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Money: A New Beginning (Part 2)


Prosperity is
relating, not acquiring.

– Tom Brown, Jr.


Our present monetary system generates a necessity for
endless growth, embodies linear thinking, defies the cyclical patterns of
nature, and drives the relentless conversion of all forms of wealth into
currency. Furthermore, the concept of “interest” is the wellspring of our
economy's ever-intensifying competition, systemic scarcity, and concentration
of wealth. Interest is tied into how we see ourselves as separate, competing
subjects seeking to gather more and more of the world within the boundaries of
"mine." Today, however, the human identity is undergoing a profound
metamorphosis. Part of this shift in our conception of self and world will be a
new system of money consonant with the new human being.

Given the determining role of interest, the first
alternative currency system to consider is one that structurally eliminates it.
One such system, called Frei Geld or "free-money" was proposed
in 1906 by Silvio Gesell in The Natural Economic Order. Gesell's
free-money bears a form of negative interest called demurrage. Periodically, a
stamp costing a tiny fraction of the currency's denomination must be affixed to
it, in effect a "user fee" or a "maintenance cost"; another
way to look at it is that the currency "goes bad" – depreciates in
value – as it ages. (Of course, today this would be done electronically.)

If this sounds like a radical proposal that could never
work, it may surprise you to learn that no less an authority than John Maynard
praised the theoretical soundness of Gesell's ideas (with one critical
caveat [1]). What's more, the system was actually tried out with great success,
and is again in use today.

The best-known example was instituted in the town of Worgl,
Austria, in 1932. To remain valid, each piece of this locally-issued currency
required a monthly stamp costing 1% of its face value. This anti-hoarding
measure spurred citizens to spend their money quickly, even to pay their taxes
early. Instead of generating interest and growing, accumulation of wealth
became a burden–much like possessions are a burden to the nomadic
hunter-gatherer. Worgl's economy took off; the unemployment rate plummeted even
as the rest of the country slipped into a deepening depression; public works
were completed, and prosperity continued until the Worgl currency (and hundreds
of imitators) were outlawed in 1933 at the behest of a threatened central

A similar story transpired in the United States. With
national currency evaporating through an epidemic of bank failures, citizens
and local governments created their own. By 1933, several hundred cities and
even states were preparing to launch, or had already launched, "emergency
currencies." [3] Many of these were stamp scrips like the Worgl currency.
Despite the vigorous advocacy of prominent economist Irving Fisher, Roosevelt
banned all emergency currencies when he launched the New Deal and declared a
bank holiday in March, 1933, fearing the new currencies' decentralizing
effects. [4]



Today we are at the brink of a similar crisis, and face a
similar choice between shoring up the old world through an intensification of
centralized control or letting go of control and stepping into the new. It is important to understand that the
consequences of a demurrage-based currency system would be profound,
encompassing economic, social, psychological, and spiritual dimensions. Money
is so fundamental, so defining of our civilization, that it would be naive to
hope for any authentic shift in the way we exist in the world that did not
involve a fundamental shift in money as well.

Conceptually, demurrage works by freeing material goods which
are subject to natural cyclic processes of renewal and decay from their linkage
with a money that only grows, exponentially, over time. As established in Part
1 of this text
, this dynamic is driving us toward ruin in the exhaustion of all
social, cultural, natural, and spiritual wealth. Demurrage currency merely
subjects money to the same laws as natural commodities, whose continuing value
requires maintenance. Gesell writes:

Gold does not harmonize with the character of our goods.
Gold and straw, gold and petrol, gold and guano, gold and bricks, gold and
iron, gold and hides! Only a wild fancy, a monstrous hallucination, only the
doctrine of "value" can bridge the gulf. Commodities in general,
straw, petrol, guano and the rest can be safely exchanged only when everyone is
indifferent as to whether he possesses money or goods, and that is possible
only if money is afflicted with all the defects inherent in our products. That
is obvious. Our goods rot, decay, break, rust, so only if money has equally
disagreeable, loss-involving properties can it effect exchange rapidly, securely
and cheaply. For such money can never, on any account, be preferred by anyone
to goods.

Only money that goes out of date like a newspaper, rots
like potatoes, rusts like iron, evaporates like ether, is capable of standing
the test as an instrument for the exchange of potatoes, newspapers, iron and
ether. For such money is not preferred to goods either by the purchaser or the
seller. We then part with our goods for money only because we need the money as
a means of exchange, not because we expect an advantage from possession of the

In other words, demurrage redefines money as a medium of
exchange instead of being a store of value. No longer is money an exception to
the universal tendency in nature toward rust, mold, rot and decay–that is, toward
the recycling of resources. No longer does money perpetuate a human realm
separate from nature.

Gesell's phrase, "… a monstrous hallucination, the
doctrine of 'value'…" hints at another effect of demurrage–it makes us
question the notion of “value.” Value
assigns to each object in the world a number. It associates an abstraction,
changeless and independent, with that which always changes and that exists in
relationship to all else. It is part of humanity's descent into representation,
the reduction of the world into a data set. Demurrage reverses this thinking
and removes an important boundary between the human realm and the natural
realm. When money is no longer preferred to goods, we will lose the habit of
defining a thing by how much it is worth.

Whereas interest promotes the discounting of future cash
flows, demurrage encourages long-term thinking. In present-day accounting, a
forest that has the capacity to generate one million dollars a year every year
into the foreseeable future is considered more valuable if immediately cut down
for a profit of 50 million dollars. (The net present value of the sustainable
forest calculated at a discount rate of 5% is only $20 million.) This state of
affairs results in the infamously short-sighted behavior of corporations that
sacrifice (even their own) long-term well-being for the short-term results of
the fiscal quarter. Such behavior is perfectly rational in an interest-based
economy, but in a demurrage system, pure self-interest would dictate that the
forest be preserved. No longer would greed motivate the robbing of the future
for the benefit of the present. The exponential discounting of future cash
flows implies the "cashing in" of the entire earth as opposed to an
immediate wholesale “liquidation” of our remaining resources.

Whereas interest tends to concentrate wealth, demurrage
promotes its distribution. In any economy with a specialization of labor beyond
the family level, human beings need to perform exchanges in order to thrive.
Both interest and demurrage represent a fee for the use of money, but the key
difference is that in the former system, the fee accrues to those who already
have money, while in the latter system it is levied upon them. Wealth
comes with a high maintenance cost, thereby recreating the dynamics that
governed hunter-gatherer attitudes toward accumulations of possessions.

Whereas security in an interest-based system comes from
accumulating money, in a demurrage system it comes from having productive
channels through which to direct it – that is, to become a nexus of the flow of
wealth and not a point for its accumulation. In other words, it puts the focus
on relationships, not on "having". The demurrage system accords with
a different sense of self, affirmed not by enclosing more and more of the world
within the confines of me and mine, but by developing and deepening
relationships with others. It encourages reciprocation, sharing, and the rapid
circulation of wealth.

In today's system, it is much better to have a thousand
dollars than it is for ten people to owe you a hundred dollars. In a demurrage
system the opposite is true. Since money decays with time, if I have some money
I'm not using right now, I am happy to lend it to you, just as if I had more
bread than I could eat, I would give you some. If I need some in the future, I
can call in my obligations or create new ones with anyone within my network who
has more money than he or she needs to meet immediate needs. As Gesell put it:

With the introduction of Free-Money, money has been
reduced to the rank of umbrellas; friends and acquaintances assist each other
mutually as a matter of course with loans of money. No one keeps, or can keep,
reserves of money, since money is under compulsion to circulate. But just
because no one can form reserves of money, no reserves are needed. For the
circulation of money is regular and uninterrupted.

No longer would money be a scarce commodity, hoarded and
kept away from others; rather it would tend to circulate at the maximum
possible "velocity". The issuer would ensure stable prices (P)
according to the equation of exchange (MV=PQ) by regulating the amount of
currency in circulation (M) to correspond to total real economic output (Q).
The same result could be achieved by linking the currency to a basket of
commodities whose level corresponds to overall economic activity, as proposed
by Bernard Lietaer.

The dynamics of a demurrage-based currency system ensure a
sufficient amount for all. This is in contradiction to today's economy in which
a surfeit of material goods is coupled with their grossly unequal distribution.
Hence the deeper contradiction in which, on the one hand, there are hundreds of
millions of people who are unemployed or engaged in trivial, meaningless jobs,
while on the other hand there is much important, meaningful work left undone–highlighting
a disconnect between human creativity and human needs. "With Free-Money
demand is inseparable from money, it is no longer a manifestation of the will
of the possessors of money. Free-Money is not the instrument of demand, but
demand itself, demand materialized and meeting, on an equal footing, supply,
which always was, and remains, something material."[7]

When I look at the poverty of this world, the anxiety, the
desperate and destructive pursuit of a fraudulent dream of security, I can
hardly stifle a howl of protest. Not because it is unjust, though it is, but
because it is so unnecessary! We live, after all, in a world of plenty, and we
always have. The present money system and underneath it, the enclosure of the
wild into the exclusively owned, has created artificial scarcity where none
need exist. It is not food or any other necessity that is scarce; it is money,
whose built-in scarcity induces the same in everything else.

In a highly specialized, technological society, most of us
need to perform exchanges to live. To do so we need a medium of exchange –
money. Some people, noting this inescapable fact, can see no alternative but to
return to a primitive society, to undo the millennia-long course of
civilization, which they quite understandably view as an enormous mistake. The
scenario changes if money is used to recreate rather than destroy the social
relations of a hunter-gatherer. In those societies, when a hunter killed a large
animal, he or she would give away most of the meat, dividing it according to
kinship status, personal affection, and need. As with demurrage money, it was
much better to have lots of people "owe you one" than it was to have
a big pile of rotting meat, or even of dried jerky that had to be transported
or secured. Why would you even want to, when your community is as generous to
you as you are to it? Security came from sharing. The good luck of your
neighbor was your own good luck as well. If you came across an unexpected large
source of wealth, you threw a huge party. As a member of the Pirahã tribe explained it when questioned about
food storage: "I store meat in the belly of my brother."[8]

A negative-interest currency is a step toward the gift
economies of yore that strengthen and define communities. Describing Lewis
's theory of the gift, author Jessica Prentice writes, "Part of the
sacred/erotic energy of gifts is that the receiver cannot accumulate
them–either a gift needs to be passed on, or another gift needs to be given so
that the gift-giving energy keeps moving. Gifts are about flow, and they are
meant to circulate."[9] This is a perfect description of free-money, which
like a gift collecting dust in the closet loses its value when kept unused.
Free-money reverses the compulsion to constantly expand and fortify the
accumulation of the private, the realm of me and mine. Just as interest shrinks
the circle of self until we are left with the alienated, mercenary ego of
modern civilization, demurrage, the opposite of interest, widens it to reunite
us with community and all humanity, ending the artificial scarcity and
competition of the Age of Usury.

Demurrage recreates, in the realm of money, the
hunter-gatherer's disinclination toward food storage or other material
accumulation. It resurrects the ancient hunter-gatherer mentality of abundance,
in which sharing is easy and natural, in which there is no mad scramble to
enclose the world. It promises a return in spirit to the "original
affluent society" of Marshall Sahlins, but at a higher order of
complexity. It is not a technological return to the Stone Age, as some
primitivists envision after the collapse, but a spiritual return.

Consider the !Kung concept of wealth, explored in this
exchange between anthropologist Richard Lee and a !Kung man, !Xoma:

I asked !Xoma, ‘What makes a man a //kaiha [rich
man]–if he has many bags of
//kai [beads and other valuables] in his

‘Holding //kai does not make you a //kaiha,’
replied !Xoma. ‘It is when someone makes many goods travel around that we might
call him

What !Xoma seemed to be saying was that it wasn't the
number of your goods that constituted your wealth, it was the number of your
friends. The wealthy person was measured by the frequency of his or her
transactions and not by the inventory of goods on hand.

Wealth in a demurrage system evolves into something akin to
the model of the Pacific Northwest or Melanesia, in which a leader "acts
as a shunting station for goods flowing reciprocally between his own and other
like groups of society."[11] Status was not associated with the
accumulation of money or possessions, but rather with a huge responsibility for
generosity. Can you picture a society in which prestige, power, and leadership were
accorded to those with the greatest inclination and capacity to give?

In a system where affluence comes from sharing, our focus is
no longer on how to make a living. We focus instead on how to best give of our
gifts. A corollary is that money and art are no longer at odds.

Imagine a life where you simply focus on your art,
on your gifts, on being of service, in the serene knowledge that your needs
will automatically be fulfilled as a matter of course–such an economy is
possible. In it, competition is reduced to its proper domain: a yearning for
excellence in all that we do. In it, productive work comes from a desire to
create a more beautiful world, not to own it; to live and not just
survive. We all know in our hearts such an economy is possible. We know it in
our dreams, those we deny because we have to "make a living". Life
becomes a grim business, a struggle. The Age of Usury presents us with an
ineluctable pressure that we can resist but never escape: to make a living is
to deny art, purpose, and beauty.

The locution "cannot afford to" reveals just how
often money impedes our innate tendencies toward kindness, generosity, leisure,
and creativity. Interest-money generates the greed that we mistake as human
nature and perpetuates the illusion that security and wealth come from
gathering more and more of the world unto the self, carving out a larger and
larger exclusive province of "me" at the expense of every other
living person, animal, plant, and ecosystem. As well it seems to directly contradict
the teaching of karma, which says that what we do to the world, we do to
ourselves. In our current money system, giving out to the world means less for
me, not more! Free-money reverses this role and brings money into line with
karma, reinforcing rather than denying its fundamental principle that by
enriching the world we enrich ourselves.

When wealth is separate from accumulation but refers to a
richness of relationships, each person's wealth makes everyone wealthier. Art
will no longer be limited by what we can afford, for money will be art's ally
not its enemy. Business will be the seeking of ways to bestow wealth upon
others rather than the stripping of wealth from others. No longer, then, will
our lives be full of cheap stuff. Work will no longer be bound to the search
for money, but will seek out ways to best serve each other and the world, each
according to our unique gifts and temperament. That will be, self-evidently,
the way toward riches–both spiritual and financial, for no longer will the two
be in conflict.

I would like to comment on the popular New Age idea of
"prosperity programming," "opening to the flow of
abundance," which is to say, becoming rich through the power of positive
thinking. These ideas come from a valid source – the realization that the
scarcity of our world is an artifact of our collective beliefs, and not the
fundamental reality. However, they are inherently inconsistent with the money
system we have today. One of the principles of prosperity programming is to let
go of the guilt stemming from the belief that you can only be wealthy if
another is poor; that more for me is less for you. The problem, illustrated in
Part 1 of this essay, is that under today's money system it is true! More for
me IS less for "you". The monetized realm grows at the expense of
nature, culture, health, and spirit. The guilt we feel around money is quite
justified. Certainly, we can create beautiful things, worthy organizations,
noble causes with money, but on some level we are robbing Peter to pay Paul.
Please understand that I am not suggesting that you not open to the flow of
abundance. On the contrary, when enough
people do this, the money system will change to conform to the new belief.
Today's money system rests on a foundation of Separation. It is as much an
effect as it is a cause of our perception that we are discrete and separate
subjects in a universe that is Other. Opening to abundance can only happen when
we let go of this identity and open to the richness of our true, connected being.
This new identity wants no part of usury.

My dear reader, think about it: Is it really who you are to
say, "I will lend you money — but only if you give me even more in
return"? When we need money to live, is that not a formula for slavery?
Significantly, the forgiveness of debts for which Solon was famous was prompted
in part by the indebted servitude of a growing proportion of the population.
Today, young people feel enslaved to their college loans, householders to their
mortgages, and entire Third World nations to their foreign debt. Interest is
slavery. And since the condition of slavery demeans the slaveholder as much as
the slave, in our hearts we want none of it.

The metamorphosis of the human sense of self, the transition
from an Age of Separation to an Age of Reunion, is underway today, propelled by
a convergence of crises that is rendering obsolete the old self, and the
civilization that rests upon it. Each crisis springs from a different facet of
separation; each facet of separation contains within it the seed of its own
demise. Such is today's financial crisis, the culmination of a Ponzi scheme
centuries in the making and based on the delusion that a finite planet can
support exponential increase forever. Today, unless we find as yet undreamed of
sources of natural and social capital to incinerate, that bubble is about to

The longer we hang on, the harder we scramble to apply one
technical fix after another to our tottering money system, the more severe the
crisis and its subsequent dislocation will be. The eventual result, however, is
assured: a new system of money will
emerge that is aligned with the priorities of the connected, interdependent
self: sustainability, beauty, and wholeness.

Demurrage-based currency is only part of this transition.
Due to space considerations I have ignored key pieces of an economy of Reunion,
such as full-cost accounting, JAK banking, local currencies, mutual credit
currencies, the leasing economy, P2P economics, and industrial ecology. Yet
demurrage is the key. An economy that emulates ecological principles cannot
rest on a money system that requires exponential growth. The two are inimical.
While usury still reigns, all the other pieces will remain marginal.
Nonetheless, the efforts of visionaries such as E.F. Schumacher, Paul Hawken,
Herman Daly, and countless others are not in vain. They have planted the seeds
for a new kind of economy that will heal our ravaged earth.

Money in the Age of Reunion will be an agent for the
development of social, cultural, natural, and spiritual capital, and not their
consumption. It will be a mechanism for the sharing of wealth and not its
accumulation. It will be a means for the creation of beauty, not its
diminishment. It will be a barrier to greed and not an incentive. It will
encourage joyful creative work, and not necessitate "jobs". It will
reinforce the cyclical processes of nature, and not violate them. And it will
accompany a shift in consciousness that we are beginning to experience today, a
shift toward a connected self in love with the world. That, after all, is the
true self, and that is what we will return to as the pretense of everlasting
increase collapses.


[1] Keynes
discusses Gesell's work in his 1936 classic The General Theory of
Employment, Interest, and Money
. He says that the demurrage solution is
sound but incomplete. Since currency is not alone in having a liquidity
premium, the danger in a demurrage system would be that other forms of money,
such as marginal reserve bank-money and commercial paper, would take over the
role currency exercises today, with similar results. This is not a
theoretically insuperable difficulty, but it does require a more comprehensive
transformation in money than I can describe in this space.

[2] This history
draws on Bernard Lietaer's 2001 book The Future of Money.

[3] A list and
description appears in Stamp Scrip. Irving Fisher, LL.D. New York,
Adelphi Company, 1933

[4] Birch, Dave.
"When Monopoly money was real", Digital Money Forum, June 12, 2007,

[5] Gesell,
Silvio. The Natural Economic Order, 1906. Trans. Philip Pye. Ch. 4.1

[6] Gesell, Ch.
5.5. Gesell also advocated the abolition of land ownership.

[7]Gesell, ch.

[8] Everett, Daniel
L., "Cultural Constraints on Grammar and Cognition in Pirahã: Another Look
at the Design Features of Human Language" Current Anthropology, Aug-Oct
2005. Vol.46, No. 4

[9] Prentice,
Jessica. Stirring the Cauldron – New Egg Moon, April 13, 2005.

[10] Lee,
Richard. The Dobe !Kung. P. 101

[11] Sahlins,
Marshall. Stone Age Economics, p. 209

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