http://www.bloombergview.com/articles/2015-07-03/-neglected-prophet-of-economics-got-it-right'Neglected Prophet' of Economics Got It RightBy Leonid Bershidsky
In some parts of Europe, negative interest rates are creating absurd situations. In France, some corporate bonds pay interest to the issuer because they were linked to a benchmark rate that has dropped below zero. In Sweden, Denmark and Switzerland, banks are turning depositors away with threats of negative interest rates. If this goes on much longer, we'll be living in the world of "free money" imagined by the economic dreamer and adventurer Silvio Gesell in the 19th century.
Gesell was born in Germany, made a modest fortune as an importer in Argentina. After he returned to Europe, he became finance minister of the short-lived Soviet Bavarian Republic in 1919, was arrested and charged with treason but acquitted. He kept publishing his works in Berlin until his death in 1930. John Maynard Keynes called Gesell "a strange, unduly neglected prophet" and described his bold idea as follows:
According to this proposal currency notes (though it would clearly need to apply as well to some forms at least of bank-money) would only retain their value by being stamped each month, like an insurance card, with stamps purchased at a post office. The cost of the stamps could, of course, be fixed at any appropriate figure. According to my theory it should be roughly equal to the excess of the money-rate of interest (apart from the stamps) over the marginal efficiency of capital corresponding to a rate of new investment compatible with full employment. The actual charge suggested by Gesell was 1 per mil. per week, equivalent to 5.2 per cent per annum. This would be too high in existing conditions, but the correct figure, which would have to be changed from time to time, could only be reached by trial and error.This amounts to a tax meant to prevent money-hoarding. Cash would still be used as a medium of exchange, but it would lose its significance as a store of value.
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COMMENT: You will have 3 choices: pay a bank 1 or 2 percent to hold your money, pay the government more each year for a stamp on your currency, or spend it.
