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sophisticated that Egypt became the breadbasket of the ancient world. This monetary
system remained in place for over a thousand years.
The second example of a currency with a circulation incentive from history occurred
in Europe during the period 1150–1300. At this time silver bracteates (thin plates) were
issued by nobles and bishops to circulate as currency. The bracteates were recalled at
regular intervals and later reissued with a lower silver content in a form of tax collection by
the nobles, the rate of reduction of silver averaging around 2–3 per cent a month. As a
consequence of this, people preferred to spend the currency rather than hold on to it. And
so we find that during the period when bracteates circulated, art and culture flourished,
craftsmen worked five days a week and the standard of living of workers was high. As
Bernard Lietaer says, ‘Is it a coincidence that cathedrals flourished as the most grandiose
symbols of community solidarity in Western history, yet declined as soon as the brakteaten
system was replaced with the king’s monopoly on the creation of currency?’ 5
Of course, some people will argue that pyramids and cathedrals are useless, or that
the pyramids were built with slave labour. But there can be no doubt that each of these
periods in history was a time when real capital was built up and when ordinary people
enjoyed great prosperity.
Gesell’s Influence
Although Gesell did temporarily gain some political power during his lifetime, he was
generally considered a crank and was eventually executed for high treason by Bavaria’s
hardline Marxist government in 1930. Of the economists of the day, only Irving Fisher and
John Maynard Keynes acknowledged his work. Fisher said of Gesell’s theory, ‘The plan
offers the most efficient method of controlling hoarding and probably the speediest way
out of the depression.’ 6 Keynes, meanwhile, devoted seven pages of his book ??????? to
Gesell’s writing, saying that he was an ‘unduly neglected prophet’. 7 He said that he had
read Gesell many years after being urged to do so by the theorist’s devotees. ‘Like other
economists I had treated his profoundly original strivings as being no better than those of
a crank. The significance of his theories only became apparent after I had reached my own
conclusions in my own way.’ Keynes said Gesell was unaware that money had a greater
liquidity premium than any other article, and that ‘He has constructed only half a theory
of the rate of interest.’
Although his ideas were not put into practice during his lifetime, Gesell’s theories
gained prominence through the Depression of the 1930s, as I shall discuss below. Today, his
works are widely known, and there is a Gesell Society in Japan, where 0.5 per cent interest
rates are sufficient to divert money into productive investment.
Practical Applications of Gesell’s Theories
Although no country has ever adopted a national currency with a built­in hoarding tax,