European national and local governments possess the power to rebuild their infected economies with self-liquidating “Stamp Scrip” money. This could be achieved without deficits, debt, or taxes. It would also strengthen democracies from the bottom-up with independent sources of finance.
The small town of Woergl in Austria attracted worldwide attention for Stamp Scrip when they introduced it in 1931 during the depths of the Great Depression to stimulate their local economy. It was a great success. Unemployment was reduced and a number of civic infrastructure projects built. Many other towns began to copy the Woergl initiative but were closed down by the authorities to protect government monetary sovereignty.
World-renowned economist, John Maynard Keynes, supported Stamp Scrip. He described its inventor, Silvio Gesell, as an “unduly neglected prophet” [i]. Keynes explained how money should be become self-liquidating like Stamp Scrip. Keynes stated: “money is a mere intermediary, without significance in itself, which flows from one hand to another, is received and dispensed and disappears, when its work is done”[ii].
Keynes stated: “The idea of stamp money is sound”[iii]. Surprisingly, it is neither a store of value or unit of value. Its value was defined by official money. In the Great Depression the value of money was defined by specified weights of gold or silver. Today, official money has no defined value. Self-referential markets determine the value of official money on an unpredictable basis that feeds instability and “doom loops”.
Stamp Scrip survived in the Great Depression in a number of other European countries and in the US. Yale economist, Irvin Fisher wrote a handbook Stamp Scrip in 1933 to explain how local communities could introduce Stamp Scrip. He also advised members of the US Congress on how Stamp Scrip could be introduced by the US Government to avoid deficits, debt and the taxes to service them.
Stamp Scrip began circulating again without a crisis tethered to the Euro in 2003. Christian Gelleri initiated its re-introduction as a school project. His grandmother had met Gesell. At the time Gelleri was a teacher at a Rudolf Steiner School in the Chiemgauer region of Bavaria. Steiner was also a supporter of Stamp Scrip and referred to it as “perishable money”. In 2005 the project grew to become independent of the school. At all times its operations have been governed by a democratically organized stakeholder owned mutual association.
Gelleri inspired hundreds of regions to establish their own “Regiomoney”. Margrit Kennedy supported this development as it put into practice the ideas in her 1997 article: ‘Interest and Inflation Free Money: How to create an exchange medium that works for everybody’. A Regional Money Association was established in 2006. Gelleri and Kennedy convened its first meeting in the Traunstein Rathaus on February 4th of that year. The author was researching Stamp Scrip in nearby Woergl and was invited as a guest speaker.
The European Central Bank (ECB) has accepted the existence of Regiomoney. When the ECB reviewed “Virtual Currency Schemes” that included Bitcoins, it did not suggest that privately issued complementary currencies tethered to Euros were not legal, only that they introduced “uncertainties for their users”. This remark is especially relevant to Bitcoins that are neither tethered to any unit of value nor any official currency.
The largest and oldest private sector complementary currency in Europe is the Swiss based mutually owned and control Wirtschaftsring (WIR). WIR credits are tethered to, but not convertible into Swiss Francs. Complementary exchange systems such as the WIR and the International Reciprocal Trade Association founded in the US in the early 1970s have been found to increases macroeconomic stability. Stamp Scrip could become another complementary currency to support the stability of the Euro. By funding society on a bottom-up basis it can also enrich democracy.
Crucially, a modern digital version of Stamp Scrip would create emergency “lifeboat money” for distressed economies. It would substantially improve the bargaining power of democratic governments to negotiate with unelected technocrats in multi-national institutions in charge of managing financial crises. For this reason, institutions like the International Monetary Fund, The European Commission of the European Union and ECB may resist the spread or development of self-financing politically liberating money. But times are changing.
Central Banks and multi-national monetary authorities now admit they are running out of monetary policy ammunition. To maintain a reason for their existence in a digital age they may see it as being in their existential interest to be the sponsors and regulators of monetary innovations?
Today, the inconvenience of using stamps can be avoided by using a digital form of Stamp Scrip. Around 80% of Chiemgauer money is now digital. The reason self-liquidating money was called Stamp Scrip was because the notes issued as money required a stamp to be affixed to each note each week to keep them valid. The issuer of the notes obtained the revenue from the sale of the stamps. This revenue was used to redeem the notes after a year with small profit to cover costs. It was the users of the money who paid the cost of the stamps.
The cost paid by money users could be considered a fee for obtaining the use of a publicly accepted medium of exchange to allow transactions to arise that might not otherwise be possible without bartering or joining a mutual credit association like the WIR. The cost to users represents a negative interest rate. With the current record low global interest rates there is no better time for issuing negative interest rate money. The ECB has noted the benefits of negative interest for a proposed Central Bank Digital Currency.
When Stamp Scrip began circulating in Germany early last century it had a negative interest rate equivalent to 5.4 % per year. Keynes stated: “This would be too high in existing conditions, but the correct figure, which would have to be changed from time to time, could only be reached by trial and error.”[iv] The Chiemgauer was originally issued with a cost of 2% per quarter. This was reduced in 2014 to 3% every half-year.
The lower cost did not change its velocity of circulation. The incentive to spend was the same. Its velocity is still four times faster than the Euro. The velocity of the Euro had more than halved its speed since first being introduced. Fisher reported that US Stamp Scrip with a cost of 2% per week circulated four times faster than official money in stable times and twelve times faster during the Depression. Its extremely high cost in the Great Depression did not deter its acceptance in that crisis.
Surprisingly the 2% cost per week would still increase the profits of merchants as this represents less than 0.3% per day. Each day the merchants may turn over their funds in their tills multiple times to reduce the cost per transaction well below that of credit card and/or bank account fees.
During the Great Depression, Stamp Scrip was described in many other ways. Other descriptive terms included: cost carrying, evaporating, free, demurrage, natural, neutral, perishable, rusting or speed money. For convenience the term speed money is used below.
When the value of speed money is defined by Sustainable Energy consumption to create Sustainable Energy Dollars (SED) the term $Z is used [v]. The use of such a tether could reduce the need for carbon trading or taxing. Introducing speed money is a step towards this objective. $Z would introduce decentralised money creation/liquidation and irrelevancy of unstable currencies.
Some jurisdictions may wish to introduce Speed money by legislation. A copy of the bill that Fisher assisted in drafting for the US Congress is provided as the first Appendix in Stamp Scrip. This Bill authorised the US Government to issue $US 1 billion to be distributed to each State in proportion to their populations. Half the money was for individual welfare and half for creating employment on infrastructure projects.
The US Post Office would sell the stamps to be affixed to the notes each week that cost 2% of their face value. Stamp sales over 52 weeks would generate revenues of 104%. So after gifting all the money away and then redeeming all the notes issued, the government would make a gross profit of $US40 million! The Bill would have replaced the need for government debt and the need for the Federal Reserve Bank. So the Stamp Scrip Bill was replaced with one to save the Fed and keep the government in debt as explained here.
Extreme levels of negative interest like 104% make speed money self-limiting. This was revealed in Woergl. Citizens who had more speed money than they could spend began paying town taxes in advance. Another notable feature was that to give confidence to citizens in the value of the notes, the mayor took half his stipend in Stamp Scrip.
Today governments are willing to do “what ever it takes” to protect their citizens and businesses. The best solution requires governments changing their habits of thinking about money. The political rewards of protecting voters and businesses without additional government debt or taxes while reducing deficits are compelling. It should allow governments to be more generous in rebuilding their economies and do so on a decentralised self-determined basis.
The current economic infection has created a crisis that should not be wasted with analysis that leads to paralysis. Unprecedented times provide the best time to trial unprecedented initiatives. It is now politically tenable to take a “ready, fire, aim” approach for governments or others to trial self-liquidating money. It may allow future generations of citizens and governments to dodge the bullets of higher deficits, debts and taxes.
About the Author
Shann Turnbull PhD has been a serial entrepreneur founding enterprises and re-organising listed firms. In 1975 he co-authored the first educational qualification for company directors in the world. His PhD research established the science of governance for evaluating and designing organisations by using bytes as the unit of analysis. ([email protected] )
[i] Keynes, J.M. 1936. The General Theory of Employment, Interest and Money. Book VI, Chapter 23, Section VI, First sentence, <https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch23.htm>.
[ii] Keynes, J. M. 1923. A Tract on Monetary Reform, The Collected Writings of John Maynard Keynes Vol IV, p. 124, London: McMillan (1971-1989).
[iii] Keynes, 1936, Op. cit. First sentence of eighth paragraph.
[iv] Keynes, 1936, Op. cit. Section VI second last paragraph.
Turnbull, S. 2018. ‘Sustainable Value Money: Why it is needed, how to get it?’ In: Boubaker, S. and Nguyen, D. (eds.), Corporate Social Responsibility, Ethics and Sustainable Prosperity, pp. 413-43, World Scientific Publishing: Singapore, https://ssrn.com/abstract=3022277.
Turnbull, S. 2018. ‘Renewable Energy: Stabilising Money and Society’ in: Droege, P. (ed.), Urban Energy Transition: Renewable strategies for cities and regions, pp. 491-510, Elsevier Science Publishers: Oxford, https://papers.ssrn.com/abstract=3051587.