only 5292 Schillings worth were in circulation. (average)

As long as the Canadian dollar would also work as it does now as medium of exchange with about 5% capacity trade can use both, G-Credits and dollars, as medium of exchange.

Only with G-Credits the profits of trade will tend to stay in the community. In Woergl, which is the name of the town in Austria the 5,300 Schillings moved about 3 millions worth in 14 months, because all of their money was circulating. This money therefore changed hands about 500 times in a year. This could be one benefit of the G-Credits. 5 millions worth of trade in a year! Another benefit in Woergl was the reduction of unemployment by 25% while during the same time unemployment in the rest of Austria rose another 10%. With the adoption of G-Credits in Grand Forks unemployment will all but disappear.

G-Credits need to have an exchange rate to the dollar because the dollar is NOT a stable currency. If we want a G-Credit with a stable purchasing power we have to divorce it from the dollar. The purchasing power or value of the dollar is measured by a consumer price index and it is no problem to use this index to determine what the exchange rate to a stable currency is until a price index for G-Credits can be established. Whoever issues the G-Credits can hold their exchange rate without problems at the desired rate by simply exchanging them at this price. 10,000 dollars worth are peanuts because only minimal amounts of them will be exchanged during a month and during one month until the next exchange rate is published it could in the worst case scenario hardly be more than 5% difference, when the exchange rate is published only once a month, much less if published weekly. 5% difference would indicate an inflation rate of the dollar of 100% and in this case nobody would want to exchange the stable G-Credits for dollars.

If the dollar gets deflated, it means that it gets worth more in purchasing power, it can never happen at higher rates than 2% a year because even that would bring a standstill of the economy. Even stability is not possible with a hoard able money and causes unemployment.. Here the last of the necessary attributes of the G-Credits comes into play.

G-Credits must have an expire date after which they have to be exchanged for new ones with a new expire date a year in the future. This would cost 5% of the face value and that would force the G-Credits into circulation while with a stable or deflated dollar the dollars will be used even more as the usual 95% of them as store of value and therefore be missing completely as medium of exchange on the market..

So now we see how much the G-Credits will cost.. 500 dollars (1999 value) a year! This is exactly 5% from the 10,000. (In Woergl it was 740 Schillings all together and they charged a high 12% fee a year, split in monthly 1% payments). While this is really peanuts compared to the possible amount of trade (0.1% of 5 millions), it is still enough to keep the G-bills in circulation because it would cost people wanting to use them as store of value as much or more as using other goods as store of value.

This concludes the basic part of the G-Credit proposal and there is actually only the question open who shall implement it and how should the few G-Credits be backed.

It does not really matter which agency will issue the alternative money. In Austria it was the city council on the advice of one man while in Germany it was only a club with 11 members and they ended up with millions worth of trade.

For Grand Forks I could imagine that the city could do it or the credit union or any church or the chamber of commerce or all of the above together. Even the doukhobors could do it once they realize that their promised land could be right here in Grand Forks, when these G-Credits put an end to usury.

A backing of the G-credits is not really necessary and if the city issues them, it should be able to back 10,000 dollars worth as could all other agencies I mentioned. There could also be an implied backing if the original 10,000 are given to different charities as interest free credit.. They could also be sold in a way that a 10 or 20% down payment would purchase 100% of interest free credit for them. This would have the benefit for the issuing agency that they had some money ready to buy back G-Credits from people who would need dollars.

At each such return, of course, the 5% cost for exchange would be collected right away to discourage redeeming as much as possible. The city would, of course, accept the G-Credits for their services and taxes and people would use them for that purpose just as they did in Woergl. Businessman would also accept them, even in case they would have no immediate use for all of them. Even redeeming some of them at a cost of 5% would be better than losing a sale. The G-Credits would circulate because they and the city in turn would use them. There should also be a spread of about 3% between buying and selling G-bills, which would make speculation with them costly..

There are a few smaller details besides the two points that this alternative money must have. A guaranteed value measured by an index and an added cost for idle money in the amount of the average cost that goods have to bear by nature.

One of these details would be the exchange rate. I would suggest to start right away with the same value as the 1980 value of the Can$. This dollar was worth about twice as much as the dollar of 1999. Therefore one G-Credit would start with a value of about 2 dollars of 1999 and it would keep the same purchasing power for ever no matter what will happen to the dollar in the future. The G-Credit will always be worth the same as the 1980 dollar was and it will show on the exchange rate what the dollar is doing.

Another detail will be the amount of G-Credits issued. There is no real danger of over issue because the issuing agency must buy back the Credits or nobody would put trust in their value and because they have to give this guarantee right on the face of the bill, they will be very careful not to put more on the market than they are able to redeem.

Because a money which does discourage hoarding does a twenty times as good a job of moving goods and services as proven in Woergl only 5% of the normal amount are necessary and this small amount is easily controlled.

Because the G-Credits cannot be hoarded any over issue will be noticed right away and counter measures can be introduced in time. With normal hoard able money this is impossible because only a small percentage of it is in circulation while the larger part is held as store of value and only enters the market at times. Its circulation is therefore completely out of control and never in the history of the world was it possible to have a stable currency without either inflation or deflation.

The GRAND FORKS CREDITS could be the first really stable currency in the world. All 5000 Credits of it in the beginning, and later all the currencies following the lead, but we would have to hurry. There are more alternative currencies already in the works in the rest of the world.

There is only one draw-back to the G-Credits if one can call it that. They can be used as a store of value only for short periods of time, therefore people and communities have to find other ways for storing wealth. I can see no problem with that. The people during the Gothic times, when a similar not hoard able money was in use, did it by building their towns, their castles and their beautiful domes. They were not built by slave labor and normal folks in our times have yet to reach a standard of living which even lowly tradesmen of those times enjoyed.

We do not have to care, that the G-Credits are not a very good store of value as long as they are a better medium of exchange. If people want a store of value, they can use the Canadian dollar or any other currency or they can use durable goods, or gold and silver or they can invest in enterprises or their own homes.

There are a few reasons for that.. One of them is the fact that our economists do not even know what they should consider as money, another one is that they always keep fighting last years inflation when the economy is already in the throws of stagflation or even deflation. Once this has set in they do not dare to counteract decisively enough because that could bring back inflation again and possibly at a higher level. (To days situation in Japan proves this point.) There is after all a lot of money floating around all over the world which would bounce back on the market if there is danger that it would lose on value.

Then there is the fact that the larger amount of money is not used as a medium of exchange for goods but as gambling chips on the stock exchanges and as blackmail to press unearned interest from labor and entrepreneurs alike. This can be done because while goods and services are forced to take any offer, reasonable or not, before the goods spoil or the service provider goes hungry, our money since ancient times can be held back until its demands are met.

Not the money a laborer gets for his services. He has to use it for food and shelter. No, it is the money that grows by compound interest and is only used to invest in still more interest bearing assets.

And while basically the solution was proposed by an inspired man, Silvio Gesell, over hundred years ago the simple way to put the moving force on money by an expire date and a fee for this service is only a couple of years old, even when something like it was used 5 to 800 years ago. At that time a much to high fee was used for tax purposes and was later even doubled, which killed the usefulness of this money.

There is also the fact that some powerful people profit by the status quo and would lose a lot of power and the most significant reason that these reforms have not been made is the fact that most followers of Gesell were living in Germany and only a few survived the war and after the war the economic miracle which was based in part on Maynard Keynes proposals made farther reaching reforms in the eyes of the public unnecessary. There was no need for them until now and there was no deflation which could have sparked self help groups. The time between 1950 and now was not ripe for these reforms and nobody worked out a way to introduce them on a smaller or trial basis.

Grand Forks Credit Bonds

Canadian Dollar

Functioning medium of exchange?

Only in a moderate inflation climate.

No with deflation.

Badly with high inflation.

Store of value?

Yes, during a deflation and with stable prices.

No, with inflation.

Preferred store of value?

Yes, during a deflation and with stable prices.

No, with inflation.

Measure of value?

The above columns compare the proposed Grand Forks Credit Bonds with the Canadian Dollar in the three functions of money. Even when the Credit Bond is not a alternative money in a real sense, it can be used in two of the three attributes of money. In fact, it is a better medium of exchange and a much better measurement of value as the currencies of the world are now. Only as a preferred store of value it is unsuitable. For that purpose other things have to be found like shares or real estate or precious stones, art or precious metals.

The Grand Forks Credit Bonds (or any other local medium of exchange with the same basics) have two significant features in which they differ and have to differ from the usual medium of exchange - our money. Their value - measured by a cost of living index stays the same and Bonds are forced into circulation by a charge of 5 or 6 percent for every year they are kept out of circulation.

This is actually all the differences but they will cause far-reaching results. Having a medium of exchange which is truly stable will change the way business is done in more than one way. Speculation and short term gain will decrease and long term beneficial investments will increase. Long term investment, of course, would mean plenty of jobs and because nobody could cause a disruption of trade by holding back the medium of exchange it would stay that way.

I have already shown elsewhere how high the real cost of such an alternative local money ( if one can call it that) would be, but will do it again here on the example of the Grand Forks Credits.

Why should such tiny amounts be able to force the Credits into circulation, you ask?

They did not have an exchange rate because it was not necessary for the short time and at that time the official currency was heavily deflated and therefore stayed in hiding. They only charged 2% in case of redemption.

Investing might be something most people not even think about but there are people who have money to invest and if they get scared and do not do it anymore the economy comes to a standstill.

Now, locally, if we give a boost to our economy with the G Credits we will also generate savings which cannot be kept in those G bills and we have to find some way to store the new wealth for those, who already have their own homes, which is still a prime choice for savings. The second best thing are shares in local businesses but, of course, not in ones that are moribund as most of them are in a stagnant economy. Yes, the G Credits will give them a boost too but there is a limit to secondary service oriented business. We should get some basic business off the ground and the shares in it would be a welcome store of value for the people with spare G bills they have no other use for.

I am sure there are lots of projects possible for which even the infra structure is already in place and which can be made possible with the steady economic benefits of the G Credits. They would pay for the labor and the laborers in turn would spend them in the economy. In fact, they could do nothing else with them.

As for the different projects. There are just a few suggestions. Rebuild the dam for the smelter lake and add a power house whose main objective is not power but the maintenance of an appropriate water level for a bathing lake with sandy beaches, maybe even hotels, restaurants, retirement homes, a riding stable and other stuff to make it a holiday destination point and, of course, stock it with fish.

Rebuild the Jam factory, add a factory for processing vegetables, sauerkraut and pickles, make a tax enclave out of the sunshine valley and invite all non-polluting industries.

Once the basic fundamentals of a stable medium of exchange, which cannot be hoarded are in place the problem of what to do, when one accumulates some spare G-bills should not be too difficult to solve. There are thousand ways to do it and one of them is also to lend them to a neighbor, who has some use for them with little or no interest. Getting the loan back in the full amount of stable G-bills without needing to use usury to offset a possible loss of purchasing power, as one has to do with an unstable currency, is profit enough.

One is the absolute guarantee of its value or purchasing power over the years without even 1% of inflation or deflation. Actually is this the only attribute for a honest medium of exchange and we never had one in all the history of mankind. There was always either inflation which is cheating the savers and creditors or deflation which makes business impossible and drives the borrowers to bankruptcy.

The second attribute, some means to keep money in circulation, follows from the first because without inflation money can otherwise not be kept in circulation.

Some people (even eminent economists like Milton Friedman) believe that money will always be kept in the market, because it would otherwise lose the interest it could earn. This is only true as long as interest bearing assets are available which bring at least 3%. Otherwise it goes on strike and no more investments are made which could drive through competition the interest rate farther down. As there is only on thing which can put a downward pressure on interest rates, the competition of new capital, no more pressure will develop and interest income will be eternal.

And so will be scarcity and hunger among the people who have to pay the interest. Interest works beautifully to lead money to the most profitable assets if interest is high enough and money will always go to the highest interest first. First to 10% and then only to 9% if no more assets pay 10%. And so on down to 3%. Then the money goes on strike and there is only one way to get it moving again, if not inflation is taken as an option.

It might sometimes add additional costs to your business but so do credit card payments."

:

`Why do LETs and similar alternative exchanges not really work and why should G Credits be any different?

Only when money in times of deflation does not work anymore is there a chance for other ways to exchange goods and services which is the ultimate reason for trade. Money is only the intermediary. We know money not working is only the case when the economy is in a deflationary period and in this case the money substitutes work even less than cash because their drawback, limited acceptance, is still in force..

Whether the crescent moon in the dream meant that the Islam will be converted to free economy or has no meaning at all, I do not know and when I later heard that the triple cross will be a sign of a safe heaven in the troubled times to come, predicted by some seers, I think that this might be possible, but I still do not know."

I noticed that you seem to be critical of Bernard Lietaer. Where do you disagree with him?

While I have no problems at all with Mr. Lietaers proposals principally, I am very pensive about two mayor concepts of his. There is for one this:

///It is also suggested that the monthly stamp tax be fixed around 2%, so that this money could be automatically withdrawn after approximately 4 years. For example, a 100 New Currency bill would require a 2 New Currency stamp each month to be valid. After 50 months or a little over 4 years, the total face value would have been repaid in stamps and the bill retired./// EQ

(A Strategy for a Convertible Currency by Bernard A. Lietaer, July 1990)

The second disagreement I have with Mr.Lietaer is the question of the index. He writes:

///Or some other mix such as:

1,000 oz. of gold representing $ 418,200

100, 000 oz. of silver " $ 528, 000

and 500,000 lbs of lead " $ 181,000

For the required total of $1, 127,200

///

Questions and answers to be continued as soon as new questions are asked.

Money is an absolute necessity for the functioning of a market economy and every attempt to do without it, is bound to fail. Without a medium of exchange there can be no economic division of labor and without money as a measurement of value there can be no generally accepted prices for goods and services.

Every deal in a free market is done between two partners to the benefit of both. The buyer exchanges his money for something which is at this time for him worth more than the money he gives for it.

The seller gives his goods or services for an amount of money, which he knows by experience will buy him more than the good he sold are worth to him. Both benefit and they both know that without money the deal could probably only then be made when both partners have exactly the good the other needs or desires which would hardly ever be the case and even then they would not know what price to charge because they would not have a measurement of value.

Money is so the birth mother of civilization and division of labor and gives the freedom of choice to all and makes it possible that people can concentrate on producing goods or services better and cheaper and faster as the can do them for themselves. That is beside the fact that there are some things they would not even be able to do for themselves.

There is only one drawback since ancient times. While goods and services have a built in force that pushes them on the market especially when they were produced for the market in the first place and not for home consumption, money, no matter what it is made from can wait. It does not rust or spoil. There are hardly any storing costs and it does not go out of fashion.

Therefore it has a dominance over the goods and services it is supposed to help exchange. This dominance finds its expression in an extra bonus for the temporary owner of money. He can either ask for a price reduction or charge interest for lending it out.. This might not seem to be such a big deal, because everybody will benefit when he is temporary owner of money and lose when he has to sell for money.

Sorry! It does not work this way. While the majority of temporary money holders are in this situation there are a few, who have accumulated so much money, that the use of it as medium of exchange is only a tiny part of their dealings.. The only thing which they want to do with their money is to invest it at the highest possible interest to accumulate even more. And the dominance of money gives them the power to do so. This works quite nicely as long as the find some assets to invest in, which bear at least 3% interest. The problems start when there are no more such assets because steady prosperity has multiplied them to a stage where competition between them pushed the interest down below 3%..

If there is a situation where the labor market gets tight as the economists say and the workers can therefore ask for higher wages because the unemployed who would work for any wage become less, they paint the specter of inflation on the wall. They have the gall to ask for higher interest as if interest is not also a cost factor in the prices as are wages. Higher interest costs push up prices just as higher wages push them up. There is only one significant difference. Higher wages put more money in the hands of the people, who are going to buy something with their money thus raising demand for goods and keeping the economy humming.

Higher interest only puts more money in the hands of people, who do not want to buy something with it. They are the ones, who have too much money already and are only looking for high interest bearing assets, or, if there are no secure assets, gamble with their money in the stock exchanges.

It seems that this is the purpose of higher interest rates. While it also pushes the prices up, it pushes them out of reach for most wage earners, who did not get higher wages. The ones, who get the higher interest, did not want to buy any goods in the first place and the missing buyers put now a cap on price increases. Especially on price increases on services which is - wages. There is now less demand for goods and less demand for people who produce these goods. The factories who used to produce these goods are suddenly no interest bearing assets any more and there is no more demand for investment capital.

While this was not the purpose of the inventor, there is nothing that can be done as weathering the storm. If the interest date goes below 3% money simply goes on strike and waits for better times. This is the curse of money. It prevents the fall of interest rates below 3% and keeps scarcity of capital goods for eternity.

Money receives its power only from the fact that it is an absolute prerequisite for trade. If money disappears from the market, there is no more trading. We have already explained that money in a situation with very low or non existent inflation can be pulled out of the market without suffering losses as unsold goods and services do. This gives it the power to blackmail price concessions from the suppliers of goods and services or, in case the owners of money decide not to use their money for the purpose of buying something and only rent it out to those, who want to buy something, to charge interest.

While this is a tremendous power, it is not undisputed. There are many money surrogates and credit to take the place of money. But because they all have higher costs and are dependant on an ultimate convertibility into cash money they can only challenge the limit of interest or price concessions, but not the fact of them.

The result is: No more trade! Producers cannot sell their goods. Labor cannot sell its services! And this lasts until a war or prolonged forced unemployment has destroyed enough capital assets to raise the interest above the 3% point again. How does this work?

It is quite simple, once you understand, on what a price is dependant on. It is on the scarcity of a desired object! It is that simple! If there are not enough capital assets, the can demand a higher price and a higher rental. And because money strikes and puts a stop to commerce no more capital goods are produced once the ominous 3% are reached. In this way scarcity of capital goods is guaranteed and the hunger in the world.

There is a way to take this power away from money without destroying its usefulness as medium of exchange but there are powerful forces aligned against it. The strongest of them is the ignorance of the population and the ignorance of science paired with the fact that the few, who believe that they are benefiting from the system in use today, are in no hurry to tell, if they even know themselves.

Knowledge is power, but knowledge is sadly missing and it is a rare man, who wants to acquire this specific knowledge.

The simple, and the right, answer is the law of supply and demand. Generally speaking is a price of a good a sign of limited supply. If there is an abundance of something like air or water or even empty land without people or sand in the desert, it has no price. The bigger the perceived need for something is and therefor the demand for it and the more limited the supply the higher the price.

Exactly the same applies to money. In order to have any worth at all the supply of it has to be limited. The more that gets printed or issued the less it gets worth. It is as simple as that and one has to wonder about the gall of the people who are responsible for over issuing when they claim that inflation has nothing to do with it

On the other hand, if not enough is issued or money is pulled out of the market and as a result prices fall and make business impossible they also wash their hands of it and claim deflation as an act of God.

All of this is explained in more detail on this pages, but even these few sentences here should give food for though and should lead you to question the wisdom of the economists who are the expert advisors of National Banks and governments

There is only one fact that determines the worth of money and this is its amount combined with the speed of circulation and the relationship to the offered goods and services. The picture of the scale on these pages should make the relationship clear.

Because money is an absolute necessity to a market economy this function is also what makes it to a thing of value. In former times people believed that gold or silver gave money its value but it is the other way around. Because gold and silver were used as money they became so valuable.

The proof for this is the fact that silver lost 3/4 of its value in the moment it was demonetized and the fact that paper, which is not backed by anything works quite well as medium of exchange as long as only the right amount of it is issued. If you wonder why all of this is not common knowledge which is taught in schools, think who is profiting from the fact that he can collect interest for pieces of paper to whom others give value.

The economic miracle of Woergl showed the amazing power of such a small amount of Freigeld, as this money was called. There were on the average only 5293 Schillings worth in circulation but because the full amount always stayed in circulation, it moved nearly three millions worth of goods in a year. Normal money moves on the average only 4% of this amount, not because it can in some cases not move as fast as money with demurrage, but because the larger part of it hardly moves at all. In fact during times of deflation and such one was during the time of the experiment even the usually moving part of the money does not do so.( And neither do the accounts, the so called book money) This diminishes the average speed of turnover still more.

I do not want to delve too deeply into the reasons why the powers that be sometimes create or at least tolerate a deflation and the through it caused depression. The powerful Austrian National Bank at that time seemed to be afraid of a few Schillings worth of alternative money. Why?

Because even this small amount was a danger to its monopoly and the deflation policy. It showed up their feet of clay and was endangering their rule. If people would realize that they can create their own and a better medium of exchange, they would not willingly pay interest to use theirs. They would realize that they can trade with this alternative money as well or even better as with the money the National Bank supplies. So what would happen? More and more trade would be done with alternative money. In fact surrounding towns and villages were ready to follow the example of Woergl which would have increased the people trading with the money of Woergl at least 30 fold.

As there is only a limited amount of trade this would have curtailed the use of the money of the National Bank and would have broken their power. Maybe even the possible 90 millions of trade would not have put a dent in it, but once the success of alternative money was getting more and more known, who could have prevented further spread? And less and less need for the money of the National Bank.

Now, with both money's competing for one stream of goods and services, there would have been to much money in relation to goods and this means inflation. As in the case of Wörgl neither money was issued with regard to an index this would indeed have caused inflation for booth money's. The money of Wörgl was not divorced by an exchange rate from the other Austrian money.

Therefor the necessity to have an exchange rate and control the issue of the alternative money in a way that it keeps its worth. The demurrage would still make it the preferred medium of exchange and the more goods and services this money would move the less will be left for the money of the National Bank. Not enough goods for to much money means inflation. Not for the alternative money, because it will keep its worth, as we have shown that it could, but for the other money which would lose most of its source of value and power.

There is no doubt, that they will try to prevent this loss of power but there is actually very little they can do. Either galloping inflation, with or without the help of alternative money, will destroy their power base or deflation will destroy the people, who should pay them their unearned interest.

Starting the old game again and again after each collapse will not work this time. There are already to many people who know the alternative way.

In former times economists believed that the material which money was made from (mainly gold and silver) gave it its worth and there are still some who adhere even today to such old fairy tales while in reality only one thing gives value to money. It is the willingness of people to accept it as payment for goods or services.

They do this because they know from experience that others will in turn give them goods or services for these coins or paper which we call money and which are a generally accepted medium of exchange whose value everybody can check by simply looking at the price shields in the stores or store windows.

Money is at the time of each trade therefore a measurement of value for the good or service traded and only if it is kept as store of value for some length of time that the question of its own value arises.

The problem we have with this is that the value of money does not stay the same and it either loses some of its worth through inflation or gains value through deflation. The reason it does this is simple. The relation of the amount of money in circulation changes against the amount of goods and services traded. Too much money means inflation and too little money means deflation. This is the simple truth of the matter and some economists explain this in the so called quantity theory of money. (You will find somewhere else on these pages a scale, which shows the working forces graphically)

Please, note that I said "Money in circulation" because this is the point. Not all of the money is always in circulation. The moment some of it is temporarily kept as a preferred store of value, it is not in circulation any more. Fact is that 95% of all the money " in circulation" is not really in circulation but most of the time used as a store if value. As long as the rest is circulating and the money which is used as store of value does not unexspectily go back on the market thus causing inflation everything seems to work fine.

There is only occasionally another problem. When after a long time of favorable business climate the interest bearing assets become so many that the competition among them pushes the interest rate below a real 3%, money is not readily invested any more. Then even the usually circulating 5% hardly circulate. This means that goods and services do not find enough buyers and the downward spiral of deflation begins.

If one thinks that a simple issuing of more money can prevent this, as Milton Friedman seems to think, I have bad news for him.. As experience has shown does a moderate influx of new money then readily disappear also in the stores of value and if massive doses are used, there is the danger that inflation rears its ugly head and most of the stores of value begin circulating also increasing inflation to unstoppable levels as has happened in many countries of the world.

There is nothing that can be done against it unless one changes the basic structure of money itself and therefore we must say that the value of money is a temporary one at best under the foreseeable circumstances because whether the speed nor the amount of money in circulation can be controlled. This in relation to goods and services on the market determines the worth and value of money, therefore the value of money can not be controlled either without exercising some control over the circulation.

Under current circumstances when only 5% of the existing money really circulates (and only circulating money determines the value of money, including the value of the other 95%) we have a serious problem.

It is a funny phenomena that people use money every day as a measure for all kind of services and goods but never give a second thought to the fact that all these goods are at the same time a measure of the worth of money.

Imagine that at one time 10 eggs cost one Dollar and at another time 10 eggs cost two Dollars. Everybody will say that in the second case eggs are twice as expensive but hardly anybody will ask the question why. Was it because the hens laid less eggs or was it because the Dollar got inflated and this was the reason for the change in the relation?

Yes, some people might get suspicious that it is the Dollars fault if all other prices also go up, but if it is done in a slow way they do not realize that this is the way government uses to avoid raising taxes and still have money to spend.. If people, who save money, end up with less purchasing power despite the interest they get for their money, it does not bother the government as long as the really big movers still make enough money to bribe them through their lobbyists.

People will believe, if they even realize that all prices are steadily going up, that this is an unavoidable fact of life and not at all the fault of the people who control the issuing of money. Of course, they are not telling them either, just as they are not telling them, when the opposite policy, a policy of scarce money brings unemployment and business failures. They will claim that the high prices are the fault of the greedy unions and that they have to curtail the money supply to counteract the "tight" labor market and that the following unemployment and deflation is an act of God to chastise the wastrels.

It is hard to believe that these people are not knowing what they are doing but it is just as inconceivable that they do. I cannot bring myself to the belief that humans can be as devilish as that and therefore I had to come to the conclusion that they do not know what they are doing. They do not know which results their actions have and if one tells them they will not believe just as no Doctor in times not so far past would have believed that he is bleeding his patients to death and they did so in many cases and how long ago was the time that it was dangerous for young mothers to have a Doctor attend a birth because they did not know that they had to wash their hands after they cut open a dead body?

Just as the doctors in times past believed that they knew what they were doing so do our economists now and they either poison the economy with inflation or bleed it to death with deflation. It would be funny to watch how they fight yesterdays inflation at the wrong time and then do not dare to fight deflation vigorous enough fearing to bring back inflation if the economy would not suffer so much.

Some people believe that in case of a collapse of our monetary system barter can take its place or some book keeping system, where some other form of standard like average hours of work are used. Trials for such alternative means to keep some trade and some division of labor alive get started all over the world but they all have a basic flaw. They are clumsy and costly and there is no practical standard of value as money is.

Money has its faults, but it also is necessary to the exchange of goods and while barter works for some exchange of surplus among self-sufficient hunters, farmers or herdsman it would not allow a trade between people who trade only one skill against all necessities of live, as it is done in a developed market economy with a functioning medium of exchange. Fact is that a collapse of the monetary system would put in jeopardy the very live of the majority of mankind, because there is just not room enough on this world for all people to live a life of self-sufficient farmers or hunters.

Without money people would have to live of the land as the Indians did before the coming of the white man and in these times the endless continent only fed a few thousand of them. Going back in time might look good for some people, just as the tall sailing-ships look good but just as we cannot go back to the old ships for world trade, is it impossible to go back to barter.

But, of course, there is plenty of room for improvement of our ancient monetary system and the very nature of money needs a facelift if we want to get away from the eternal boom and bust cycles.

The wildest economic theories make the rounds how the National Banks and even the commercial banks can inflate the money supply by inflating credit and how the National banks (the Fed in the US) can control the money supply by the interest rate they charge and nothing comes close to reality. Milton Friedman states this quite clearly in his Money Mischief (p 208)where he says: "The Fed has given its heart not to controlling the quantity of money, which it can do, but to controlling interest rates, something it does not have the power to do."

Yes, the Fed can command the interest rate for new money it issues, but is has no control whatsoever over the money which is already on the market and where the law of supply and demand decides the price of borrowing money. If they charge too high a rate, they cannot force people to borrow that money and they will not do it when they can get a cheaper rate on the money market.

Even a lower rate than the one on the money market does not necessarily mean that people will borrow more money. They wont do it if there are no safe interest bearing assets in sight where they can invest it. The first man is the lender and he wants the highest possible interest and the second man is the middle man (usually the banks) who arrange these loans and the largely forgotten man in the theories of the economists is the third man, who is supposed to borrow the money and pay interest for it.

Sometimes he cannot do it. Not even at 1% or 2% interest if there is nothing safe to invest it in. When on the average prices fall 10% as they did during the great depression there is nothing left for a trader to invest in. Everything he buys will be impossible to sell with profit and any long term investment is even more at risk. The factories he might build will stay idle. On the opposite, instead of borrowing he will hold on to any money, he can put aside even if he could find a fourth dumb man who would offer him more interest as he would have to pay himself. These fourth men are usually very poor risks and he might not get his money back.

The same applies also to the first man. It is better for him to hold back his money and profit only from the fact that it gains value instead of lending it to a trader, who cannot make a profit.

These are the simple basic facts of economics but nobody seems to be able to see them and after thousand of years of monetary history we are not one iota farther ahead with our knowledge as the old Greeks were. And now this boom cycle is nearing its end and the fall could be swift and merciless or long drawn out like the end of the Roman empire and it all only because nobody sees the plight of the third man.

The third man, who usually is up in debts to his eyebrows can only service them as long as the Fed keeps money easily available. In the moment the Fed decides to do away with the policy of easy money, he is cought, even when he did not go out on a limb by taking on   new debts. There are always some third men, who thought that with leverage, they can make a lot of money and when they are forced into bankrupty it works like the play with Domino stones. If one falls he causes the next to fall and the next and the next. In the end the whole economy is down.

He thinks that a 3% Tax on demand deposits will create a non-hoard able money and says on the end of his "How to reduce interest rates and poverty" the following:

"There would be little need and little demand for more bureaucracy and statism in its many forms. Until that time, however, hoard able money will disruptively rule the world."

These are my believes also and the following words on page 136 I can also whole heartily support: (Not that the tax on demand deposits will do the trick and is even necessary, but that non-hoard able cash will do it.)

"In my opinion, it is not the saver's "liquidity preference" as Keynes maintained,. but money's undue store of value that explains why the money-rate of interest is always positive and never goes to zero. Interest is not solely a reward for saving, it is also partly a bribe for not hoarding."

He sees this better as Keynes did but there is one thing he did not see, when he wrote the following (page 135):

"The use of stamped script is unnecessary. Using currency for mayor purchases is extremely inconvenient - and for each piece of currency to have an ever-changing value is simply too inoperative. A tax on demand deposits can do the trick all by itself."

Here he falls into the trap of entering the so called interest ladder in the middle. While he says in an other part of his book quite clearly about the Brakteats of the Gothic, which were cash money, that those brought a never again seen prosperity and explains in another part that the 3% tax on demand money would also force the interest rate for savings accounts down, he neglects the power of cash on whose value all accounts depend.

The price of goods and the value of money are determined by the law of supply and demand on the market and not by one to one transfers of deposits. A tax or demurrage on cash would go to the root and this tax would force, as he so ably explained it between the demand and savings deposits and their interest rates also a negative interest rate onto the demand accounts.

It seems that he believed the inconvenience of cash would be worth 3% plus the added costs of transfers though the banking system and nobody would escape back to the use of cash, which would still be free to be hoarded with his proposal.

What he says about an ever-changing value for a piece of currency under demurrage is beyond my comprehension. He must have had stamp script as Irving Fisher proposed with 104% demurrage a year in his mind. Nevertheless he came close, but close is not good enough.

Dahlberg sees clearly the connection between the levels of interest for savings and demand accounts but neglects that there is also a difference between durable cash which is paid zero interest but allows the owner to demand a price concession when exchanged for goods which are not durable or otherwise occur all kinds of depreciation and costs of storage.

He never mentions that the commercial banks do not care about the actual level of interest. They are only interested in the spread between the interest they have to pay for deposits and the interest they can charge for credits. They try to get as much interest as the market will allow and will pay as little as possible for deposits and in former times the spread was as little as 1/4% when the banks were in fierce competition with each other. Now with virtual monopolies and cartels they can control a much higher spread but they cannot really control the general level of interest and neither can the national banks do it.(Read Milton Friedman about this)

The reason that there never was a negative interest or even an interest for credits below 4% in monetary history is, that there never was a money with demurrage with exception of the Gothic times and in ancient Egypt, where we even today can only stare in wonder at the remnants of these civilizations.

But back to the banks and the error of Mr.Dahlberg. If the government puts a tax on demand deposits the banks will have to charge their customers for it, but not only the amount of the tax. There must also be room for their spread, which is about 3% these days. The proposed 3% will therefor now be 6% and if Mr. Dahlberg believes that people will pay this for the convenience not to have to use cash it is his privilege. I, for one, do not believe it.

It is quite different when the charge is applied at the bottom of the interest ladder, on cash. My proposal is 5 or 6% a year demurrage on cash and this was the proposal of Silvio Gesell also. My slightly different technical means need not concern us here. Only note that Irving Fisher proposed 104%!

This shows that a tax on demand deposits is not only not necessary but would be a double tax when a demurrage is levied against cash and useless when there is no demurrage on cash because people would then only use cash and would shun demand deposits and their transfers.(The so called book money).

On the other hand, with demurrage on cash and no additional charge on demand deposits there might still be some use for them for the sake of convenience, only the cost for this convenience will have to be paid. I believe that convenience will then lose much of its allure.

This whole bundle of misconceptions arises from the fact, that our modern economists make no difference between the exchange of cash for goods and the transfer of numbers on accounts. They call this book money because it gives them an alibi if they add it to M1 as quantity of money, that they and the Fed cannot control the amount of money in circulation and are therefor not responsible for inflation or its opposite, deflation. This sorry excuse of a theory where nobody even knows what belongs to money and what not is also the reason for the error of Mr.Dahlberg. He seems to think that deposits have developed as a money which is independant from the deposits.they are made out of. The fact that he is not alone in this is the reason for the mess in which the currencies of the world are and have been for some time.

Nobody denies the fact that one can pay with credit or the transfer of credit but the value of these numbers that are shuffled around depend on the value of the cash which is at the base of it and the whole Ponzi scheme of credit stacked upon credit would fall apart if only a small part of the participants would ask for cash. It is the old fractual banking brought to new hights. As long as nobody asked for the gold which was supposedly backing these bank notes everything worked just fine, but in the moment when some people wanted their gold, the fat was in the fire and the banks came crashing down.

Now people think, that the money in their savings accounts and in their checking accounts is covered by the same amount of credit, which other people have taken out and have put real assets up for as security. Sorry, my dears, if more than a few of you want your money as cash, the banks could not collect fast enough from their debtors and if you insist, they will have to go to the Fed for new funds. The Fed will give them the money against interest and will simply print new cash, if they are short of it. You will get your money alright but it will get less worth every time new one gets printed.

Milton Friedman says on page 39 of his "Money Mischief" the following: "In short, Fisher's equation plays the same foundation-stone role in monetary theory that Einstein's E = mc2 does in physics." He speaks there about the quantity theory of money in the form Irving Fisher used: MV = PT.

The same formula was used in the form of P = MV/T by other economists but they often used instead of T (for transfers) W which means wares and means the supply of Goods and services on the market. Both formulas were an outgrowth from the original raw quantity theory which only stated P = M/W.

Hardly anybody though explained that this in turn was just the application of the age-old law of supply and demand: P = D/S to money.

The raw quantity theory was formulated when economists noticed that in a market economy with a medium of exchange (money) all of demand is expressed by money.

Only later it was realized that money is used on the market over and over again while wares disappear once they have reached the final consument. Therefor the aspect of turnover and its speed was introduced. V (for velocity).

This is as far as economic science has come so far in spite of the glowing commentary of Milton Friedman. The formula is still not satisfactory because it has not incorporated the use of demand account transfers (the so-called book-money).

There are three ways to do this. Two right ones and one wrong one and to nobody's surprise the wrong one is chosen in most cases. It is the one where credit is erroneously added to the factor M, the amount of money on the market.

One right way would be the one Silvio Gesell used. He amended the formula in this way: P = MV/W - C. This shows that buying on credit (C) removes wares from the market. Therefor the remaining W is exactly as much smaller as the credit bought and the remaining W is a true counterpart to MV.

Another right way (and I am not sure, who originated it) is to add the transfers to V in this form: P = M(V+b)/W. Small b is in this case the development of the banks and the commercial usage of transfers, which are only a slowly changing factor in relation to cash movements.

Even these two last correct formulas have not much exactly practical use until the very nature of money is changed and then, as Gesell explained the old raw quantity theory will also work. The reason for this is, that non-hoard able money, which is earned by selling goods and services on the market must be used to buy the same amount of other goods and services from the market without leftovers like surplus goods and unemployment. (Which is surplus services).

This, by the way, ties the possible speed of turnover to the availibility of wares. While always new wares come on the market, only the sold ones generate income for buying.

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There should be no problems. While there may be temporary access problems to your account and transfer problems from one account to another there should be no longer lasting effects on your money. On the nominal sums - that is.

There will be no guarantee at all for the real worth of the money, but there never really was one. Inasmuch as cash in your pocket is concerned there is not much difference either. The value of the money in the accounts is tied to the value of cash. If the Dollar loses on value, it does so in both cases and while the banks can keep your money safe as far as its nominal amount is concerned they have no power at all to do it for the purchasing value.

So, who can? Only the National banks of each country. In the US it is the Fed who is fully responsible for the value of the US$ and the moment it prints too much the Dollar will lose value according to the law of supply and demand. More money means less valuable money. It is as simple as that.

Now this bubble is already very fragile and if some money out of the stock exchanges will reach the market in addition to the one, which people have now set aside and hold as cash safety against the Y2K, inflation will heat up and the Fed has no choice but to raise interest rates and this in turn will cause a stock market crash and still more money from there will flood the market and then the Dollars all over the world will get jittery and will look for real assets. Some will find them and even really cheap from people who went too far out on a limb and are now forced to sell their assets which they had put up as collateral for loans.

Something like this has happened often in history and was sometimes even done on purpose to get these assets and did not need a Y2K as reason. Now, even if the technical impact of the Y2K is negligible the economic one might be farreaching and might just supply the needle which will bust the world wide speculation bubble. This need not happen at the stroke of midnight unless there are really mayor technical glitches, but can happen anytime in the new year when the money which is now held back comes in larger amounts back on the real market and does not stay on the stock market.

There are interesting times ahead of us and if gamblers on the stock market believe that the can also win in a bear market they will be sadly mistaken when the gamblers who sold them the hedges are broke and cannot fulfill their obligations. The others, who still ride the horse of speculation to the end will not believe that the end is here and what will happen to them depends on how far they went out on a limb. If for instance somebody has gambled on Jahoo or amacon.com, made nice paper profits, and, using his stocks as collateral borrows more money, as he did with such success before and these stocks now begin to tumble. He will be in deep trouble. In a swift fall even stop loss orders will not help him and might even hurt him, when his broker sells the stocks way below the stop loss level.

It could easily happen that his collateral will be gone and only half of his debt paid.

Most economists only pay lip service to the law of supply and demand and it is only a few who will admit that in a market economy all demand is expressed by money and credit. By credit only temporarily which means that in the long run it is money alone which is demand.

Supply, of course, are the offered wares and services on a market and the relation of them to the demand influences the prices of all goods.

There is a big difference between wares and money which is most of the time not considered at all. It is the fact that wares only appear on the market once to disappear after having run though the stages of business from producer to traders to consumer while money as medium of exchange stays on the market although with different owners. Only if used as store of value does it leave the market.

Only moving money is demand and has as such influence on the price of goods. The scale on these pages shows the economic forces quite clear.

Keeping this in mind we will now try to find out what influence a demurrage applied on cash money alone in the amount of the average storage costs of wares will have on the economy.

At first it will make the cost free use of money as store of value impossible. If money cannot used as such any more a lot less money will be needed and that money will stay on the market as demand buying goods and services which would stay unsold otherwise. If money has the same costs as goods when used as store of value the more durable goods will take its place and the money will stay in the market as driving force of demand.

It would be as if somebody had put a motor to the economic vehicle of the currency and that would make it possible to steer it exactly between inflation and deflation on the level course of stability by simply adding to the amount of money when the price level goes down or simply not replacing the money which is collected for demurrage when prices go up.. There is only one drawback in the eyes of the owners of money. It is the possibility to have a stable currency combined with a steady demand for goods and services! Why?

For one because this would make speculation, a mayor source of income for the big money owners, impossible and secondly it would push interest rates down, which is also against the interests of the big owners..

The reason for the reduction of the interest level is the competition between capital goods especially when there can be no more refusal to invest at low interest because it would cost the owners of money the yearly demurrage fee (of 5%). If they can find no more capital assets which will pay interest the money owners will have to invest even at zero per cent interest or lose 5%.

While this would be a tremendous boone for 98% of the population who pay more interest hidden in the prices of the goods they buy as they are ever able to collect on their savings, it would be a loss for big money.

I have the suspicion that this is also the reason that the simple solution to most of the economic ills of this world which is known for more than a hundred years worked successfully during ancient Egypt, during the time of the Gothic and in a small way in experiments during the big depression, is all but unknown. While the power of big money rests on very shaky ground it is still strong enough to suppress knowledge which would hurt its ability to collect unearned income.

The demurrage on money, which Silvo Gesell, the inventor of this idea, proposed with 5.2% a year or with 6% and even thought that later 3% might be sufficient has taken on a life of its own with people who claim to follow his lead. One of the more famous ones, Irving Fisher wanted to use 104% a year, 2% every week. These days Bernard Lietaer proposes 60%, in the practical Experiments in Woergl and Schwanenkirchen 12%, 1% every month, were used and some others like Maynard Keynes believed that demurrage is not necessary when moderate inflation would keep money in circulation. He, as well as some others with the same idea forget, that this is in opposition to the idea of a stable currency.

Others, like Arthur Dahlberg, think, that demurrage on demand deposits will do the trick of keeping money in circulation and some want to do away with cash altogether.

They are all wrong. Gesell knew exactly why he proposed 5%. This is all that is needed to take away from money its status as preferred store of value and its ability to demand price concessions when exchanged for wares. It is enough to level the playing field. Anything higher would slant it in favor of the wares and instead of money being hoarded when the price level sinks, wares will be hoarded as happens with high inflation. Nobody would part with his goods for a money which would cost him 8% of demurrage like the stamp script of Irving Fisher when he has to hold it for a month and nobody will be willing to take it off his hands because then he is in the same bind.

Even the 12% of Woergl and Schwanenkirchen were too high and specially the Waera, which were used for some time before Schwanenkirchen had a hard time to become accepted and found only a very limited market.

The necessary level of demurrage can actually quite easily be determined by the amount of interest ( minus inflation premium) that money without demurrage can demand. Exactly this, no more and no less, is the necessary level of demurrage.

A demurrage of 50% would diminish a stock of money, held for a year, by half, just as 100% inflation does. Demurrage in the level of 100% would wipe it out completely and this would be a sure thing not like with inflation only a maybe. Nobody in his right mind would accept such a money and - I am sorry to say - whoever proposes such a money did not think twice.

As a trader opposite a customer, who would want to pay me with a money, which has a 5% demurrage in a month as proposed by Bernard Lietaer I would have such an advantage that I could double my prices and the customer would be forced to pay them. He cannot wait. Figurativly the money burns in his pocket. My wares might cost me around 1/2% a month on depreciation but his money will cost him ten times as much. His psychological disadvantage is even higher when he needs my wares for food and my prices will show this and the longer he waits the higher the prices will go. 60% demurrage in one year will then not only mean that he has after a year only 40% of his money left, but the prices will have increased. After a year his 40% will not buy 40% of the wares he could have bought a year ago because the prices will have at least doubled in the meantime. He gets also only 20% of what he could have gotten a year ago.

Most economists only pay lip service to the law of supply and demand and it is only a few who will admit that in a market economy all demand is expressed by money and credit. By credit only temporarily which means that in the long run it is money alone which is demand.

Supply, of course, are the offered wares and services on a market and the relation of them to the demand influences the prices of all goods.

There is a big difference between wares and money which is most of the time not considered at all. It is the fact that wares only appear on the market once to disappear after having run though the stages of business from producer to traders to consumer while money as medium of exchange stays on the market although with different owners. Only if used as store of value does it leave the market.

Money can therefore not be compared to wares and because it does not necessarily stay on the market the amount of money in "circulation" alone has hardly any meaning. The average speed of turnover must also be taken into consideration, where money used as store of value with turnover practically zero on the one hand and movement of accounts as adding to the turnover on the other hand must be counted in.

Only moving money is demand and has as such influence on the price of goods. The scale on these pages shows the economic forces quite clear.

Keeping this in mind we will now try to find out what influence a demurrage applied on cash money alone in the amount of the average storage costs of wares will have on the economy.

At first it will make the cost free use of money as store of value impossible. If money cannot used as such any more a lot less money will be needed and that money will stay on the market as demand buying goods and services which would stay unsold otherwise. If money has the same costs as goods when used as store of value the more durable goods will take its place and the money will stay in the market as driving force of demand.

It would be as if somebody had put a motor to the economic vehicle of the currency and that would make it possible to steer it exactly between inflation and deflation on the level course of stability by simply adding to the amount of money when the price level goes down or simply not replacing the money which is collected for demurrage when prices go up.. There is only one drawback in the eyes of the owners of money. It is the possibility to have a stable currency combined with a steady demand for goods and services! What is it?

For one because this would make speculation, a mayor source of income for the big money owners, impossible and secondly it would push interest rates down, which is also against the interests of the big owners..

The reason for the reduction of the interest level is the competition between capital goods especially when there can be no more refusal to invest at low interest because it would cost the owners of money the yearly demurrage fee (of 5%). If they can find no more capital assets which will pay interest the money owners will have to invest even at zero per cent interest or lose 5%.

While this would be a tremendous boone for 98% of the population who pay more interest hidden in the prices of the goods they buy as they are ever able to collect on their savings, it would be a loss for big money.

36) A serious Question

These people forget the people, who must take such a money as payment for their wares. They will refuse to do so, just as they refused to accept Irving Fishers 104%. Even the 12% of Waera were not easily accepted and had to be forced down the throats of the businessmen of Schwanenkirchen by threatening them with buying from outside and that was during the depression.

One must understand that during high inflation these 48% or other such high user fees would go on top of the already high inflation loss for the acceptant of such a money. I explained in my proposal for the creditos that maybe 10% might be tolerated if the purchasing value of the creditos is guaranteed, which means NO INFLATION for the creditos. Then it would only be the 10%. Even that is too much and it would be better to start with a new money like the Gogos.

They can be introduced at such low levels of overall amounts that the problem of reducing the amount of money on the market never arises. I only mentioned this pragmatic approach to let the people of the RGT keep their present Creditos. To go with nuovo Creditos would still be the better way.
Why the heck don't they ask businessmen if they would accept such a money after showing them how it would look as I did with my Gogos? They would ask what they can buy with such a money if they accept it and then would throw the bum out, who proposes it.

Most of my businessmen thanked me that I went to the trouble telling them about the Gogos and they figured out pretty fast that 5% user fee, even if they really have to exchange the Gogos isn't more as they have to give MasterCard if they accept such a payment. They would gladly pay them for an extra sale where they had a mark-up of maybe 50% to 100%, but they would prefer not to pay the 5% and to use them to keep them in circulation and they realize also that in that case the Gogos might come back to them giving them jet another sale. But they must have the option and therefore Gesell money MUST be convertible and in order to keep its stable purchasing power against an instable other money MUST have an exchange rate and a stable standard and in order to be accepted MUST have only the lowest possible user fee.

It also MUST have this user fee because otherwise a stable money will be abused as store of value and leave the market as medium of exchange. There has to be a fine balance between enough user fee to keep the Gesell money moving (Gesell himself proposed 5.2%) and a low enough user fee and simplicity of application to make it acceptable and able to compete in the general market with a money, where nearly everybody asks: "Why do you propose another money? What is wrong with the Dollar?"

It is really tiresome to have to explain these simple facts again and again. Proper Gesell money whether being issued by a government or locally must be equal to the average of the wares it is supposed to buy in durability. Not better, but also not worse.

The correct rate for that is about 3% in a year, but there needs to be a certain " Zinsgefaelle", which means a spread between interest paid and interest expected. Therefore 5% will probably be just the right rate and minor adjustments later on are no problem. In former times 25% and 12% also worked after a fashion for a while. In case of the Brakteats for a long while, but we do not know how often the 25 or 20% were charged. In the beginning it was only with a change of rulers, later with each crusade and still later every year and then even still more often. That killed the Brakteats in the end.

The high user fee of Irving Fisher did the same. His stamp script never really made it to the starting blocks and neither will any Gesell money with an higher than 6% user fee, even when forced on the people by the government. As an alternative money it would have no chance at all to be accepted.

The user fee is actually going on top of an inflation loss for the acceptant of such a money and therefore it MUST have a stable guaranteed purchasing value. As long as the other money is still kept on the market by slight inflation, it will be hard to launch Gesell money and at least some noticeable stagflation is needed to motivate businessmen to introduce and accept such a medium of exchange.