The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / Macro Economic Trends and Risks

URL:  https://boards.fool.com/captain-quotbefore-keynes-there-was-a-quite-24993983.aspx

Subject:  Re: Here's your chance: Balance the Fed budget Date:  1/3/2007  2:00 PM
Author:  vegeli Number:  200260 of 603841

Captain

"Before Keynes, there was a quite imaginative theory of money put forward by the Austrian Rudolf Steiner and silvio Gesell, a German businessman turned radical.

The basic idea was to make money perishable. In moder terms, to issue money as a call option on a basket of goods and services. (Keynes's prefered choice, to issue money with a negative real interest rate, was a less radical attempt to achieve the same goal.)"

A short comment here.

What's the difference between issuing money with a negative (real?) interest rate and stamp money that loses one thousandth of its face value weekly?
The basic idea was the same and Keynes recognized that he got the idea from Gesell and even wrote down that history would learn far more from Gesell than from ... (I don't remember).
His only criticism was that Gesell failed to understand the marginal efficiency of capital.

But maybe there was a deeper message. About thirty five years ago some developed a theory called the economic trinity. The trinity was composed by Marx, Gesell and Veblen (I don't remember very much because at that time I fell in love with a very beautiful girl and my interest turned more to biology :)

It went about like this: Marx thought that the capitalist controled the means of production, Veblen thought that the capitalist (businessman) controled the demand side and Gesell defended that control was exercised through the means of exchange (interest-bearing money).
In all three cases it was about a mechnism of power although on different levels (supply - demand - the "outil" to link the two).
Some defended that capitalism used all three means at the same time to be able to centralize power while others claimed that depending on concrete circumstances one of them prevailed strongly.

I won't elaborate but it always strikes me when Americans complain that their manufacturing bases erodes. It sounds like they're losing control over the means of production. They sure will deny it's similar to Marx' theory.

On the demand side we see that consumers have turned into very willing shopaholics. IMO Veblen was far ahead of his time. Back in the years of the trinity, the "virtutis fundamentum" written down by Spinoza was brought forward as the main reason why people have a similar or herdlike consumption pattern. Today we would look for a memetic explanation (imitation).

I cannot remember that Keynes defended the negative (real) interest rate. Well at least not clearly for indeed he did envision the death of the rentier. But he also acknowledged that we needed the gods of usury and greed a little longer (or something close to that).

Stated quite simply: money should be a mean of exchange and not a store of value (interest makes it a store of value). The same theory was in a not so far past also translated by the Belgian Bernard Lietaer (http://en.wikipedia.org/wiki/Bernard_Lietaer) who wrote the book " The Future of Money".

Gesell's theory was applied in some regions and with great success. Even Irving Fisher tried to convince Roosevelt to switch to stamp scrips
For some historical precedents: http://www.transaction.net/money/cc/cc04.html
The success stories were quickly forbidden because central banks feared to lose their power. Quite meaningful!

veg.
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us