Healthy Money Healthy Planet - library.uniteddiversity.coop

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Saving will become impossible. People are dependent on interest to save, and when
they have money to invest they want some fixed­interest investments.
With Gesell’s system, money in a savings account is exempt from demurrage, so when you
put your money in the bank it would hold its value.
With regards savings and investments, the saver’s loss of potential interest is tiny in
comparison to the other financial benefits, as with free money no one has to pay the
interest built into the prices of goods and services. Gesell said:
If I lend somebody a sack of potatoes for a year, he will not give me back the same potatoes, which
have meanwhile rotted, but a sack of new potatoes. It is the same with the savings bank. I lend it
$100 and it agrees to give me back $100. The savings bank is in a position to do so, since it lends the
money on the same terms.
Demurrage is just inflation in another form.
This is not true. Gesell dreamed up his currency design during an economic crisis in
Argentina. Above all, he was keen to create a stable currency for trading. With the
demurrage charge, only the possessor of money has to pay the hoarding tax, whereas with
inflation everyone is affected. And with demurrage, the face value of the note remains the
same.
But velocity isn’t important; $8000 circulating once a year is just as good as $1000
circulating eight times a year.
Engineers or mechanics might argue this, but the two are actually quite different and a
social system isn’t the same as a mechanical system. Money only has value because the
people accepting it give it value and trust it ongoingly. If $1000 circulates eight times a year
it goes through eight people, who all show their confidence in the currency by accepting it;
on the other hand, only two people are involved if $8000 circulates once. What rapid
circulation does is to build up community confidence in a currency.
Human beings are not machines and are capable of a wide range of behaviours,
including self­interest. We must therefore design a currency that recognises this.
Just as the speed of blood flowing around a body is important, so too is the speed of
money flow in an economy. The circulation fee is to the economy what the heart is to a
human body – it is the booster that keeps life flowing at an optimum pace, the pump that
enables blood to flow through all the organs and cells of the body, distributing oxygen and