A strange duly neglected crank

The ‘Strange, Unduly Neglected Prophet’ was the description given by Keynes to Silvio Gesell, the author of the notion of “stamped money” which is discussed at the link. There are cranks all over economics, but there have always been more of these in monetary theory than anywhere else. They have now even risen to the ranks of central bank governors all across the world.

Gesell has always remained famous among economists because he is one amongst Keynes’s “brave army of heretics” whom he discusses in Chapter 24 of The General Theory. Apparently Gesell has now risen to a new prominence and taken on a strange new respectability. Some idea of how far we have gone is provided in the penultimate para of the article.

In our technological age, a Gesellian system of unhoardable cash wouldn’t actually have to involve stamping paper bills for a fee. It could involve high-tech physical cash, such as magnetic strips that allow the government to impose a “Gesell tax” on holding cash, as one economist proposed some years ago. Harvard University’s Kenneth Rogoff has been advocating we get rid of paper money altogether and move almost completely to a system of electronic cash. He believes it could give central banks the power to impose negative interest rates deep enough to rescue our economy from future recessions. In all of this, Gesell was a pioneer.

The nonsensical notion that recessions occur because people don’t spend their money, or their income, or hoard their savings, or whatever might be stopping people from spending, is the core belief of economic cranks everywhere. Just because it is now mainstream economic theory shouldn’t lead you to thinking that just because these once understood fallacies are today taught to everyone around the world that they actually make any sense whatsoever. They have been ruining economies and destroying our wealth for centuries. Why should anything change now?

This entry was posted in Classical Economics, Economics and economy. Bookmark the permalink.

6 Responses to A strange duly neglected crank

  1. Sunni Bakchat

    Absolutely amazed today to read Guy Debelle stating he couldn’t understand why business was not investing at such low interest rates. Numerous other stupid statements were also made at a conference somewhere or other.
    This gent is next in line to be Reserve Bank Governor. He has no idea why business isn’t investing!
    We are dealing with people running the Reserve Bank who need to do things they weren’t taught at University i.e. to use their brains to think independently. The fact they don’t seem to be able to reference any pre-20th century economists or even Hayek is simply unbelievable.
    Then we have Philip Lowe wanting also to march interest rates to zero. Does anything more than the fact he studied under Paul Krugman need to be said. The same Paul Krugman the AFR lefty luvvies like to publish regularly.
    The current Reserve Bank governor seems to be a lefty as does his second in command. God help Australia if the foreseeable future is about low growth, high debt and deflation. It is a recipe for massive wealth destruction. It seems this duo’s politics is actually about robbing those who save to finance those spend and take on debt.
    Meanwhile barely a peep is heard from anyone on the subject in Australia.

  2. bollux

    Anyone that thinks the Reserve Bank is independent, is a dope.
    Anyone who thinks the Reserve Bank acts in the best interests of Australians, is a dope.
    Anyone that thinks the Reserve Bank should be allowed to operate in Australia, is a dope.

  3. Squirrel

    “It could involve high-tech physical cash, such as magnetic strips that allow the government to impose a “Gesell tax” on holding cash”

    That’s one form of socialism. Another form, which would probably win a lot more votes, would be to slash the middle and upper level salaries of those directly and indirectly on the public payroll (federal, state/terrritory, local, QUANGOs etc. etc.) and redistribute the money in the form of lower taxes overall, a much higher tax-free threshold, lower GST, lower company tax, lower land tax, stamp duty etc. – let’s see how that works if things really get tough and we need some serious stimulus for the real economy……

  4. David Brewer

    …it could involve high-tech physical cash, such as magnetic strips that allow the government to impose a “Gesell tax” on holding cash…Kenneth Rogoff has been advocating we get rid of paper money altogether and move almost completely to a system of electronic cash. He believes it could give central banks the power to impose negative interest rates deep enough to rescue our economy from future recessions.

    What is missing from these proposals is any admission that they involve:

    1. theft of savings, or else:
    2. compulsion to spend on things you don’t really want to buy

    This means that, even if they work, the proposals don’t just adjust incentives, they wilfully deprive consumers of a large measure of their freedom. This in itself represents a large welfare loss, surely larger than any possible gain from supposedly maintaining GDP growth. It makes a fetish out of the quantity of consumption, while forgetting its quality. The whole point of consumption is to satisfy wants; rigging the system to invent wants, or to generate consumption in the absence of wants, vitiates any claim the proposals might have to offer welfare benefits.

    Remember also that consumers are people who have wants other than consumption. For example, they may want to save for future investment, retirement, charitable giving, or passing on an inheritance. Stacking the deck against the satisfaction of these wants is a further infringement of individuals’ freedoms.

  5. Flyingduk

    They are coming for your money, they always do, but now they are close to actually controlling your finances by the abolition of cash. Buy guns, gold n bitcoin. Winter is coming….

  6. Terry

    “they wilfully deprive consumers of a large measure of their freedom.”

    That is the point. It’s a feature, not a flaw.

    Socialists, and we must count most modern economists amongst them, have got it all figured out. It is just that pesky free will thing that keeps stuffing up their infallible understanding of how economies should work.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.