Re: Response to Ryan comments

[Trond Andresen <t.andresen@xxxxxxxxxx>]

At 13:41 1/06/98 PDT, William B. Ryan wrote:

>William Hummel:
>
>In reply to your post of May 30:
>
>http://csf.colorado.edu/mail/pkt/may98/0371.html
>
>The point I hoped to make is not pedantically trivial, but relates
>fundamentally to what Silvio Gesell (as Trond Andresen informed us)
>called "shrinking money."

Well, the German term is Schwundgeld, which literally means "shrinking
money". But it is not the best term, since it gives grounds for
misinterpretation, for instance that this proposal is equivalent to a system
with a "planned inflation rate", which it isn't.
I think negative-interest currency (NIC) is a better term for this.

There is a very important diffence between NIC and inflation: When you have
inflation, wages and prices increase persistently, and the purchasing power
of a unit of currency falls. In an NIC system, however, prices and wages may
perfectly well be unchanged. You have to distinguish between the fact that
on one hand there is a fee on money held (negative interest) - and that the
currency unit keeps its purchasing power, on the other.

If, however, one should wish to picture a system with inflation that were
equivalent to an NIC system, this system would have to have the following
characteristics:

(a) All wages and all prices basically increasing in step

(b) This inflation rate was under perfect control by the authorities

(c) This inflation rate did not _at_all_ create expectations of steeper
inflation in the future, and behaviour based on this.

I don't think that (b) and (c) are feasible, even if the political will was
there. But an NIC system is, not the least with today's information
technology (electronic cash cards instead of bills and coin).

Back to Bill Ryan again, who said:

>...
>The point I hoped to make is not pedantically trivial, but relates
>fundamentally to what Silvio Gesell (as Trond Andresen informed us)
>called "shrinking money."  Unfortunately, Gesell mis-identified its
>cause.

"... Gesell mis-identified its cause".
I do not understand what you mean by this. Please clarify.

Trond Andresen