Monday, 19 January 2009

A new kind of money

Vince Cable was bang on with his phrase "giving the kiss of life to a corpse". The real problem is not that the banks refuse to lend, it is that they have lost the ability to do so. They have been consolidated to the point of uselessness to the local economy.

They also have no local infrastructure, and what structure they do have points towards the discredited speculative economy, not the real one. It is time to break them up, de-merge them and rebuild a local and regional lending infrastructure like they have in Europe and North America.

But just for a moment, take a quick trip back with me to March 1933, and Roosevelt's inauguration. About 5,000 banks had closed their doors a few days before. The second greatest economist of the age (Irving Fisher) had just published a book called Stamp Scrip, which urged a new kind of local money which lost value week by week, to encourage spending rather than hoarding.

Within a few months, there were 4,000 or so of these local currency systems across the northern states of the USA, following on from the highly successful models in Austria and Switzerland, and all based on the ideas of an Argentine trader called Silvio Gesell. Money that rusts. In Worgl in Austria, the very first, people had paid their local taxes months in advance and the council was able to invest in a range of new infrastructure: the originator there rejoiced in the name of Mayor Unterguggenberger, but that's beside the point.

There we are, some alternative economic archaeology. What's interesting about it is that Roosevelt was persuaded by the bankers to make stamp scrip illegal, in case it undermined confidence in banks. It was almost his first executive decision.

But what's interesting about it now is the reference to the whole affair on Barack Obama's blog, which really makes you wonder what is going to happen in the next few days:


Mark Herpel said...

On February 17, 1933, Senator John H. Bankhead of Alabama introduced a bill into Congress for the purpose of authorizing the Federal Government to issue a dated Stamp Scrip that shall operate as legal tender during the limited period of the issue. The Bill for the US Government to issue $US1 trillion of self-liquidating negative interest money never passed. It would have created serious competition for the privately owned Federal Reserve System that makes its profit from money creation. Two weeks later on March 3rd the New Deal was announced that stopped the passage of the Bill and the use of self-liquidating ecological forms of money then being used in thousands of US communities. Senator Bankhead's plan is that the emergency issue be injected into the national circulation, partly through the regular expenditures of the Federal Government, partly through the expenditures of the state governments among which certain shares of the scrip issue would be apportioned, and partly through localities among which the states would further sub-divide the issue.

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