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Bitcoin: Paving the Way for a Global Cashless Society

January 19, 2014

After five years of Bitcoin, the verdict is out: it is a ‘free market’ Globalist dream, paving the way for a global cashless currency.

For and Real Currencies

It’s impact is quite stunning, there is little doubt about that. It started trading in early 2009 at just a few cents. Late 2011 1 Bitcoin was worth $6 and now people pay about $650. A little while back it actually reached $1000, when Chinese buyers started weighing in. It then took a big hit when the Chinese Government clamped down on it, citing ‘lack of consumer protection’. Bitcoin has crashed a couple of times on the way up, but has continued to rebound.

Major retailers all over the world are now starting to accept it.

But while this remarkable appreciation is the key to its perceived success, it is actually symptomatic of its main problem: it was designed to be scarce. Its rising price shows there is greater demand than supply.

When money rises in value, all other assets decline. It is good for those holding money, bad for those offering labor or goods and services, i.e. the real economy. In this way it behaves very much like Gold, which is also infamous for its deflationary nature.

Because it is appreciating so strongly, hardly anybody is paying with it. While the total outstanding value of Bitcoins is now somewhere between five and ten billion dollars, real trade is minimal. Who is going to pay with Bitcoin, when it is going to be worth another hundred times more in two years?

To be effective in servicing real trade, the money supply must grow and shrink with economic activity, allowing stable prices.

As it stands now, Bitcoin is a wholly bogus speculative item, with no real economic significance at all.

And it’s a pure ponzi scheme, of course. Later adapters pay for the gains of those helding Bitcoin from the early stages. As long as there are new buyers, it’s party time, but it’s ultimately unsustainable.

Money Power Control
Money Scarcity is, together with Usury, the hallmark of Money Power control. This week the story broke that Wells Fargo is now considering offering Bitcoin services. Undoudbtedly they’d be interested in offering saving and lending ‘services’.

Bitcoin is spent into circulation debt-free, but then will be lent out at interest by the bank. Compound interest lending will allow the banks to gobble up the whole money supply in just a few years.
This is why an interest-free credit based money supply is better than a ‘debt-free’ one: The debt free money is only debt free at the moment it is spent into circulation.

The CIA’s In-Q-Tel investment arm was involved with Bitcoin from the early stages and while it’s speculation, I’d be willing to bet a fiver the market has been cornered already.

Gold vs. Bitcoin: both are artificially scarce

Gold vs. Bitcoin: both are artificially scarce

Bitcoins are ‘mined’: computers must solve complex algorithms to acquire new Bitcoin. Clearly this is a rather irrational way of creating money, again mimicking Gold. Every new Bitcoin comes with a more complex algorithm, requiring more computing power. At this point only major players (like banks) have the computing power to mine new ones.

Clearly there are better things to do for supercomputers than such an artificial procedure. The more so since we can create abundant, interest-free money through bookkeeping.

A few weeks ago it transpired that JP Morgan filed a patent for a Bitcoin like architecture.

But already in 1998 the NSA wrote an extensive report, ‘predicting’ (or planning) a peer to peer electronic unit, quite similar to Bitcoin.

Bitcoin’s appreciation is of course an excellent marketing gimmick: the Libertarian techies who picked up on it early are now rich and are a good fanbase to build on. There is a vibrant Bitcoin community, keeping the dream alive. This is quite similar to what happened in the Bush years, when the Money Power controlled potential opposition by selling them a few ounces of Gold, creating a large base of faithful pseudo-opposition clamoring for the ‘reform’ they want anyway.

The Mass Media have welcomed Bitcoin. Sure, in the early stages there was some bewilderment and scepticism, but we have seen huge media coverage for Bitcoin from the word go. Had it been a threat, it would have been ignored and if that hadn’t worked, attacked.

Bitcoin is not anonymous, although many believe it is. All transactions are publicly logged. While it’s possible to operate discretely, if the community sees a problem, they tend to find out quickly who’s who. Centralist control of its use is thus possible, notwithstanding its peer to peer character.

And Bitcoin is a global phenomenon, which obviously is very pleasant for our globalist masters.

Bitcoin is driven by greed, it’s in no way a rational solution to our monetary problems. It’s global, scarce, cashless and soon the first banks will provide usurious lending.

The lesson is: as long as we hope to breed money from money, not realizing it’s usually our own labor that breeds money for those holding a lot of it, we will be fooled by units like this.

Money must be cheap (interest-free) and plentiful, but stable. Only then can it be a good medium of exchange, allowing the producers of society the benefits of their labor, instead of the providers of capital.

Bitcoin offers none of these features.

It has the Money Power’s fingerprints all over it.

Is the National Security Agency behind Bitcoin?
Baffling Bitcoin
Bitcoin, Impressive but Flawed
Cause and Effects of Money Scarcity

  1. Do you think that the Quark, advocated by Bill Still, suffers from the same problems as bit coin?

    Currently, the only way to purchase Quarks are by bitcoin. So if Quarks aren’t inherently deflationary and are safe from being compromised with usury, then converting all your bitcoins to them would be a good idea before they crash or are confiscated.

    • I’m not completely sure pm, but I did see a vid by Still where he said he was holding quark because he expected them to appreciate when the shtf. That implies the same scarce money issue as Bitcoin.

  2. deadeyeblog permalink

    Bravo, Anthony – great article. There’s also plenty of reason to suspect fraud and manipulation in the origination of Bitcoins, but that’s beside the point. I think your view on the nature of money has really matured over the years to be rational, precise and sound.

  3. Many interesting points. But what if Bitcoin isn’t conceived of (or discussed as) a one-time solution to everything that ails us, but instead as an experiment, and an addition to the landscape of money (and money-like things)? What if it’s thought of as “interesting”? As “provocative”? As “something that portends trends, tendencies and developments that we’ll probably be seeing more of”?

    • well, nothing in the public domain is ‘by accident’. There is always an intent, a calculation, and nowhere is this more true than concerning the monetary.

      So I tend to take a hard line in these matters, just to be on the safe side.

      But one of the good things of Bitcoin is that it helps immensely explaining to people that we can just create our own money. ‘Just like Bitcoin’, I hear even myself say………

  4. I think your skepticism of bitcoin is well founded and your criticisms of bitcoin are spot on. There’s also this sleezy stuff:

    On a different note, I think I remember coming across an article that talked about how a new software was developed to produce more bitcoins (beyond the theoretical “limit” of 21 million). This software was suppressed by bitcoin advocates, of course. Did you hear about this? Personally, I don’t believe that the total # of bitcoins is limited “by nature” and I can’t believe that any Austrian economist/commodity money advocate would believe that either. It’s a human creation, not a natural commodity, and you’d have to be a fool to believe that 21 million is a natural limit rather than an artificial limit that can be changed by some autocrats – if they choose to permit a new software, for example. In short, you’re correct in multiple ways when you say that bitcoin is “artificially scarce.”

    On a lighter note, bitcoin is interesting as a monetary experiment and it is fertile grounds for scholarship.

    • There is the possibility of 2.1 quadrillion units (satoshi) no real need mess with the protocol.

      • Of course, but splitting Bitcoins in smaller fractions when they become worth more is just a symptom of the disease that we were discussing: money scarcity.

        • Deflation is a symptom, not the disease. The disease is the basic interest itself, which appears with scarcity AND “everlasting-ness”. Thus scarce money with demurrage (for example, freicoin) and zero interest mutual credit are two different free-monies, as opposed to capital-monies.
          They have different advantages and limitations, but can complement each other.
          Scarce money is more liquid because it is counterparty-less. The counterparty is really the rest of society accepting that money, whether by implicit agreement (gold, freicoin) or by coercion (demand for it in the form of taxation). Scarce money doesn’t need any “backing” as Gesell explained very well. Scarce money NEEDS demurrage to work properly.

          On the other hand, credit monies are less liquid, but modern technologies can make them much more liquid by operating in a ripple-like network (
          Credit can use any unit, including units that don’t really exist in the market.

          For example, I could define a “valun” ( as a weighted basket of 100 commodities.
          Nobody has to actually store that “backing” people just need to agree that they owe each other say “5 valuns to be paid back in bread, milk or freicoin”.
          So scarce money doesn’t need to even be the unit of account, nor store of value. You store value with credit or real stuff. Scarce demurrage money could work on its own, but alongside mutual credit is much more powerful and resilient.

        • Disease? I think of Bitcoin as the equivalent of a biotech that had a molecule that may cure the common cold. Just look at remittance services like Western Union–they strip away billions of dollars a year from hard working immigrants sending money to their families. …

  5. I think bitcoin has a lot of potential and could become quite altruistic and helpful in society. Its open source, peer to peer protocol, could facilitate the adoption in third world countries where people have been shut out of traditional banking structures and could empower rather than exploit. It is very early in the bitcoin innovation and by generalizing and disregarding it is only an agent of greed is a weak argument against it.

  6. FauxCapitalist permalink

    And the Austrian detractors, like Gary North, are against Bitcoin for all the wrong reasons. They’re not against it for the reasons you mentioned, Anthony, but because it’s not gold. Because it doesn’t fit into their centuries-old notion of “the most marketable commodity” being gold. Because you can’t use it to buy things at Kroger’s, according to Lew Rockwell.

    But where both Bitcoin and gold lead is to a scarce, highly-manipulable money supply, and therefore must be rejected as a broad-based form of money, “free market” or otherwise.

    • Don’t forget Dr. Monteith. He’s a goldbug as well.

      • FauxCapitalist permalink

        A goldbug, yes, but not an Austrian. He thinks a gold-backed money supply is a lesser evil than a flexible money system, as he thinks it limits government more. The problem is, it doesn’t, and governments get rid of and debase gold and gold standards just like paper or credit. And he doesn’t realize that gold is sold as a confidence measure as a deliberate plan to temporarily pacify and misdirect real monetary reform until they roll out their flexible, usurious system once again.

        • He’s an Austrian. He always blames entitlements for the debt and never usury or fraudulent speculation of the banker and wealthy hedge funds.. Like Ron Paul and Phyllis Schlafly, he thinks the poor should be thrust out on the streets to find a charity when they have no food or medical care. I will never understand how someone can call themselves a Christians when they are more concerned about debts to thieves (or to anyone) than the lives of the poor. .

          • FauxCapitalist permalink

            I would call him a strict constitutional conservative. He has said several times over the past year when I’ve listened, that usury is anti-Christian and isn’t part of a sound money system. He definitely doesn’t make a regular point of it like he does with blaming unconstitutional spending. He is also no fan of Wall Street bankers, though he definitely does point more to government than Wall Street.

            He doesn’t take a strict libertarian position on the purpose of government, as he advocates county governments providing social services that aren’t primarily provided by family, friends, neighbours and charities. He definitely isn’t advocating for the victims of our economic (and spiritual) system simply to be thrown out on the streets.

            I, too, am concerned about Christians who are more concerned about justifying things in the name of the free market than the lives of the poor. But where did Jesus say that civil government was supposed to provide for the poor?

            People point to the allegedly cruel Republicans in Congress who vote to cut school lunch programs, but what business does the federal government have with that, according to the Constitution, and why can’t the States do that, and for that matter, why can’t parents be empowered to home school or pay for private schooling by receiving all their education-related tax money back if they *choose* to do so?

          • If you not putting blame where it belongs on a regular basis, usury in private banking, then you are part of the problem and leading people astray. It’s quite common in the alternative media and they don’t do it out of ignorance. Christians especially are especially to be held accountable as they know that God condemns usury as a sin on par with murder throughout the Bible. It is inexcusable to keep people uneducated about what has caused more poverty and deaths than all the wars in history, and to blame it fatuously on unconstitutional spending.

            What does Jesus say about civil government?

            “When the Son of Man comes in his glory, and all the angels with him, then he will sit on his glorious throne. Before him will be gathered all the nations, and he will separate people one from another as a shepherd separates the sheep from the goats. And he will place the sheep on his right, but the goats on the left. Then the King will say to those on his right, ‘Come, you who are blessed by my Father, inherit the kingdom prepared for you from the foundation of the world. For I was hungry and you gave me food, I was thirsty and you gave me drink, I was a stranger and you welcomed me” Mathew 25:31-46.
            He said also to the man who had invited him, “When you give a dinner or a banquet, do not invite your friends or your brothers or your relatives or rich neighbors, lest they also invite you in return and you be repaid. But when you give a feast, invite the poor, the crippled, the lame, the blind, and you will be blessed, because they cannot repay you. For you will be repaid at the resurrection of the just.” Luke 14:12-14.

            Our governance of others should reflect the charity Jesus had for the poor (and sinners) during his ministry. Jesus wasn’t a selfish tea party anarchist. He cared for everyone in need and said that we have a responsibility to do the same. “A new command I give you: Love one another. As I have loved you, so you must love one another. By this everyone will know that you are my disciples, if you love one another.”John 13:34-35

            The constitution does in fact grant the government a mandate to provide for the poor: “We the People… to promote the general Welfare…” certainly states that everyone’s welfare is always to be considered government’s concern. The Federal government should implement safety net programs because these basic necessities of life are not privileges but rights that need to be guaranteed to everyone. No state should have the power to deny every person created in the image of God their birthright : healthcare, work/unemployment, food, shelter.

          • FauxCapitalist permalink

            Not putting blame on usury on a regular basis is a common disease of most top personalities in the alternative media, and deliberately so, thanks to the Rockefellers by sponsoring Mises, the John Birch Society, the work of Ed Griffin, the Austrians, etc.

            As for any translation, I go by the most literal translation, to get the most accurate translation of each word. Young’s Literal Translation also says “nations”.

            However, the people of the nations are separated out as individuals, judged for their individual belief and actions, since every member of a nation aren’t all sheep or goats.

            As for the general welfare clauses, the first one is in the preamble, and preambles don’t generally have any legal force. But even if it did, it would be dependent on the second such clause, in enumerating Congress’ 18 powers, and in that case, it’s a restrictive clause. Yes, Alexander Hamilton later changed his position on that once he wanted to justify the previously-admitted unconstitutionality of chartering a central bank operating outside of D.C.

            As Madison pointed out, the clause is restrictive because the 18 enumerated powers would be meaningless if it was expansive, and the clause restricts Congress to carrying out its enumerated powers to the extent that they are serving the general welfare (meaning applying to everyone, and not particular segments, no matter how large).

            Why should the U.S. federal government implement any social welfare programs, aside from their constitutionality? The plan of Cloward and Piven is often misrepresented, deliberately, negligently, or ignorantly. They didn’t plan to flood local and state welfare services in order to bankrupt “destroy America”. They did it to destroy the sustainability of local and state programs to implement one on a national level. So we see where there has been a stated effort to implement such a national plan by deliberately destroying state and local ones.

            Are federal bureaucrats best in a position to determine the social need of all American citizens in particular areas? For the same reason, I don’t trust them to issue the money supply for anything outside of its 18 enumerated powers.

          • FauxCapitalist permalink

            Reposting here, as words were getting cut off.

            Not putting blame on usury on a regular basis is a common disease of most top personalities in the alternative media, and deliberately so, thanks to the Rockefellers by sponsoring Mises, the John Birch Society, the work of Ed Griffin, the Austrians, etc.

            As for any translation, I go by the most literal translation, to get the most accurate translation of each word. Young’s Literal Translation also says “nations”.

            However, the people of the nations are separated out as individuals, judged for their individual belief and actions, since every member of a nation aren’t all sheep or goats.

            As for the general welfare clauses, the first one is in the preamble, and preambles don’t generally have any legal force. But even if it did, it would be dependent on the second such clause, in enumerating Congress’ 18 powers, and in that case, it’s a restrictive clause. Yes, Alexander Hamilton later changed his position on that once he wanted to justify the previously-admitted unconstitutionality of chartering a central bank operating outside of D.C.

            As Madison pointed out, the clause is restrictive because the 18 enumerated powers would be meaningless if it was expansive, and the clause restricts Congress to carrying out its enumerated powers to the extent that they are serving the general welfare (meaning applying to everyone, and not particular segments, no matter how large).

            Why should the U.S. federal government implement any social welfare programs, aside from their constitutionality? The plan of Cloward and Piven is often misrepresented, deliberately, negligently, or ignorantly. They didn’t plan to flood local and state welfare services in order to bankrupt “destroy America”. They did it to destroy the sustainability of local and state programs to implement one on a national level. So we see where there has been a stated effort to implement such a national plan by deliberately destroying state and local ones.

            Are federal bureaucrats best in a position to determine the social need of all American citizens in particular areas? For the same reason, I don’t trust them to issue the money supply for anything outside of its 18 enumerated powers.

  7. Freicoins will likely be lend at near-zero interest rates despite being scarce, due to the demurrage.

    They’re also being distributed more fairly through matched donations to nonprofits:

    We don’t have as many merchants as Bitcoin yet though:

  8. God damn it, just bust everyone possessing a Chuck E’Cheese Felony token so we can get on with our lives.

    You know what’s more anonymous than #Bitcoin? Cash.
    You know what’s a more reliable currency than bitcoin? Anything.

  9. Bitcoin with its fixed volume is doomed in its cradle. Not to mention a 500 point variance in value in a matter of days. Just another quant meddling in the spirit of money. Rocket scientists amuse themselves by bamboozling the masses. Just a thought.

  10. Enjoying your blog, Anthony. Thanks for this article about bitcoin – I hadn’t realised it had so many stinkworthy elements to it.

    I was wondering if you and/or others could give me some tips on the things about our system that make it bad. I’ve been really studying up on economics in the last year or so and I’m finding it hard to know where to begin to clue others in on a general everyday level to the reasons why our money system is so stinkingly bad?

    The things that have slowly come into focus (glaringly so) are:

    *built-in scarcity;
    * interest-charging both from formulation of money to its recirculation;
    * a lack of demurrage (I think I’ve got that right – those built-in elements which mean with our current system it suits hoarders of money, that money doesn’t “decay” like everything else on the planet (even plastic eventually); and money itself becoming the end rather than the means so that we the people are left disenfranchised.

    Is there anything I’ve missed?

    Cheers, all.

    • Dark Dirk permalink

      The hidden redistribution function of interest or how rich get richer and poor poorer.

    • there’s also the boom-bust cycle (alternating inflation and deflation) and the fact that the bankers (centralized control of credit allocation) decide who gets financed or not, which is not a good idea if you want a society based on merit and good will, instead of money grabbing.

      Demurrage is indeed one of the two main solutions, although I tend to focus more on interest-free credit. It’s easier to understand once you realize how our current money works. But demurrage is probably slightly better.

      Thanks susieq777!

      • Dark Dirk permalink

        And I am trying to convince you that the demurrage currency is the only solution, because interest-free credit via mutual credit system is not possible. In MC you cannot put value to goods and services without limit, but limit means that soon it will convert to ordinary money system (when people reach their credit limits). I have asked you some questions about MC, to make you put more thought on the subject, and you tend to avoid them.

        • Oops! Not by design Dark Dirk!

          I don’t really understand your comment. Why cannot we put value to goods and services without limit?

          Do you mean that MC cannot provide all the credit the economy needs without inflating?
          If so, I think you’re right, that’s why I think it will need a combination with interest-free full reserve banking.

          For the rest an MC economy would be very similar to our current monetary system.

          • Dark Dirk permalink

            You cannot put value to goods and services without limit, because some people will get credit to infinity. Prices will skyrocket without credit limit. And in MCS by design there is nobody who will call you and say “Hey, your balance is negative. Please, do something to make it zero or positive.”. If all money is credit what about repayment plans ? And of course dead person case. What happens in MCS if somebody has credit (negative balance) and dies ? MCS simply goes out of balance.

          • These are all well established and well managed issues.
            Of course credit must be repaid, quite simple. The credit facility sees to that.
            As we have been discussing extensively in the articles about MPE, I fully agree volume must be managed.
            If someone dies, his debts are part of his estate. Credit is based on collateral. There will be a very small percentage of nasty defaults, these costs are passed on to the community in the one off service charges that come with the credit.

          • Dark Dirk permalink

            Where are “established and well managed issues” ? Can you give me a book or site to read ? or they are debated in your articles and I have missed them ?
            How you base a credit on collateral in MCS ? Describe the whole process. And Is there a credit not based on collateral ?
            All mutual credit system that I have found on the internet do not deal with such an issues. They are simply a book keeping services who at the end fail, because of dis-balances of the system, and their managers say that they stop them, because they lack time and money to support such systems.

          • No, I’ve learned interest-free credit from Hank Monrobey and designing my own unit. It’s a small underground movement, basically.

            There is well managed, and badly managed MC, there is no doubt about that, so I can understand your scepticism. I assume you have read my article on MC, but just to be on the safe side:

            The main example of highly effective, long term, multi billion turnover MC is the Swiss WIR:

            In a well managed system there is a) contract, b) collateral.
            Usually there is also some baseline credit. Default is insured by passing on costs to the rest of the community. In the WIR complete mortgages have been done. It’s basically just banking, without interest.

            At this stage, when people are realizing they can create money, they think they know all, but they have only seen the light at the end of the tunnel.

            Interest-free credit is a serious business and many fall short in getting to the bottom of it when they open up. I don’t blame them, it’s natural, but it’s a fact.

          • hit reply to read truncated text

          • Dark Dirk permalink

            Thank you. I will read them again, because I am very skeptical about mutual credit system. I have searched how things are done in WIR, but failed to found information.

      • Anthony wrote: “… that’s why I think it will need a combination with interest-free full reserve banking.”

        Full reserve banking requires existing money be re-loaned (recycled) rather than creating new money for the loan. This is opposed to the “fractional” system whereby new money is created through the loan like we have now.

        When you require that borrowers find willing lenders to part with their money and assume risk, I think you are effectively promoting usury – though not on purpose. After all; how would you compensate lenders? If some ones a mortgage for 30 years, what is a reasonable amount to make someone willing to take the risk and inconvenience?

        If new money is created upon the creditability and collateral provided by the lender, there is no need to compensate anyone with interest.

        • “When you require that borrowers find willing lenders to part with their money and assume risk, I think you are effectively promoting usury – though not on purpose. After all; how would you compensate lenders?”

          There is the mechanism known as JAK banking, Larry. People save interest-free, but get rights to interest-free credit themselves. This is a proven concept and would be much enhanced by greater numbers. And also if it is combined by the same credit facility.

          It is the real essence of the mutuality of interest-free credit. I’ll lend you interest-free, if you me too.

    • Susieq777: Anthony is very knowledgeable about these things, but everyone has his/her subjective viewpoints. There is usually some truth coming from every position in a debate, so it’s important to understand all positions, including mainstream economists and heterodox economists. I’ll give you my 2 cents below. (I earned my MA (history) studying 17th and 18th century economics in Britain, and I did my MA thesis on the English Financial Revolution. This I tell you so that you know I have some credentials and hopefully to convince you that it won’t be a waste of your time to read what I have to say.)

      Most of the time when people are taught about economics, they learn about supply and demand as a core concept. In addition to business costs (debt, taxes, resources, labor), supply&demand is a very useful concept for understanding how prices are set. Although there are caveats to this concept, such as inelastic demand and sticky prices, it’s very useful to keep this concept close at hand when thinking about economics, but from here out I’m just going to talk about the boom/bust cycle and how different economic ideologies react to it.

      This blog has attracted people who are discontented with the present money system and are looking for a better way, so you’re probably not going to hear (m)any defenders of the present money system on here. By present money system, I mean bank credit, which is created when banks make loans. Bank credit is created via double-entry book-keeping, but it is essentially just a claim on the monetary base (i.e. paper-fiat today, gold/silver coin in the past). The total amount of bank credit and debt is vastly bigger than the monetary base, making bank credit the most abundant type of money in the economy. When people talk about a fractional reserve, they are referring to the fact that the monetary base is only a fraction of the total amount of bank credit, so if we all tried to exchange all of our bank credit (deposits) for paper/coin at the same time (a bank run), the bank wouldn’t have enough paper/coin to exchange for all of the deposits/claims on money (bank credit) that it has made in its books. Bank failures cause major problems because money is literally destroyed. When a bank fails, anyone who still had bank credit (deposits) with that bank will no longer have that money – it’s gone. When banks fail, governments now like to bail them out (ex. FDIC insurance in the USA) because if they don’t bail out the banks, then people’s bank credit is lost, deflation happens and the economy goes into a death spiral. In short, under the present money system, we are dependent on the banks for the financial health of the economy. Economic “busts” are associated with financial crises, deflation, and a loss of trust in the banks, which usually makes the depression last longer because distrust of the banks prevents the banks from recovering. Economic busts are when macroeconomics gets weird because it is during economic busts that liberals, Keynesians, Marxists, and many types of monetary reformers start asking: “How can the government help?”

      Keynesian liberals are more mainstream than Marxists and monetary reformers. Although not all Keynesians are alike, in general I would summarize Keynesianism as the economic philosophy of “keep banknotes moving.” Keynesians typically advocate government deficit spending on public works projects (bridges, dams, etc.) in order to create jobs (solving unemployment) and increase government revenue (because the money spent by the government will be taxed when workers are paid (income tax) and when workers spend money (sales tax)). However, the John Maynard Keynes’ solution is temporary and depends on the banks recovering before government debt becomes odious. Keynesianism is criticized because increased government spending means more government debt, but this isn’t seen as a problem by everyone because “modern” finance means perpetual government indebtedness anyway. Keynesianism can also lead to banks giving tons of loans to the government instead of making loans to private citizens, thus slowing the recovery of the private market.

      As I’m sure you know, Marxists generally want to control the means of production. In the most extreme instances, Marxists try to nationalize the means of production. This violates the principle of private property (government stealing), inevitably leading to increased radicalism and probably civil war. Ironically, Marx is not a monetary reformer. His economic philosophy calls for gold to serve as the monetary base while the economy continues to depend on (public) bank credit to serve most of its financial needs. Monetary reformers tend to disassociate themselves from Marxists for these reasons.

      There is a general agreement among monetary reformers that the present money system is plutocratic and that usury (charging interest on loans) is a major contributing factor to the “bust” part of the boom-bust economic cycle. The “boom” part of the cycle is associated with loose credit, i.e. the banks are creating a lot of bank credit and loaning it into circulation so that there is more money. The “bust” part of the cycle usually occurs after a major financial crisis (like a housing bubble), which causes the flow of bank credit to constrict. During busts, less money is loaned into the economy while money continues to flow out of the real economy to the bank as people repay their debts to the bank. This makes money scarcer so it becomes harder to repay debts. People thus continue to default on loans because money has become scarcer and the bust continues. The quickest solution to a bust (if banks haven’t failed entirely) would probably be for the banks to continue lending, but that doesn’t always happen. (On a side note, a Panglossian banker might say that, in theory and over time, the same dollar bill could be used to pay off many dollars of debts in a bank’s book. Theoretically, all debts can be repaid, but monetary reformers like to claim that it is impossible to repay all debts because there is more debt than money. The truth is in the middle. Theoretically, all debts can be repaid, but that depends on money getting into the hands of those who need it – something that does not always happen.)

      Beyond agreeing that the current financial system is flawed, there are a lot of different monetary reformers out there. There are self-described reformers who want social credit, demurrage money, MPE, local currencies, government fiat, gold/silver, a 100% reserve ratio by banks, etc. Be careful because these self-described reformers want to try to sell you their ideas, so they paint a pleasant picture about how their reform will work. They will also try to suppress doubts about their reform(s), so it is important that you are very critical of these potential reforms, just as you should be critical of the status quo. I essentially agree with Anthony’s criticisms of the 100% reserve ratio, gold, and MPE, but we differ on demurrage money. Since you said that you are interested in demurrage money, you should know that Anthony probably won’t criticize it. I’ve seen that he supports it, and it has worked on a small scale before. However, I would argue that demurrage money only works on a small scale because then it is only those who want to use it that are using it. On a large scale, opponents of demurrage will be forced to use it and would probably speculate against it.

      Demurrage is a tax on holding money, designed to increase the velocity of circulation in order to prevent the hoarding of money. It is usually paired with social credit, but it doesn’t have to be. The idea is that demurrage will make money circulate faster, thereby making it easier to get money and repay loans. The idea that money should “deteriorate” like things in nature is a contrived argument based more on nature-worship than on any economic principle. Moreover, the related argument that gold/silver shouldn’t be money because they don’t deteriorate – because they’re “barren” – is pure opinion. Precious metals have been used as money for thousands of years because they don’t deteriorate, making them a good store of value so people trust them and want them. There are a lot of problems with precious metal money, I know (deflation, elitism), but adopting demurrage money won’t prevent precious metals from becoming a limited money system of the rich (thus helping the rich avoid paying the demurrage tax). The rich would still have to use demurrage money to some degree if the government forced them to, but demurrage money would also be the money of the poor if the government forced its use (via legal tender laws and collecting taxes in demurrage money).

      So before jumping on the demurrage money bandwagon, think about all of the bullshit that would come with demurrage money: 1. Increased arbitrary government (or “monetary authority” – still a branch of government) control of the money supply. 2. Higher taxes (demurrage is a major tax and a power grab by the government), thus making the economy less business friendly. 3. Just because the velocity of circulation increases, doesn’t mean that the poor will get that money. Why would Adam Smith’s profit-seeking rational individual give demurrage money to the poor instead of spending that money on real wealth? Demurrage money advocates want to control people and literally transform human nature. This is tyrannical and I believe it won’t work. If the state tries to force people into a “gift economy” by taxing the holding of money, that only encourages people to get rid of the money – the rational profit seeker would spend it, not give it away for nothing. Ignoring the existence of the rational profit seeker is foolish and is a major weakness of demurrage money proponents. 4. The demurrage tax punishes savers (“hoarders”). Saving money is a major part of achieving upwards social mobility. Those poor people who wish to move up the social ladder by saving their money will either be taxed for saving demurrage money or will have to save via commodities (which fluctuate in value).

      Demurrage money is usually paired with social credit. Social credit can be done in many different ways, but social credit tends towards price inflation. Many social creditors have decided that in order to control inflation, the government must use some sort of tax in order to take excess money out of circulation and retire it. Social credit with demurrage aims to use the demurrage tax to prevent the volume of money from growing too large and causing price inflation. Inflation is the deterioration of the purchasing power of money, typically associated with too much money in circulation. Ironically, demurrage money advocates want to prevent inflation from causing the purchasing power of money to DETERIORATE by – here’s the kicker – intentionally making the purchasing power of money DETERIORATE via a tax on money. In other words, inflation is called a hidden tax on money. Demurrage money advocates aim to increase government power and use a new, unhidden tax on money in order to prevent inflation (inflation = a hidden tax on money). It’s kind of absurd and personally, I can’t support demurrage money. In my opinion, social creditors should use a different tax (like property tax) to retire excess money, not undermine their social credit system by punishing (demurrage tax) people for using it.

      That was a lot of reading, I’m sorry. Feel free to ask me any questions.

      • Noriba permalink

        Nice analysis TR – have you done some formal writing on the subject of monetary reform? My take is very kitsonian – so demurrage although appealing, may ultimately not be sound in principle. This really depends on how one chooses to define money. If it is supposed to be a stable unit of account (I think commodity money is an extremely flawed concept…money is a primary object…a unit with certain attributes and properties different than a commodity. Specifically…money represents a debt between the individual and the rest of a communities service sector – and is a medium – a sign of a demi-exchange of wealth with a general purchasing power which can complete the exchange when the holder desires). So if it supposed to be a stable unit of account, it should not be given the capacity to be fertile (usury) , nor involuting (demurrage) – again – this is an argument purely based on abstract first principles. From an empiric standpoint, i believe demurrage has been shown to fxn to well to enhance the velocity of circulation and counteract the tendency for folks to view money as a commodity /asset/ fetish and thus hoard it beyond reasonable liquidity needs.

        • Dark Dirk permalink

          “demurrage although appealing, may ultimately not be sound in principle”
          No, demurrage is very strong based, but TR just not understand it’s main idea. And it is to force people SPEND money or loan them at LOWER interest rates. The idea is NOT to give that money to the poor. The collected demurrage tax will be used to sustain the system (pay salaries, expenses and other). If you want to now more about demurrage you should read Silvio Gessel’s book Natural Economic Order.

        • To Dark Dirk: I understand demurrage perfectly well. I just disagree with it. I think that it is short-sighted and coercive, for reasons I gave above. I know about Silvio Gessel and I also know that the idea of demurrage money was around before Gessel (see “British Monetary Experiments, 1650-1710” by John Keith Horsefield).

          You said that the goal of demurrage money is “To force you SPEND money on REAL WEALTH. Not to save them and charge interest on them. There is no need to give that money to the poor. They will receive them when they produce some real wealth. The idea of demurrage is to increase velocity of money and make hard saving them.” You do know that saving can be done without charging interest, right? You should also know that having demurrage money will not automatically get rid of usury; the only way to get rid of usury is for people to choose to not give or receive loans. Even demurrage money can be lent at interest by private individuals if they choose to do so. I also understand perfectly well the uncharitable idea that the poor should only get money by producing real wealth, and I disagree with it because it leaves the poor dependent on the wealthy and it leaves the poor helpless to invest in themselves. (This problem is also in capitalism.) If I were a poor man working under a demurrage system and I was paid in deteriorating demurrage money when I produce real wealth, then I would have a very difficult time moving up the social ladder. In capitalism, many poor people must work for the elite like slaves to climb the social ladder, and it is hard enough considering that the money that they earn is constantly going to buy food, clothes, shelter, etc. Adding demurrage money will simply deteriorate the purchasing power of the poor even further and make it harder for them to save money (in order to pay for things like education, a home/land, and save for retirement). Having the poor use commodities as a store of value inevitably increases exposure of the savings of the poor to fluctuations in the market. Using commodities for saving purposes also mimics inflation. During inflationary periods, people dump the inflating currency for commodities in an attempt to preserve their purchasing power. Asking people to save via commodities is asking for people to mimic the inconvenient consumption patterns seen in an economy experiencing inflation. This is an inherent problem with demurrage. It punishes people for using money; in a way, demurrage is the half-way step between our fiat system and a commodity money economy (like the foolish Venus Project). Personally, I think that we should use positive incentives (like charity) rather than negative incentives (like more taxes) in order to shape the world.

          To Noriba: Thank you. I haven’t done any formal writing on the topic of monetary reform, but I have been intensely researching the topic on my own and in academic settings for about 3 years. You’re right to ask questions about the intersection of demurrage money and money as a store of value because demurrage money turns the store of value function on its head. From my research experiences, I have found that the use of money as a store of value is immensely important because it makes the money more desirable, which in turn makes the money more successful because people want it (and aren’t just forced to use it). One of the biggest weaknesses that I see in demurrage is that people won’t want it because they will be forced to pay the demurrage tax, so it will be hard to get a populist movement to back it without encountering strong resistance. On the other hand, gold money has many flaws (deflation, elitism) yet people cling to it because they trust it as a store of value. Gold/silver have great historical staying-power because of their use as a store of value.

          This last point deserves its own paragraph. (I would appreciate Anthony’s commentary on this point because I respect his opinion on monetary theory.) When a monetary system is trusted as a store of value, then there can be more of that type of money in existence (higher volume) while maintaining its purchasing power. When money is hoarded, it is not circulating. I reached this conclusion when studying the East India Company in India/Bengal/China. The East India Company (and other Europeans) were dumping tons of silver and even much gold into this area, but the purchasing power of the gold/silver did not collapse because so much of the incoming gold/silver was hoarded by Asian elites (many of whom buried the gold/silver with them when they died.) Money only has an upwards pressure on prices when it is circulating, that is to say, when money is chasing goods/services. If nobody is spending money, businesses are inclined to lower prices. Another example is the world reserve currency, the US dollar. There are billions (probably trillions) of US dollars that are hoarded overseas because people see them as a good store of value. The total volume of the dollar is able to be quite immense because people around the world keep it as a store of value. Now if the global community suddenly decided that the dollar was a terrible store of value (let’s say that OPEC stops accepting dollars or the US gov’t screws up), then foreigners would probably not want to get caught hoarding billions of soon-to-be worth less US dollars. They would dump those dollars where people are forced to take them: in the USA. What would happen if billions of US dollars from overseas came home all at once, in exchange for US commodities? Increased demand for commodities would cause commodity prices to rise. If foreign billionaires started dumping their US dollars for American silver, for example, one would expect the price of silver in the US to rise.

          Demurrage folk might not like the sound of “making money desirable,” b/c one of the main principles of demurrage is to make money less desirable in order to transform human nature and increase the velocity of circulation. Yet people are guided by their desires and their passions. That’s why Adam Smith’s philosophy has stuck around so long: it allows people to chase their desires, it harnesses people’s desires (positive incentive for adopting Smith’s philosophy). Demurrage money doesn’t harness people’s desires. Instead, it works against the grain by trying to change people’s desires (negative incentive/punishment for using demurrage money). But will people be changed by demurrage money? Or will human nature cause demurrage money to back-fire?

          • Dark Dirk permalink

            As long as you think that value can be stored you will be deluded like that. Value cannot be stored. If you save number in a book (or gold, or silver, or bitcoins, or paper dolars), instead of real goods, at time of major crisis you will discover that your “stored value” cannot buy anything, because there are no goods on the market. You can not eat gold, silver, paper money ot bit in a computer.
            The main purpose of demurrage currency is to remove storing of money.
            Of course I know that you can charge interest on demurrage money. The idea is to get rid of interest in natural way, not to forbid it. You can not forbid storing of money and you can not forbid charging interest. Silvio Gessel perfectly have knew that, so he proposes a system in witch interest will go away naturally.
            I also know that he is not the main author of the demurrage money idea. In his book he cites all sources that he used.

            “Adding demurrage money will simply deteriorate the purchasing power of the poor even further”
            That is simply not true. I am spending all of my income over the month, and I am not saving anything. In such a system, I will pay zero demurrage tax, because I have no extra money at the end of the month.

            “But will people be changed by demurrage money?”
            Of source they will be changed. They will be forces to spend money on real wealth or buy gold, silver, bitcoin or other stupid store of value good if they believe that money can be stored. I do not believe that.

            “Or will human nature cause demurrage money to back-fire?”
            Give an example how demurrage currency can back-fire.

        • Noriba wrote: “My take is very kitsonian – so demurrage although appealing, may ultimately not be sound in principle”

          The need for demurrage is evidence that there is not enough money in circulation as the intent is to increase velocity. Punishing savers via demurrage is a poor solution as it is far better to increase the money supply instead.

      • Dark Dirk permalink

        “Why would Adam Smith’s profit-seeking rational individual give demurrage money to the poor instead of spending that money on real wealth?”
        That’s the main idea of demurrage money. To force you SPEND money on REAL WEALTH. Not to save them and charge interest on them. There is no need to give that money to the poor. They will receive them when they produce some real wealth.
        The idea of demurrage is to increase velocity of money and make hard saving them.

      • I like demurrage, because it would be very liquid: people would tend to pay in advance to get rid of excess cash, for instance. This would lead to supply chains financed interest-free without any intermediary involved.

        Historically, the ancients used to pay with depreciating units based on warehouse receipts. This seems to have worked well.

        however, the great downside of demurrage (besides its ‘arcane’ (for the uninitiated) nature) is the lack of experience in modern history. Ok, the experience we have (Worgl) is very positive, but it’s a little thin to run entire countries on.

        Of course the migration to an interest-free credit based economy would also be very tricky, we cannot calculate all the consequenses, but it seems more easily managed.

        • You’re right to assert that demurrage money is very liquid, but the flaws that I see in demurrage money don’t have to do with liquidity. (See previous 2 posts.)

          You’re also right that depreciating warehouse receipts (like tobacco warehouse receipt in colonial Maryland and Virginia) have been successfully used in history. (Usually warehouse receipts are associated with Lombard banks.) However, I believe that there are important differences between depreciating warehouse receipts and general (mainstream) demurrage money. The depreciating warehouse notes that I know of, like Worgl, co-existed with other (non-demurrage) money systems. I believe that demurrage money can work perfectly well on a small scale because only people who want to use it will use it. But my concern is that if demurrage money ever became the predominant money system, then people who don’t want to use it will be forced to use it. This would encourage speculation, IMO, because it is the rich who would most dislike the demurrage tax and have the greatest capacity to speculate against it. The other difference between general demurrage money and depreciating warehouse receipts is purely psychological: warehouse receipts are seen as being “backed” by the commodities in the warehouse. I know that money doesn’t have to be “backed” by anything, but backing money with commodities is a useful psychological trick for inspiring trust in a type of money for 2 reasons. 1. The volume of “backed” notes is “controlled” (by nature, not arbitrarily by a person) and 2. “backed” notes that are guaranteed to be directly exchangeable for a commodity at the warehouse will always be seen as at least as valuable as the commodity for which the note can be exchanged.

          Don’t get me wrong, I think that demurrage can work if everybody was on board and wanted it to work. All economic systems can work in theory. However, if demurrage money ever became the predominant money system of a region, then it would almost certainly face new challenges that small-time demurrage experiments would probably never face. You seem aware of this, Anthony. In order to anticipate these challenges, it is necessary to put yourself in the shoes of demurrage opponents and to think about how demurrage could back-fire if it went mainstream. In my opinion, economic systems that work in theory tend to fail because they fail to anticipate how their opponents will undermine the economic system. If you put yourself in the shoes of the opponents of an economic system like demurrage money, then you will be aware of the flaws of said economic system. You should even go as far as to think about how wealthy opponents of said economic system might intentionally destroy it, so that if the economic system is ever tried, then you’ll be able to anticipate potential problems and prevent them ahead of time – if you can. All consequences must be calculated and addressed. Sometimes an economic system that works in theory is almost inevitably doomed to failure (that’s my opinion of Marxist communism) because inherent flaws in that economic system create resistance that is unable to be overcome.

          • Dark Dirk permalink

            And with what bitcoins are backed ? Do you know how much a bitcoin worth ? That example alone destroys your claim that people like backed currencies.

          • I said “money doesn’t have to be “backed” by anything, but backing money with commodities is a useful psychological trick for inspiring trust in a type of money.”

            I obviously know that bitcoins aren’t backed by anything. However, some people believe that bitcoins ARE a commodity (, and it would be superfluous to back a commodity with a commodity. Your example does not destroy my claim that people like backed currencies. Go out and ask some hard-core Ron Paul fans if they would prefer their money to be “backed” by something, then you’ll see that *some* people would like their money to be backed.

          • Dark Dirk permalink

            OK, my mistake. I agree with you that people like money to be backed.

          • Dark Dirk permalink

            Actually people like anything that can give them a profit. Money system have to be forces. Like American dollar witch is declared a “legal tender”. Do you like American dollar and why ? I doubt that you like it, because it can be saved. Actually you like it, because it is a “legal tender” and sate will force somebody to repay you if he do not what do to that.

          • Dark Dirk permalink

            Correction: have to be forced
            and: state will force somebody to repay you if he do not want do to that.

          • Noriba permalink

            actually I am not sure if TR is a commodity money or ‘backed’ money advocate – but I would insist money is not a commodity if we are strict with definitions which we ABSOLUTELY must be if we are ever to consider this a true technical disciplne (which it is) – and its backing should ideally come from a communities trust that money is being managed such that it’s purchasing power is not volatile and stays commensurate with the real wealth in a given community. Only a transparent ‘currency managing’ apparatus, with enough monetary literacy in a given community could handle that. The prognosis is grim boys. Make money sound – and folks will realize it is not to hoard…probably no need for demurrage – folks will save based on liquidity projections, and mostly save real commodities – which could always be brought to market in times of urgencies. is this a naive stance?

          • I’d say that’s a good, moderate stance on the issue. Money must be trustworthy (sound). “Backing” a currency can help inspire trust, but it isn’t necessary. It’s a good idea to avoid arbitrary meddling with a money system too.

            A lot of problems can be solved within the current monetary system too. Charity, ample production and healthy wages must be part of any real solution to socio-economic injustices.

          • Dark Dirk permalink

            Charity ? ample production ? healthy wages ?
            You are a socialist. Have you read Silvio Gesell’s explanation of economic boom and crises ? Crises happen when there is ample production, because prices of goods fall down, profits fall down, money seeking fall down, interest fall down, bankers begin to hoard money, because they need more money to receive the same amount of money with lower interest, money supply shrinks and a economic crises being. It will last until enough goods will be destroyed and prices rise. Then interest again can be payed over the capital and new boom begin. Sorry, but ample production is not a solution in current money system.

          • I don’t identify as a socialist. I oppose nationalizing industries because it tends to lead to increased radicalism, antagonism, civil strife, and instability. As a pacifist, I wish to avoid those things altogether.

            Also, ample production is necessary to end poverty in any economic system. Inadequate production of ____X____ makes ___X___ unavailable to the poor. Charity and healthy wages help ensure that everyone has money (effectively a claim on real wealth) to spend.

          • Although I will concede that we already have ample production in the current economic system… It’s charity and healthy wages that are lacking.

          • Dark Dirk permalink

            I agree that we have ample production, but I think that we do not have healthy wages, because business owners tend to save money, and do not want to increase salaries. They always compare what they are paying to other concurrents at their sector. If they pay equally they do not rise salaries. They do not have any incentive to spend money. Some of them are charitable persons, not not all of them. Some are control freaks. Current money system rewards saving and charging interest and causes infinite deflation. Deflation pushes down wages. So current money system rewards saving, lowering wages and taking new debts.

          • No, this sounds fair enough to me!

            I also agree that in a sound system people are more likely not to hoard. Usury simply is a very strong driver to hoard and take that away and circulation will already quickly improve.

          • Dark Dirk permalink

            I think that usury is not the main driver to hoard money. People like to save money to have them at their disposal when they need them (black days). But usury is a main driver to loan money. If somebody comes to somebody else who have saved money and asks him for credit, he says: “But way I should loan you that money ? That will make me do that ?” and borrower should give him interest.
            So I think that sound system with out demurrage is not enough to stop people to hoard money.

          • Noriba permalink

            the psychology of saving is contaminated and made paranoid due to the very existence of usury, which on a macro level creates inherent scarcity and an unsettling observation in the mass consciousness, as we see productive folks willing to use their demanded talents and labor to exchange real wealth (by putting out real goods and services) slaughtered by a usurized exchange system. They head into hard times with every round of musical chairs as industries and businesses fail. Couple this with the inflation that bursts in every time liquidity is injected by the keepers of money – to keep the sick system going (versus validly injecting liquidity i.e. when there is an actual need due to the demand of increasing wealth that needs to be serviced by exchange media). Hence folks feel the need to store liquidity (albeit with eroding cash/credit). If we had disciplined and sound monetary regulation – people would invariably save, – as projecting liquidity needs is natural, but I don’t think in such an environment folks would feel the need to hoard. So I would argue a usurious environment promotes hoarding. And hence, I think valid saving is OK – and demurrage would punish such folks, unless acquiring money / credit would be so ridiculously simple that even saving would be a soft insult to society. May be I am irrational – but I do think that money/credit should not be so easy to get such that saving should become obsolete?

          • Oh, I very much agree with the idea of anticipating and combating saboteurs.

            A key problem today is the ridiculous notion that speculators have ‘rights’. The system should be designed to incentivize positive behavior and the opposite for negative ones. But the controllers should always be proactively looking for rentseeking in the system and making adjustments accordingly.

            In my own system I have full control always.

            Personally I’m not in favor of legal tender laws. The Government should just accept its own unit for taxation, that’s more than sufficient for widespread use. But I see no reason why marketplayers should not be allowed to compete. If they succeed they have something to offer. Unfortunately, the ‘get quick rich’ schemes like Bitcoin continue to lure the uninitiated, who are legion.

            And lack of monetary literacy is ultimately our biggest problem.

            But I don’t really see how demurrage in itself would attract real opposition. It’s just an incentive to dump cash, which is normally speaking rational behavior anyway. It’s only because of usury or deflation that people hoard money. The rich would not be damaged by demurrage, other than their loss of usurious income.

          • I think the tax on holding money would be enough to create opposition to demurrage. Most people don’t see saving money as immoral; instead, they see it as good planning for future expenses. You seem fixated on the subjective justification for demurrage, and while I admit that there is an internal logic to supporting demurrage money, how can you “anticipate saboteurs” if you “don’t really see how demurrage in itself would attract real opposition?”

            As for speculators, I don’t think that the government can do anything to stop them. We are all potential speculators, but it is the rich who have the greatest capacity for speculation. Of course, I should be clear what I mean when I talk about speculation: I mean selling the currency short or rapidly dumping money for commodities. Ironically, demurrage money encourages people to get rid of their money quickly by trading that money for commodities before they lose purchasing power via the demurrage tax. Then, after the demurrage money is spent, someone else will have it and they too will be encouraged to quickly spend it on real world goods in order to avoid the demurrage tax. In short, demurrage money incentivises speculation. When people trade their demurrage money for real goods simply to avoid the demurrage tax, the demand for real goods goes up. Increased demand is generally seen as justification for raising prices by businesses, especially if increasing demand outpaces supply increases. The only way that I see to break this cycle would be to make the demurrage tax very small so that people are OK with holding onto the money, or to make the demurrage money scarce enough to put a downwards pressure on prices.

          • Dark Dirk permalink

            SIlvio Gesell proposed tax to be near 5% per year. Chiemgauer has 8% per year. That is not so big tax to encourage speculation. As I sad in previous example I am spending all of my salary over the month, so I will not pay any tax.
            Of course there will be opposition to the demurrage tax and it will be very strong. At country level that reform should be carried by someone with big bolls.

          • I think the lower tax level would have a better chance of succeeding.

          • One would also have to consider how often the demurrage tax is charged. Is it charged on a currency unit every month? every week? or is the tax accruing constantly, only to be paid when the money is spent? I’m not sure which would have a better chance of succeeding. Either way, you’re right to acknowledge that there would be opposition. Perhaps there is a better monetary system that would not face nearly as much resistance.

          • Ross N. permalink

            Actually the demurrage tax will arise naturally in a Sovereign money system. When you go to put your money in a savings account, it is the same thing as putting in jewelry or some other valuable. Banks then charge a fee for storing your money.

            It is your money because it has changed its nature. This type of money is sort of a permanent wealth fund that everybody gets to use. It is related to goods and services production, and is a promise to labor and be productive. This permacredit type money is seen as a form of public wealth.

            We cannot easily charge demurrage on money already in circulation. And besides, money is in digital form for the most part now anyway.

            “With the development of cashless payment practices, especially since the after-WWII decades, and the speeding-up of the velocity of cashless circulation by IT techno­logy, cash now represents the minor part of M1, where­as the share of sight deposits has been growing ever faster.”

            China has been charging a tax on savers, and yet they still have a stubbornly high savings rate. Economists there have been suggesting more social services, especially some protection for retirement.

            So, even with the demurrage in China, the personal savings rate is a problem.

            When you boil economics down, it is political economy – which in turn is a study in force and human behavior. Money is a creature of man’s law and his abstract nature – along with social evolution. Again, China is an example, where the behavior of the people and their hoarding is a function of their social construct.

            So, a complete economy includes the law, the design of the money system, and a full understanding of the human animal. Demurrage should be part of the mix, and will be so naturally in a legal sovereign system. Making money match the nature of goods and services is the highest form money can achieve. Savings will then be both in money and goods/assets, including also shares in the commons and business. Thinking that savings must be money is a form of hypnotism that most humans are conditioned into. In a proper economy, cash is available to be exchanged for goods and services. Demurrage helps make sure the cash is available.

            In a banker credit system (sight deposits) like we have now, IOU’s reflux to the ledger to disappear, so they are already under drain pressure. In that case, demurrage would be an onerous tax, because the money is already in velocity flight, and has usury embedded at its birth.

          • well, the rich fooling around with the money supply is not a problem of demurrage, but of the rich: they tend to play games with every money system.

            It’s not so much ‘opposition’, it’s rentseeking.

            The goal of the system is reasonable exchange of real goods and services, anything else can morally and legally be guarded against.

            The examples you gave (naked short selling etc) are exactly what I would avoid: it should be illegal and the controllers of the system should make sure people trying should get burned. I’d also guard against accumulation of too much money with too few, for instance.

            It’s not so much that hoarding money is ‘immoral’, I don’t really feel that way, there is no real difference between saving money and wealth, on a moral level. The problem is there is a conflict of interest between savers of money and the rest of the users of the unit.

            I don’t believe there will be more than temporary uneasiness. The system will work well and people will adapt and start working with it. From my own experience people realize money must flow. There are very good and reasonable alternatives for passing wealth for future use. There even be full reserve banking, as long the money of savers is immediately made available for others as (interest-free) loans, so that the flow is not interrupted.
            Of course, it cannot just be forced on an unwitting populace, it must be the result of a desire for monetary reform.

            Demurrage will create the weird situation that people will always have enough cash and are always looking for ways to get rid of it, that’s quite an attractive turn around.

            It’s more the initial uneasiness with something counterintuitive than anything else.

          • In the first 1500 years of Christendom (according to Michael Hoffman ) , when usury was a mortal sin and outlawed by kings, it was considered one’s moral obligation (jus pauperum), after adequately providing for one’s family, to give all excess wealth to the poor . Back in those days, the Gospel of Jesus meant something real and it translated in a natural and equitable distribution of prosperity. It only makes sense that any money withheld without purpose deprives someone else in need. It’s why our greed is good marketplace ethics has created such a stark income disparity and why indeed it is harder for a rich man to get into heaven than it is for a camel to pass through the eye of a needle.

        • Dark Dirk permalink

          Lack of experience ? What about Chiemgauer ? These people are doing a real reform.

          • Of course, I’m much in favor of Gelleri’s work, he’s helped me out when I was in the early stages of my own unit.

            But Chiemgauer, notwithstanding its success, is only turning over a couple of million, not quite WIR like. Also: they suffer from too much converting back, the unit is not circulating very well: the network remains too small. Another problem is that they are now offering credit…… 7%.

            The big difference with the Worgl was, of course, that local taxes were accepted in the unit, but as a pure market unit demurrage has its problems. Its stamps are also annoying.

      • Thanks so much for your detailed reply, TR. Much to ponder. I don’t know enough to ask any questions that won’t make me look like a total dunce. Still trying to find my way around the whole concept of economics. To be frank, it does my head in and bores the shit out of me at the same time, but I feel it’s necessary to have some understanding.

        I don’t think demurrage as a concept could work unless people’s ideas of money shifted from something that symbolised security into something that symbolised flow. Sorry if that sounds like a hippie response but I am rather taken by the idea of money rotting like everything else in nature, haha. Do you think that something like demurrage could only happen if the whole global economy collapsed?

        • In my opinion, historians make economics more interesting. If you read some economic history, you will learn a great deal and it will probably be more interesting. I would recommend Carl Wennerlind’s “Casualties of Credit” for starters. Wennerlind is a professor of history at Columbia University and he wrote about the English Financial Revolution in that book.

          “Do you think that something like demurrage could only happen if the whole global economy collapsed?” This is a loaded question. A lot of things could happen if the global economy collapsed… most of them would be horrible. Personally, I don’t want to see demurrage become the dominant money system. I think demurrage is a coercive form of socialism and a major government power grab. Moreover, demurrage stinks of hatred, disrespect for sound money (an immensely important economic principle), and contrived nature worship. Humanity can come up with a better alternative money system – one that demonstrates love for all people and that does not sacrifice money’s role as a store of value (sound money) in order to artificially & unnecessarily prop up money’s role as a medium of exchange. A money system that demonstrates universal love for humanity will be both charitable and sound. Don’t hastily conclude that demurrage is the answer, because then you run the risk of no longer thinking of better ways.

          • Thanks very much for the recommendation. I think some historical reading is in order also.

            I agree with you about hastily finding an answer and so shutting myself off to alternatives. However, I disagree with you about demurrage stinking of hatred. To me from what I can see now it is *rescuing* humanity from enslavement to the current economic system and restoring dignity. I think it’s quite wonderful. As for nature worship – well, I think the paradigms of separation we’ve dwelt in for thousands of years leading to the separation of mind from body and the separation of body from earth are what is killing us. Being good custodians of the earth is not the same thing as nature worship. Learning from the ground that supports us is valuable – everything dies, and everything lives again in another form. Perhaps demurrage needs to follow the same course … I have absolutely no idea what that would look like 🙂

            But I am swimming in pools I really probably have no place swimming in commenting with such a limited view on things. What I like most about the way you look at things is is your love for humanity. We are at a point in time greater than any other of the past 10,000 years where we can turn this thing around, economically and socially. It’s very exciting, although of course what comes with that terrain is trying to manage your despair that humanity is not worth a blip and that we are going to annihilate ourselves out of existence. I think lots of people fall by that wayside, but really it’s the civilisation around us that’s dying, and something else will come in its place.

            I was thinking last night (as I lay dizzy on the couch, my chronic illness issues reminding me of what happens when I think hard enough that my brain feels like it’s frying) that economics seems to be an area laden more than others with the possibility that what would actually work on the ground in real life would probably be a theory that looks crap on paper. Which is a frustrating thought. But maybe a good one for me to keep in mind as I learn more about this area 🙂

          • I have found that the opposite is true: It is easier to make an idea look good on paper, but many of those ideas won’t work well in reality (Marxist communism, for example). On paper, you can ignore the sovereignty of your opponents. On paper, the idea of the wishful author always wins, always succeeds. Keep in mind that when someone puts an idea on paper, they are trying to sell it to you. They will paint a nice picture of their idea and give their justification for it.

            This is an example of a rosey picture that doesn’t have any real substance to it: “it [demurrage] is *rescuing* humanity from enslavement to the current economic system and restoring dignity. I think it’s quite wonderful. As for nature worship – well, I think the paradigms of separation we’ve dwelt in for thousands of years leading to the separation of mind from body and the separation of body from earth are what is killing us.”

            Have you read Orwell’s “Animal Farm?” The pigs become the new masters, the rescuers become the new enslavers. Rebels always present themselves as the heroes that will save humanity, but that doesn’t meant that their ideas will save humanity. Their ideas might just replace one tyrannical practice with another. This talk about being separated from and returning to the earth is a mask. It gives a justification for demurrage that is not based on sound economic principles, or love, or alleviating poverty – but a justification for their new demurrage tax based on nature (yet demurrage money is wholly artificial, a man-made tool). It’s a rhetorical trick.

          • Just because the opposite is true does not mean that its opposite is not also true 🙂

            And “this talk” about being separated from and returning to the earth might appear as a mask when it comes to demurrage, but it’s most certainly not a mask when it comes to people being empowered so that they are not beholden to the next load of people who come along after this particular version of it collapses and try to “lord it over” them. Again. Like the people in the Old Testament wanting a king.

            Love is what it’s all about. Baby.

            Okay, I’m tired of talking about this now. Thanks for the conversation.

          • You’re welcome. I agree on the love sentiment and, yes, there could be many worse things than demurrage to arise out of an economic collapse..

            On a side note, I hope you feel better.

  11. Thank You Anthony for the wonderful Article….Just one word CIA….

    I have been saying this since 2010 that BitCoin is CIA….they always bring it from ground level up as if one of us have created it…Then they create chaos around it, major hype, Mainstream first rejects it then slowly accepts it…Trademark PSY-OP 101….

    99.99% of bit coin is in Langley ….Most of the followers and forums are created by the CIA….CIA is the ground worker for the Banks and Elites….

    Many don’t know besides Black-ops and Murder-Suicides….CIA is heavily heavily into Internet…They have Mega Quantum Computers that could process all of humanity log on the internet of one day in one sec…..

    They have folks who have IQ of more than 300+ who knows all the programming languages ever created…not to mention off-world support…..We are talking about REAL AMERICA here..not the one which Hollywood creates….for main -stream consumption….

    Sadly, They will push it further as 90% of humanity is already brainwashed now …Never underestimate the power of Evil…We need to acknowledge it first and then fight it….They win because we under-estimate their hold on humanity….

  12. The current financial system is one sick puppy everywhere you look.

    The fundamentals are starting to show through all the smokescreens put up by the various central banks. The central banks are losing control and country after country is entering the ‘currency wars’ by devaluing their currencies in order to try and remain competitive and to stimulate growth in their economies.

    We are already seeing the first wheels coming off the present system. Sure there will be some ‘rescue plans’ in the months to come but that is just patching over holes and or kicking the can down the road. The big reset is coming and I personally believe it will start to gather momentum during the first half of 2016.

    If this is the case I think we will see many moving into bitcoin so yes, 2016 could well be the year for bitcoin.

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