How is demurrage different from inflation? Isn't the financial system already set up to encourage savers to invest their assets rather than storing value as bills under mattresses?
> The major central banks' post-WWII policy of steady monetary inflation as proposed by Keynes was influenced by Gesell's idea of demurrage on currency,[2] but used inflation of the money supply rather than fees to effect the goal of increasing the velocity of money and expanding the economy.
So if you have a choice between (1) x% demurrage and 0% inflation, or (2) 0% demurrage and x% inflation, you should always prefer option (2). This allows prices to adjust faster, which is generally a good thing.
More noteworthy, demurrage is assessed immediately whereas inflation is delayed. Under a demurrage system, this places an incentive to invest in assets which lead to longer-term sustainable growth. Inflation can instead incentise nearsighted short-term growth (and all the ramifications that has).
Some groups have had success in introducing local currencies with similar features. One path we've looked at is getting communities of people (perhaps starting with some #occupy groups and their supporters) to use it and convince local businesses to accept it, hence the subtitle of being the worlds first “global-community currency”.
We're open to other ideas as well.
Unlikely.
One of these assets being money that acts as a store of value? :)
Even if the timing of inflation/demurrage costs were different, could you explain more about the link between the timing of fees and the sustainability of investments? I don't see how the two are related.
No, inflation is measurably delayed and hurts the poor and middle class more than it does the wealthy because insiders have preferential access to credit, allowing them to benefit from inflation. Instantly and continuously assessed demurrage would remove that preferential treatment.
> Even if the timing of inflation/demurrage costs were different, could you explain more about the link between the timing of fees and the sustainability of investments? I don't see how the two are related.
Demurrage reduces interest, where interest can have negative/short-sighted effects. As the value of an investment is calculated by discounting future cash flows by the expected interest rate, a lower interest rate means investments generating sustainable cash flow are more likely to be preferred than a one-time ROI.
The classic example being clear-cutting a forest vs. sustainably harvesting it. The incentive is to clear-cut the forest when there are high interest rates, as the cash can be re-invested, whereas a sustainable logging model makes more sense as the long-term interest rate approaches zero.
The same applies under demurrage. You're just shifting the loss of value form the real variables to the nominal variables.
I've read a lot of advocacy for demurrage, but somehow nobody is ever able to put a finger onto where the difference is supposed to be exactly.
Demurrage reduces interest, where interest can have negative/short-sighted effects.
Perhaps it reduces the nominal interest rate. Why should it reduce the real interest rate? (Unless you suppose that after introducing demurrage inflation stays the same; but then you might as well go ahead and increase inflation to achieve the same effect)
Can you provide that measurement, then? How long is the period between the moment I pick up a dollar bill and the moment inflation starts to reduce its value? A month? A week? A day? If I pick up two dollar bills, 24 hours apart, is the former bill worth more than the second bill, since inflation hasn't reduced its value since I picked it up?