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What if money expired?

Sure, they would be able to tell at a glance if the note had the correct number of stamps on it (no need to complicate this). If the note was deficient then the proprietor would not accept it (or, if they thought they were savvy, they would offer to place the necessary stamps on the note and charge a premium for doing so).


Eletcronic payments are displacing cash at most establishments. It is just more convenient. Simply wave your card (or mobile phone) at the EFTPOS terminal and the payment is done. I don't know how many notes you think the average person would be carrying at any one time but I doubt that it would be much more than what you could count with one hand.


Various regions in the US replicated the Worgl experiment in the 1930s and those that did it properly also had success (and also ran into trouble with the US treasury).

In fact, it there was a proposal to apply demurrage nationally. As history shows, Roosevelt went down a different path. He took the US off the gold standard and adopted a policy of perpetual inflation.

As I said upthread, this is not a new discussion.

How would they know this unless the time of issuance was made clearly visible on every note? I go to the grocery store and buy 73 bucks worth of groceries, with three twenties, a ten and a five, and get two singles back. If they were issued in different months, presumably they'd have different numbers of stamps on them, and the grocery clerk would have to identify each of them individually, and calculate for each whether the number of stamps was correct, and if not, either refuse them or recalculate their value (or as you prefer it, would have to dig out the stamps and affix them and add their cost to the tally).

Sure, you can so it all electronically these days, but not everyone does and not for everything. The system envisioned, workable as it might be in a cashless society, would be a nightmare without a considerable change in the way we go about many of our daily expenditures.

I suppose people who hate the visibility and annoyance of panhandlers would be happy with it though. Let 'em eat cake.
 
How would they know this unless the time of issuance was made clearly visible on every note? I go to the grocery store and buy 73 bucks worth of groceries, with three twenties, a ten and a five, and get two singles back.
Presumably when you read the link, you saw a picture of the Worgl 1 Schilling note:
https://tontinecoffeehouse.com/wp-content/uploads/2020/06/worgl-labor-notes-1024x566.jpg (I presume that this doesn't fall afoul of hot-linking rules). It clearly makes your question irrelevant.

Sure, it would be a hassle exchanging your old notes for new at the end of the year but this would mostly be done by the proprietor's bank. Individuals - not so much. For the most part, you are just making up irrelevant objections instead of reading anything.
 
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Presumably when you read the link, you saw a picture of the Worgl 1 Schilling note:
https://tontinecoffeehouse.com/wp-content/uploads/2020/06/worgl-labor-notes-1024x566.jpg (I presume that this doesn't fall afoul of hot-linking rules). It clearly makes your question irrelevant.

Sure, it would be a hassle exchanging your old notes for new at the end of the year but this would mostly be done by the proprietor's bank. Individuals - not so much. For the most part, you are just making up irrelevant objections instead of reading anything.

That note appears to be issued once a year. How does that work in practice? So I cash a check in July: assuming there is no unique July note, it must already be stamped. Who has paid for them, and who has applied them? Is it possible that what worked once in the little town of Worgl might prove administratively difficult to implement in, say, a nation of over 300 million people and an area of over 3 million square miles? There are over 11 billion dollars in one-dollar bills alone in circulation in the US. You may consider the administrative and logistical cost of the Worgl system irrelevant, but I suspect others might not.

Of course the note in the picture would be a bit difficult to put through a cash machine, and would not work at all in any device meant to accept bills, such as automated supermarket checkouts. A minor quibble, perhaps not important enough in a scheme that improves the world, but it's not nothing.

It's not clear from the picture how the bill is dated by year. Can we assume each year's bill is a different color or something? If not, then of course the less you need the money right now the easier it would seem simply to neglect to pay the interest. A bill that is up to date for March of this year would appear up to date for March two years from now.

I suppose you could date the stamps rather than the bills, but this would complicate the task of estimating how many stamps one needs each year, and unused stamps would also have to be traded in at the end of each year.

Of course for the great majority of people who live in cities, some of these inconveniences are minimal, but some of us live out in the country, and again, while this might be a minor inconvenience in the great scheme of things, it's not nothing at all.

And some of us are retired, or paid in ways other than the usual. If, for example, I write a novel every two years and live on the proceeds, I pay a higher tax than someone paid every two weeks. Most of my income is quarterly, and even assuming that I live up to the full extent of my income, and have no expenses that must be planned further ahead than a quarter (such as winter heat, income and property tax) this means that some of the income I get at the beginning of the quarter must be held for three months, and in the system envisioned, every expenditure I make at the end of the quarter is inherently taxed, since the money begins "rotting" as soon as it is issued. Sure, the tax is not very much, but it's NOT NOTHING!
 
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Slightly irrelevant, but...

I have exactly $50 cash.

It is a single bank note.

It has lived in my wallet, alone, since March 20, 2021.

It has been that long since I've needed to use cash for any reason.
 
Slightly irrelevant, but...

I have exactly $50 cash.

It is a single bank note.

It has lived in my wallet, alone, since March 20, 2021.

It has been that long since I've needed to use cash for any reason.

You're exactly the kind of cash hoarding drain on society this idea is going to put in your proper place.
 
You're exactly the kind of cash hoarding drain on society this idea is going to put in your proper place.
Yes indeed, finding out that the emergency fifty you stuffed in your wallet has turned into a 36 will do the trick that has so long eluded us. The newly prosperous society will be reborn, the glaciers will glow with new ice, the arid wastes burst forth with blooms, the lost and lonely will find love again, and the strange howling in the woods will fade away.
 
Cash hoarding when the value of cash was pegged to ready reserves of some commodity would be roughly the same as hoarding the commodity itself. One can kind of see the value of creating artificial discouragements to such behavior.

I wonder what the modern equivalent would be. Are lines of credit taxed, as assets?
 
Slightly irrelevant, but...

I have exactly $50 cash.

It is a single bank note.

It has lived in my wallet, alone, since March 20, 2021.

It has been that long since I've needed to use cash for any reason.

Mugger money?
 
That note appears to be issued once a year. How does that work in practice? So I cash a check in July: . . . . (remainder snipped for brevity)
Why do you keep trying to argue against success? The Worgl experiment WORKED! This means that all of the objections you make up concerning the minute mechanical details of the scheme are either non-existent or were figured out at the time.

You need to focus on the bigger issue. Is it better to have perpetual inflation or does demurrage instead offer some advantages?
 
Cash hoarding when the value of cash was pegged to ready reserves of some commodity would be roughly the same as hoarding the commodity itself. One can kind of see the value of creating artificial discouragements to such behavior.

I wonder what the modern equivalent would be. Are lines of credit taxed, as assets?

This is the problem and I should have seen it instantly. Lender lends us $1,000,000 and what interest rate do they charge? Essentially 5.2% plus whatever return they want. So that is the floor for interest rates, and they go up from there. That would be historically a very high rate and would have denied a lot of economic growth.

I can see the argument seeming valuable in times where current spending would give a jumpstart to the economy. But in fact these are basically short-term situations (from the end of a recession to the beginning of a recovery).
 
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Why do you keep trying to argue against success? The Worgl experiment WORKED! This means that all of the objections you make up concerning the minute mechanical details of the scheme are either non-existent or were figured out at the time.

You need to focus on the bigger issue. Is it better to have perpetual inflation or does demurrage instead offer some advantages?

You are a banker (I know, but imagine). What rate do you charge on your loans?
 
Why do you keep trying to argue against success? The Worgl experiment WORKED! This means that all of the objections you make up concerning the minute mechanical details of the scheme are either non-existent or were figured out at the time.

You need to focus on the bigger issue. Is it better to have perpetual inflation or does demurrage instead offer some advantages?

WORKED! in what sense? It discouraged cash hoarding in a local market, in an economic context where cash hoarding might have actually been a problem.

What problem is cash demurrage supposed to solve today, in your opinion? Deterring cash hoards might well be a fine thing in principle, but who is hoarding cash these days? Let alone hoarding enough cash to actually affect the economy, local or otherwise?
 
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Why do you keep trying to argue against success? The Worgl experiment WORKED! This means that all of the objections you make up concerning the minute mechanical details of the scheme are either non-existent or were figured out at the time.

You need to focus on the bigger issue. Is it better to have perpetual inflation or does demurrage instead offer some advantages?

The Worgl experiment worked in a time of international financial disaster between two world wars, in an Austrian village of 5000 people, at least for a while. It was applied only to the extent that the town itself was the payer, for municipal employees (and not 100 percent to them) and to those in what we'd now likely call workfare. It may well have been beneficial to the town, and to the people in general, but it did so in part by binding the recipients to spend their money in a time frame determined by others, and by taxing out-of-network purchases. In the case of the workers paid 100 percent in the new currency, it was essentially a voucher or chit system, uncomfortably close, perhaps, to a company store.

The scheme worked in part because the banks guaranteeing the new currency backed it with a great deal of old, fiat currency. It did not go for long enough, I think, to show how it could perform alone without another currency to back it up.

You may consider that the kinks were worked out at the time, or are not significant, but I can guarantee that Worgl did not have to think for even one second about how their bills might run through automated equipment that did not exist, nor did they need to work out how their system might be scaled up to a large country with a population of 300 million, and what administrative moves would have to be made to maintain and service many BILLIONS of bills in circulation over a vast territory both urban and rural.

You can come up with all sorts of good ideas about how demurrage might solve some economic woes, but to do so it does actually have to be practicable, and what you dismiss with a handwave as trivial or minute makes a difference, I think. A demurrage economy would, I think, have to include abolition of cash altogether in order to work. Everything that now counts as "money" would have to be virtual, and run through a system that keeps track of the time of its issuance and its ever-changing value. And of course it would have to be secure, and it would have to be accessible to everyone, everywhere, all the time.

That might be possible, and might even, at least in theory, be the wave of the future, but it isn't here yet, and there are plenty of forces that will continue to resist it, for various reasons.

But anyway, I'm sure you'll find some snarky way to disparage my opinion, and I'm about done with it. I believe you are in Australia, so I will politely suggest that you figure out a way to get this system to work in Australia, and when it does, report back. I will continue in the meantime not to take any wooden nickels.
 
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thing is, there might be a time when it is a good thing to hoard money and assets, like during a boom in the economy.
So while the Woergl experiment is something that can be used to fight a depression (unlike hiking up interest rates), it's probably not something you want in an already flush economy.

With boom and bust cycles, there is no such thing as One-Size-Fits-All
 
This is the problem and I should have seen it instantly. Lender lends us $1,000,000 and what interest rate do they charge?
:confused: Why on earth would they have to do that? That's $1,000,000 of their reserves that they won't have to pay demurrage on because that money is now in the hands of its customers.

If anything, it would be in the bank's interest to lower interest rates on loans rather than sit on a large pile of diminishing reserves.

OTOH under inflation, banks have to charge a premium on loans in order to maintain the value of these loans.
 
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There is no point in responding to this post in its entirety. It is mostly based on strawman arguments.

Had you read post #80 properly, you would know what policy the government adopted instead of demurrage to combat the depression and that maintaining both policies simultaneously would be counter productive.
 
I still think the scheme is a non-starter in current times, and not an answer to the most important economic problems we face, but for those interested, I note that the Worgl experiment was probably not the biggest or best of these. Similar schemes were used in a couple of places in Germany.

One difference here is that the expiring currency was exchangeable at par with common currency, without an extra tax. I have not read up in detail just what motivated holders of that currency not to exchange it quickly, but imagine that discounts or premiums at the local level could do so. So an up to date bill was always worth at least its face value. It's also not made clear, at least in the limited reading I did, who would be liable for continued demurrage on bills traded for regular marks. If the bank became liable for the continued depreciation, paying out regular marks for local ones would be unprofitable, and to cover the expense of the depreciation they would likely have to charge a premium to those paying in regular marks for local ones. Unless some businesses gave special discounts for local currency, I think the incentive for using it would diminish. This issue was presumably addressed in some way, but it's not made clear how. Nor is it made clear how businesses taking local marks in trade were expected to handle their volatility.

The link given here will send you to a page regarding a demurrage currency in the short-lived Bavarian Soviet Republic, but includes a further link to a similar experiment in Erfurt that seems to have had more success.

In both cases, the "Wara" of Erfurt and the Bavarian "Freigeld" are dated, the latter on January first, the former by year, so presumably they would be renewed at each anniversary, with those paid out during the year stamped up to date by the payer. I did not see a discussion of the mechanics of this.

https://www.perfectforroquefortcheese.org/2023/11/11-131.html

and the link therein is https://www.perfectforroquefortcheese.org/2021/10/komplementarwahrungen.html
 
I am not an economist at all. But a few results of this seem pretty simple:

Rich people and companies will make themselves cash poor and put their money into land, durable commodities, and precious metals. That would protect their wealth from expiration and make it harder to find money to invest. Not great for the economy.

A defacto gold or silver standard will assert itself as a means to protect smaller amounts of money among everybody else. This will effectively undo the usefulness of floating currency. That leads to an economy affected by mining futures and unaffected by the federal reserve.
 
Rich people and companies will make themselves cash poor and put their money into land, durable commodities, and precious metals. That would protect their wealth from expiration and make it harder to find money to invest. Not great for the economy.
This is exactly what happens under inflation. Those with surplus cash can preserve the value by of their cash by investing in non-depreciating assets or stocks and bonds. Others, not so much. Of course, the money invested doesn't disappear. The seller of the asset receives that money.

Worse, since debts devalue with inflation, banks and other lenders have to add the inflation rate to the interest they would otherwise have charged to make a real profit on the loans they make. This disadvantages the poor.
 
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I still think the scheme is a non-starter in current times, and not an answer to the most important economic problems we face, but for those interested, I note that the Worgl experiment was probably not the biggest or best of these. Similar schemes were used in a couple of places in Germany.

One difference here is that the expiring currency was exchangeable at par with common currency, without an extra tax. I have not read up in detail just what motivated holders of that currency not to exchange it quickly, but imagine that discounts or premiums at the local level could do so. So an up to date bill was always worth at least its face value. It's also not made clear, at least in the limited reading I did, who would be liable for continued demurrage on bills traded for regular marks. If the bank became liable for the continued depreciation, paying out regular marks for local ones would be unprofitable, and to cover the expense of the depreciation they would likely have to charge a premium to those paying in regular marks for local ones. Unless some businesses gave special discounts for local currency, I think the incentive for using it would diminish. This issue was presumably addressed in some way, but it's not made clear how. Nor is it made clear how businesses taking local marks in trade were expected to handle their volatility.

The link given here will send you to a page regarding a demurrage currency in the short-lived Bavarian Soviet Republic, but includes a further link to a similar experiment in Erfurt that seems to have had more success.

In both cases, the "Wara" of Erfurt and the Bavarian "Freigeld" are dated, the latter on January first, the former by year, so presumably they would be renewed at each anniversary, with those paid out during the year stamped up to date by the payer. I did not see a discussion of the mechanics of this.

https://www.perfectforroquefortcheese.org/2023/11/11-131.html

and the link therein is https://www.perfectforroquefortcheese.org/2021/10/komplementarwahrungen.html
It still doesn't make sense to me to get bogged down in the minute details of the implementation of a system when we haven't decided whether the system as a whole is even worth considering.

If demurrage became a national policy (instead of inflation) then as far as the banks were concerned, they would only be responsible for the demurrage on their reserves (including vault cash). Customers would be responsible for demurrage on the deposits in their own bank accounts.

Obviously money in accounts would be managed electronically and the demurrage automatic. How demurrage is recorded on bank notes could be a problem. It seems uneconomic to have bank staff licking stamps every month. Maybe they might use some sort of franking machine like large businesses use for their snail mail. This is the sort of stuff that gets examined if we ever get to a feasibility study stage. That would also have to address bigger questions like how to manage the money supply (the gold standard is long gone) given that we would no longer be able to perpetually print money.

Incidentally, you posted another example of a central bank shutting down a demurrage currency because they didn't like its sucess. There are still examples of local/regional currencies that use demurrage today. One of these is the Chiemgauer in Bavaria, Germany.
 
This is exactly what happens under inflation. Those with surplus cash can preserve the value by of their cash by investing in non-depreciating assets or stocks and bonds. Others, not so much. Of course, the money invested doesn't disappear. The seller of the asset receives that money.

Worse, since debts devalue with inflation, banks and other lenders have to add the inflation rate to the interest they would otherwise have charged to make a real profit on the loans they make. This disadvantages the poor.

I'm pretty sure the wealthy invest whether there is inflation or not. What else would they do?
 
Doubt suggested that demurrage would cause the wealthy to invest rather than hold on to their cash.

The wealthy don't hold onto their cash, though. They have capital assets, and lines of credit. Even their liquidity isn't wall safes full of dollar bills. It's bank accounts full of ledger entries.

I'm pretty sure the only people who hold onto cash are people who have enough money to save, but not enough money to invest. I.e., the working poor. Demurrage would be the worst possible thing for them, since it would drain their meagre savings. Either by depreciating their cash reserves, or by forcing them to spend money they'd rather save, on things they don't actually need.

What would probably help the working poor isn't demurrage, but micro-loans.

And it's not like the working poor are hoarding so much cash that it's a drag on the economy, right?
 
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A couple of notes, though I don't want to start all over with the same old same old.

I think the prestige has a point, that the wealthy are not the ones hoarding cash, and the poor are not hoarding all that much, in relative terms. Unless expenses, including taxes and seasonal issues, can be spread out evenly over the year, demurrage threatens to become just a surtax on irregular expenses. The percentages may be small taken one at a time but cumulatively they are not, and the effect will always be greatest on those with the least.

What constitutes hoarding can be argued in many ways, but in some degree it depends already on what one's wealth may be. Some people find it necessary to save up for things.

Of course some of the possible disadvantages of demurrage could be addressed by other economic reforms, but I think those reforms should come first. Poor people now are often at the edge of financial ruin, even homelessness, if one unforeseen emergency such as an illness or a car breakdown occurs. Correcting wage inequities, medical and food uncertainty, public transit deficiencies, usurious loans, untenable rents, etc. would help a lot. I suspect it's not a sheer coincidence that many of those advocating the demurrage economy had Communist inclinations as well.

And finally, I do not think it is "bogging down over minute details" to wonder if an idea has any hope of being implemented. Many very good ideas are defeated by practical impossibility. A pretty small hole can sink a ship. I think there is a lot of possible merit to something along the lines of demurrage if done right, but I think it's pie in the sky in an economy that still uses many billions of dollars' worth of fungible cash, in a country run by rich people that cannot manage to set up sensible health care, and that cannot even manage to get rid of the penny coin.

It's fine and fun to imagine how such a system might work, and to imagine and debate what benefits such a system might bring, but we must guard against falling into the "Gaetan" class of debate, in which the sum and substance ends up "we simply ought to change everything." I can drive around all day with a "Free Tibet" sticker on my bumper, and it's unarguably a good thing to believe, and a good thing to stand for, but it's not how the thing is going to happen if it does.
 
This is exactly what happens under inflation. Those with surplus cash can preserve the value by of their cash by investing in non-depreciating assets or stocks and bonds. Others, not so much. Of course, the money invested doesn't disappear. The seller of the asset receives that money.

Worse, since debts devalue with inflation, banks and other lenders have to add the inflation rate to the interest they would otherwise have charged to make a real profit on the loans they make. This disadvantages the poor.

I agree. But it would look a bit different. Normally, anybody in a position to invest wants to keep some cash on hand to cover emergencies and any opportunities that might come up. Some of that would be in the form of money market investments that can be liquidated quickly and still earns some interest even if it isn't much.

The proposed money expiring business would punish anybody keeping any cash on hand. Likely the rate at which it expires would equal or exceed anything in money market accounts. The end result is an empty field in the middle of nowhere ends up being a better way to at least preserve wealth instead of keeping any cash on hand.

The question I have is how would this affect inflation as we know it? Would there be more, less or about the same. Which leads to a secondary question of if this would displace the inflation with a predictable decline in value. That at least would have some utility since the rate would be known. But if this makes inflation worse or it stays the same than it is of no benefit at all.
 
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This is exactly what happens under inflation. Those with surplus cash can preserve the value by of their cash by investing in non-depreciating assets or stocks and bonds. Others, not so much. Of course, the money invested doesn't disappear. The seller of the asset receives that money.

Worse, since debts devalue with inflation, banks and other lenders have to add the inflation rate to the interest they would otherwise have charged to make a real profit on the loans they make. This disadvantages the poor.

Inflation is a curse. Artificial inflation doubly so. What even is your point?
 
This is exactly what happens under inflation. Those with surplus cash can preserve the value by of their cash by investing in non-depreciating assets or stocks and bonds. Others, not so much. Of course, the money invested doesn't disappear. The seller of the asset receives that money.

Worse, since debts devalue with inflation, banks and other lenders have to add the inflation rate to the interest they would otherwise have charged to make a real profit on the loans they make. This disadvantages the poor.

What you are proposing is built-in inflation. This dollar bill I have in my pocket will become worth less over time, which is the definition of inflation. That's why I asked what interest rate you would charge because (as you pointed out) lenders use a built-up rate that includes an inflation premium.

Granted you seem to think that the economy doesn't need bankers making loans, which is amusing.
 
Inflation is a curse. Artificial inflation doubly so. What even is your point?

Not always a curse. If you own money and have a fixed interest rate, an inflationary cycle can help you since the amount you owe does not go up. Quite a few people who took out loans in the late 60s did pretty well with the early 70s inflation cycle.

If you get stagflation, then almost everybody is screwed in the end.

Edited to add: The proposed money expiring thing does not help those who owe money, so again, even the people with a home loan at a fixed interest rate cannot get ahead this way.
 
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I'm pretty sure the only people who hold onto cash are people who have enough money to save, but not enough money to invest. I.e., the working poor. Demurrage would be the worst possible thing for them, since it would drain their meagre savings.
Inflation also drains their "meagre" savings.

Inflation is a curse. Artificial inflation doubly so. What even is your point?
Aside from the fact that you have answered your own objection to demurrage, the point is that while inflation devalues debts, demurrage doesn't so lenders don't have to charge a premium on interest to cover the inflation rate.
 
The proposed money expiring business would punish anybody keeping any cash on hand. Likely the rate at which it expires would equal or exceed anything in money market accounts. The end result is an empty field in the middle of nowhere ends up being a better way to at least preserve wealth instead of keeping any cash on hand.
It might not necessarily a bad thing if money markets that speculate purely on the value of money were subject to demurrage. Trade in internationa financial derivatives dwarfs the international trade in goods and services and makes a mockery out of trying to balance imports vs exports.

However, managed investment funds invest in non-depreciating assets and these funds are generally liquid enough for those who want to hold onto their cash for more than a year or so (and avoid a 5% demurrage charge).

The question I have is how would this affect inflation as we know it? Would there be more, less or about the same. Which leads to a secondary question of if this would displace the inflation with a predictable decline in value. That at least would have some utility since the rate would be known. But if this makes inflation worse or it stays the same than it is of no benefit at all.
We can't have a policy of inflation and demurrage. If currency was subject to demurrage then we wouldn't have a policy of perpetual inflation (no more QE). If we still have bouts of inflation then the rate would probably be lower than it is now. But beyond that, it is (as always), impossible to predict the economic future.
 
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