6 ms·

Uh, our money does already expire. It's called inflation.

by numtel 3y ago

abe_m 3y ago
It is interesting how closely the proposals of Gesell are to current US Fed policy of 2% inflation. The main difference seems to be the current system runs on the Cantillion effect, where those in favoured positions (close to where the money is created) benefit from the inflation, while those farthest away bear the cost. In effect, it is the rich who are able to borrow direct from Central Banks and Government Treasuries get negative effective interest, and are able to parlay that into charging more interest to those farther down the chain, until you hit people paying 20+% on credit cards and payday loans. But as far as the perishable money, there are currently places like Turkey and Argentina where inflation is far higher than Gesell's proposed 5% inflation. Are those countries flourishing as a result of local inflation? It doesn't seem that way.
- latchkey 3y ago
  2% is an entirely made up number though. "The 2 percent target widely adopted by central banks today originated from New Zealand, and surprisingly it came not from any academic study, but rather from an offhand comment during a television interview." https://www.cfr.org/blog/history-and-future-federal-reserves-2-percent-target-rate-inflation-0 https://www.cfr.org/blog/history-and-future-federal-reserves...
- tiredofleftist 3y ago
  Quoting. "those in favoured positions, close to..." Add: "Investment is the production of capital goods, and the production of capital goods involves consumption." and: "Are those countries flourishing as a result of local inflation? It doesn't seem"...so ...Question I have: "This disinflation, i.e. near or almost deflation, been first contested - because some things actually became truly expensiver, but to determine inflation you did not need to calculate it as an average?", i want to ask.
rlnorthcutt 3y ago
There is a difference between inflation, which affects the entire monetary system, and money expiration which affects individual units of currency. In the first case, there is no incentive to use the money any faster, and as long as inflation isn't too high, there could be incentives to hoard/save it. In the second case, each unit has an expiration, and like the game of hot potato, you want it out of your hands quickly. This should heat up the economy overall, while inflation is seen as the result of an overheated system. The trick, as noted, is who is poised to benefit? The "new" dollars would be worth more, so the people at the top of the flow would have more advantages than those at the bottom. In order for something like this to work, it would also need to recognize the creation of value, and not just the creation of the currency. The person who turns a pile of wood into a chair is creating value, but they are usually not able to capture the true value of their time and skill. Overall, this is an interesting idea especially in that it changes the way we think about money.
- brookst 3y ago
  I’m not seeing the difference. If I have $1 that’s worth $1 today and $0 in one year, doesn’t it stand to reason that in 6 months I could exchange it for $0.50 with a one year expiration? Taken further, every day I could exchange all of my wealth which now has 364 days left for slightly less wealth with 365 days left. That sure sounds like inflation.
  - Retric 3y ago
    The important difference is the inflation rate could differ from its current value. Money 200 months left is unlikely to be worth exactly 10x as much as money with 20 months left. That difference may not be meaningful on its own but could have interesting knock on effects depending on how money enters the system.
    - brookst 3y ago
      That’s true, but how is it different from nonlinear rates of return on bonds of varying lengths? Changing the way money enters the system is interesting for sure, but orthogonal to whether expiring money is just inflation by another name.
trompetenaccoun 3y ago
Yes but they want more. Authorities can't print endlessly, inflation would get too bad and apart from the danger of economic collapse, ordinary people do notice when the purchasing power of their money rapidly depreciates, even when they don't fully understand why. In comes CBDC and the realistic ability to make this "free money" stamp idea a thing at scale. They could give the tokens an expiry date as well, Chinese authorities have proposed such a thing.* Or void certain ones while leaving others untouched. For example if you were to take part in an illegal trucker protest, poof go your savings. *https://www.econ.iastate.edu/ask-an-economist/why-would-chinas-central-bank-want-issue-digital-yuan-expiration-date https://www.econ.iastate.edu/ask-an-economist/why-would-chin...

Uh, our money does already expire. It's called inflation.

by numtel 3y ago

Uh, our money does already expire. It's called inflation.

It is interesting how closely the proposals of Gesell are to current US Fed policy of 2% inflation. The main difference seems to be the current system runs on the Cantillion effect, where those in favoured positions (close to where the money is created) benefit from the inflation, while those farthest away bear the cost. In effect, it is the rich who are able to borrow direct from Central Banks and Government Treasuries get negative effective interest, and are able to parlay that into charging more interest to those farther down the chain, until you hit people paying 20+% on credit cards and payday loans. But as far as the perishable money, there are currently places like Turkey and Argentina where inflation is far higher than Gesell's proposed 5% inflation. Are those countries flourishing as a result of local inflation? It doesn't seem that way.

latchkey 3y ago
2% is an entirely made up number though. "The 2 percent target widely adopted by central banks today originated from New Zealand, and surprisingly it came not from any academic study, but rather from an offhand comment during a television interview." https://www.cfr.org/blog/history-and-future-federal-reserves-2-percent-target-rate-inflation-0 https://www.cfr.org/blog/history-and-future-federal-reserves...
tiredofleftist 3y ago
Quoting. "those in favoured positions, close to..." Add: "Investment is the production of capital goods, and the production of capital goods involves consumption." and: "Are those countries flourishing as a result of local inflation? It doesn't seem"...so ...Question I have: "This disinflation, i.e. near or almost deflation, been first contested - because some things actually became truly expensiver, but to determine inflation you did not need to calculate it as an average?", i want to ask.

rlnorthcutt 3y ago

There is a difference between inflation, which affects the entire monetary system, and money expiration which affects individual units of currency. In the first case, there is no incentive to use the money any faster, and as long as inflation isn't too high, there could be incentives to hoard/save it. In the second case, each unit has an expiration, and like the game of hot potato, you want it out of your hands quickly. This should heat up the economy overall, while inflation is seen as the result of an overheated system. The trick, as noted, is who is poised to benefit? The "new" dollars would be worth more, so the people at the top of the flow would have more advantages than those at the bottom. In order for something like this to work, it would also need to recognize the creation of value, and not just the creation of the currency. The person who turns a pile of wood into a chair is creating value, but they are usually not able to capture the true value of their time and skill. Overall, this is an interesting idea especially in that it changes the way we think about money.

brookst 3y ago
I’m not seeing the difference. If I have $1 that’s worth $1 today and $0 in one year, doesn’t it stand to reason that in 6 months I could exchange it for $0.50 with a one year expiration? Taken further, every day I could exchange all of my wealth which now has 364 days left for slightly less wealth with 365 days left. That sure sounds like inflation.
- Retric 3y ago
  The important difference is the inflation rate could differ from its current value. Money 200 months left is unlikely to be worth exactly 10x as much as money with 20 months left. That difference may not be meaningful on its own but could have interesting knock on effects depending on how money enters the system.
  - brookst 3y ago
    That’s true, but how is it different from nonlinear rates of return on bonds of varying lengths? Changing the way money enters the system is interesting for sure, but orthogonal to whether expiring money is just inflation by another name.

trompetenaccoun 3y ago

Yes but they want more. Authorities can't print endlessly, inflation would get too bad and apart from the danger of economic collapse, ordinary people do notice when the purchasing power of their money rapidly depreciates, even when they don't fully understand why. In comes CBDC and the realistic ability to make this "free money" stamp idea a thing at scale. They could give the tokens an expiry date as well, Chinese authorities have proposed such a thing.* Or void certain ones while leaving others untouched. For example if you were to take part in an illegal trucker protest, poof go your savings. *https://www.econ.iastate.edu/ask-an-economist/why-would-chinas-central-bank-want-issue-digital-yuan-expiration-date https://www.econ.iastate.edu/ask-an-economist/why-would-chin...