Anthony Migchels was gracious enough to comment in two of
the posts on this subject – here and here.
As I did with memehunter, I will reply via a new post, as the discussion
merits this treatment.
I'm saying that when all backward
payments (most certainly not just taxes) are settled, the money supply (of
certificates) needed is smaller and thus certificates can be converted back.
This is why I claim the experiment is bound to end – even without
the national bank intervention. If the
only use of the certificates is to convert them back to schillings, of what use
are the certificates?
If there are no or fewer exchanges
to be financed, less or no of the certificates are needed.
Fewer exchanges mean fewer transactions mean no
miracle. The economy returns to the pace
it had without certificates, because the economy is running without
certificates.
Your calculation is all wrong BM:
7000 in transactions per day is NOT 7000 in scrip! These transactions were
financed with 5000 in circulation, meaning the certificates exchanged hands
maybe 1,5 times a day.
Walk through step by step.
I am a municipal worker. I get
paid in scrip. I can either buy
something with the scrip, pay back taxes, or exchange it at a 2% charge for
schillings. In order for me to buy
something with scrip, a vendor must be willing to accept scrip. But at some point when all past due
liabilities are settled (as you have already stated), the scrip will then be
converted to schillings to avoid the demurrage – the only place the scrip has
100% value at month end is in the payment of taxes, and these back-taxes are by
now fully paid.
So, as in your math the scrip that previously turned over more
than once per day (5500 outstanding, 7000 in transactions per day), now will be
disposed of by another means – THAT DAY.
The only other means is to turn the scrip in for exchange to schillings. At the previous rate of circulation, this
would happen 7000 times per day.
All you can counter with is to say the rate of circulation
will be lower (the holder of scrip will wait until the last day of the month
before converting his scrip to schillings, in hope of having some better use
and avoid the 2% charge), at which I will ask: where does that leave the
sustainability of your miracle?
My logic holds, and the math holds. The parish had 40,000 available to
exchange. This would have been depleted
in 6 days.
Again: I'm talking about a means of
exchange, you are talking about a store of value. A means of exchange needs to
circulate to be effective.
As I mentioned in various comments, including my most lengthy post on this subject, I have no problem with various competing and
complimentary schemes of money / credit / currency. And if a supplier agrees to accept a form of
payment, so be it. I have no quarrel
with Wörgl in this regard.
The point of my analysis (and I am oversimplifying) is that
the miracle was attributable to greatly increased tax receipts prompted by the
depreciating scrip, and that this increase in tax receipts was not sustainable –
therefore the miracle was not sustainable.
On this most critical point (my “key issue,” if you will),
neither you nor memehunter nor summer offer a concrete rebuttal, although
memehunter did rightly ask for clarification regarding the sustainability of
the velocity after all back taxes were paid.
Added after initial post:
Again: I'm talking about a means of
exchange, you are talking about a store of value.
I do not attribute the property of “store of value” to money
/ currency. All value is subjective;
therefor “value” cannot be “stored” in anything.
However, I maintain that money / currency received in
exchange for my labor or other assets is my property. To that property I have a right; however, I have
no right to the “value” of that property.
A means of exchange is not wealth.
It's not even really private property in the real sense of the word. It's more
a public utility that we use together.
Whatever I receive in exchange for my work / product is my
property. To argue otherwise is to argue
for some form of collectivism. Collectivism,
when forced, is an immoral proposition; and in any case, has never shown to be
as effective a means to increase wealth as a system that respects private
property. As this is secondary to my
main points, I am fine to leave this difference between us as is.
The only thing there is is Money
Power and PTB opposition obscuring the issue and preventing from people finding
out.
Again, as I have mentioned, I agree that the actions of the
national bank at the time to stop the experiment were wrong, and I agree that
decentralization and open competition in all facets of the economy (including
currency) is better than the system we currently live under. I also agree that money power and national
governments do work hard to maintain centralization, and use all tools
available to keep their monopoly position safe.
You don't get the difference between turnover and money supply: the money supply can be converted only once, but it can be used for transactions often. The same 5,500 would go around time after time until it's converted, it could create (and probably did at some points) hundreds of thousands in transactions.
ReplyDeleteYou are counting 7000 in transactions as the money supply.
You also seem to miss the point that as long as there are lagging payments it is natural there will be more transactions. Once things settle back to normal, less transactions are required.
The miracle was sustainable. Not in the sense that the economy would have grown so quickly for ever, but that a balance at near full employment would have been established, as it actually did before it was shut down. In the midst of the greatest depression that IS a miracle and had the certificates continued, the economy would have continued to funtion at normal pace (at the very least). It's also notable that after the experiment ended, the economy imploded immediately.
So the 'miracle' did transpire and the certificates simply proved to be a vastly superior means of exchange. If you disagree, you'd need to explain what it is exactly that you want from a means of exchange......
I disagree with your afterthought on money and his perceived 'rights'. Here Bastiat comes in the picture: the third party (the commonwealth) who is cleary suffering from insuffcient circulation. Money is something we do together. If one is the only one perceiving something as money it is worthless, because nobody will use it to trade. The commonwealth most definitely has not only the right, but the duty to create a functioning monetary system. Interest bearing notes, good for hoarding and suiting the rights of the holder of money, imploded the economy, both then and today. Demurrage money circulates in a way serving the needs of all, not just the few holding gmoney.
Also, I'd be interested in your asset position. I'd bet 10 dollars that you personally has much, much more to gain for a demurrage economy.
Perhaps the few dollars that you hold are worth and the interest that you make on them is actually, far, far less then you pay in hidden cost for capital and a chronically (and at the moment critically) depressed economy as a result of sluggish circulation?
This comment has been removed by the author.
DeleteThis comment has been removed by the author.
DeleteAnthony
DeleteI was not satisfied with the content of my two (now deleted) replies. I have summarized the relevant points as follows:
“You don't get the difference between turnover and money supply: the money supply can be converted only once, but it can be used for transactions often. The same 5,500 would go around time after time until it's converted, it could create (and probably did at some points) hundreds of thousands in transactions.”
You have already stated that the scrip would no longer be held once the taxes in arrears were paid. From this, you seem unable to draw the logical steps that follow:
1) Municipal workers receive payment in scrip
2) They take this scrip to the bank, in exchange for national schillings so as to avoid the demurrage
3) The next week, municipal workers receive payment in scrip
4) They again take this scrip to the bank, in exchange for national schillings so as to avoid the demurrage
5) The following week, municipal workers receive payment in scrip
6) Again, they take this scrip to the bank, in exchange for national schillings so as to avoid the demurrage
7) This continues until either a) the bank has no more schillings to exchange for the scrip, or b) the workers go on strike, realizing that they are working for 2% less.
As the previous activity apparently occurred at the rate of 7000 schillings worth of transactions per day, the redemptions would occur at the same pace once the payments in arrears were satisfied. But if you prefer to say the redemptions would occur at only 5500 per day, I will not argue. Any number you pick is fine with me – too small, and the economy will bust, too large and the bank will bust.
“You also seem to miss the point that as long as there are lagging payments it is natural there will be more transactions. Once things settle back to normal, less transactions are required.”
I don’t miss this point, you clearly do. It is called a bust – a period of significant slowdown in economic activity which always follows an overly stimulated economy.
“The miracle was sustainable.”
Because you say it doesn’t make it so. The world has too many examples of a bust following an artificially created boom – in this case a boom financed almost completely by the temporary high level of tax collection of arrears enabled by the depreciating nature of the scrip. And a boom certain to end once the arrears were fully collected.
There is no way around this conclusion.
The scrip was not only used to pay taxes BM: it financed local trades too. At some point the workers were paid 75% in scrip, clearly showing they could use it usefully.
ReplyDeleteI didn't say the scrip 'would no longer be held', I said turnover would diminish when backward payments had settled.
Less turnover implies the need for a smaller money supply (in scrip).
The miracle was sustainable because the scrip provided sufficient money in circulation to finance the economy. That was, after all, the problem: a deflationary bust. To generalize 'the world has seen too many busts after artifical booms' is to ignore the fact that the scrip solved the problem at hand: too little money in circulation through deflation and associated sluggish circulation.
Your calculations are completely off base BM:
Even if the scrip would always be immediately converted back, the city would have to stop issuing it, after it ran out of the 40k. However, this never even came close to happening. should the city notice that the scrip was being immediately converted back, this would have clearly implied that there was no longer need for it.
It didn't happen, thus the market clearly showed there was use for it.
The economy was not overly stimulated: prices were not rising. Keep in mind this was in the darkest hour of the great depression. The economy was revitalized, not overstimulated.
This was achieved by solving the core issue: scarce working capital due to deflation.