How depreciating money could save the global economy
Some explanation:
Um, not sure how you make money depreciate by a set figure in the current system...Central banks have unloaded trillions of dollars of stimulus in efforts to push inflation above 2% in countries from the U.S. to Japan and across the eurozone, but nothing seems to be working.Driving the news: One radical idea that could boost spending and help resuscitate moribund economies is Silvio Gessell's proposal for depreciating money, writes Stephen Mihm, an associate professor at the University of Georgia, in an editorial for Bloomberg.What it means: Money, if not spent, would lose its value by 5% a year. That would encourage people to spend, rather than hold onto it. Such a plan would radically boost the "velocity" of money, giving a major boost to developed economies where services account for a hefty majority of economic growth.
- "In Gesell's formulation, money became a 'hot potato' that note holders tried to use before it lost value," Mihm writes. "As far-fetched as they seem, his writings had practical implications because they pointed a way out of the impasse the world confronted in the Great Depression."
Context: The idea has been tried before. The mayor of Wörgl, Austria, used the town’s funds to put Gesell's depreciating currency into rotation and managed to stimulate a minor boom in the midst of the Great Depression.