Money, the Self, and Negative Interest Money
Source
From Charles Eistenstein's book on Sacred Economics, Chapter 12.
Excerpt
Charles Eisenstein:
"We have attached an exponentially growing money to a self and world that are neither exponential nor even linear, but cyclic. The result, as I have described, is competition, scarcity, and the concentration of wealth. The answer to the question I posed earlier, “What has gone wrong with this beautiful idea called money, which can connect human gifts and human needs?” comes down in large part to interest, to usury. But usury itself is not some isolated phenomenon that could have been different if only we’d made a wiser choice somewhere down the line. It is irrefrangibly bound to our sense of self, the separate self in an objective universe, whose evolution parallels the evolution of money. It is no accident that the first highly monetized society, ancient Greece, was also the birthplace of the modern concept of the individual.
This deep link between money and being is good news because human identity today is undergoing a profound metamorphosis. What kind of money will be consistent with the new self, the connected self, and a world in which we increasingly realize the truth of interconnectedness: that more for you is more for me? Given the determining role of interest, the first alternative currency system to consider is one that structurally eliminates it, or even that bears interest’s opposite. After all, if interest causes competition, scarcity, and polarization, then might not its opposite create cooperation, abundance, and community? And if interest represents the proceeds from the ancient and ongoing robbery of the commons, might not its opposite replenish it?
What would that opposite look like? It would be a money that, like bread, becomes less valuable over time. It would be money, in other words, that decays—money that is subject to a negative interest rate, also known as a demurrage charge.1 Decaying currency is one of the central ideas of this book, but before I lay out its history, application, economic theory, and consequences, I would like to say a bit about the term “decay,” which I have been advised to avoid due to its negative connotations.
Why does “decay” seem negative, and “preservation” a virtue? This attitude arises again from the story of Ascent, in which humanity’s destiny is to transcend nature; to triumph over entropy, chaos, and decay; and to establish an ordered realm: scientific, rational, clean, controlled. Complementary to it is a spirituality of separation, in which a nonmaterial, eternal, deathless, divine soul inhabits an impermanent, mortal, profane body. So we have sought to conquer the body, conquer the world, and arrest the processes of decay. Unfortunately, by so doing we also arrest the larger process of which decay is part: renewal, rebirth, recycling, and the spiraling evolution toward more vastly integrated complexity. Thankfully, the stories of Separation and Ascent are drawing to a close. It is time to reclaim the beauty and necessity of decay, both in our thinking and in our economics.
Early forms of commodity-money, such as grain, cattle, and the like were certainly subject to decay: grain spoils, cattle age and die, and even farmland reverts to wilderness if left untended. There have also been metallic money systems that approximated the phenomenon of decay by incorporating a kind of built-in negative interest rate. A crude example of such a system was in wide use in the Middle Ages in Europe’s Brakteaten system, in which coins were periodically recalled and then reminted at a discount rate.2 In England, Saxon kings recoined silver pennies every six years, issuing three for every four taken in, for a depreciation rate of about 4 percent per year.3 This effectively imposed a penalty on the hoarding of money, encouraging instead its circulation and investment in productive capital. If you had more money than you could use, you would be happy to lend it, even at zero interest, because your coins would decrease in value if you held them too long. Note that the money supply didn’t necessarily shrink as a result of this system, since the lord would presumably inject the difference back into the economy to cover his own expenses. This negative interest on money was thus a kind of a tax.
The pioneering theoretician of negative-interest money was the German-Argentinean businessman Silvio Gesell, who called it “free-money” (Freigeld), a name that I will adopt in his honor. The system he proposed in his 1906 masterwork, The Natural Economic Order, was to use paper currency to which a stamp costing a small fraction of the note’s value had to be affixed periodically. This effectively attached a maintenance cost to monetary wealth. Like any physical commodity, such money “goes bad” (at a rate determined by the value of the stamps required to keep the currency valid). For example, if a dollar bill required a one-cent stamp every month to stay valid, it would depreciate at an annual rate of 12 percent.4
Gesell arrived at the idea of demurrage-charged currency from a different direction than I have. He was writing in an era when almost no one questioned the desirability of economic growth, and visionary though he was, Gesell never doubted (as far as I know) the capacity of the earth or technology to accommodate it forever.5 His primary concern was to remedy the inequitable and unjust distribution of wealth in his time, the unprecedented poverty amidst unprecedented abundance. This he attributed to a huge unfair advantage held by the possessors of money: they possess a “hoardable commodity that is at the same time the money medium.” Other commodities (except possibly land) are not hoardable in the same way that gold or other currency is: they rot, rust, or decay; are subject to theft or obsolescence; incur storage and transport costs; and so on.
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today, as in Gesell’s time, money is preferred to goods. The ability to withhold the medium of exchange allows money holders to charge interest; they occupy a privileged position compared to holders of real capital (and even more so to those who sell their time, 100 percent of which disappears each day it goes unsold). The result is an increasing polarization of wealth because everyone essentially pays a tribute to the owners of money.
A corollary to Gesell’s point is that it is unfair for us to pay simply for the means to make exchanges. Gesell believed that the simple desire to make an exchange should be enough. If I have something to offer that you need, why should we have to pay for the means to give and receive it? Why should you have to pay for the privilege of receiving a gift? This is one of the ways in which Gesell’s money deserves the moniker “free.” As we shall see, a credit system based on depreciating currency allows zero-interest loans. While we must still repay loans, no longer must we pay for them. In that sense, money becomes free.
Gesell advocated currency decay as a device for decoupling money as a store-of-value from money as a medium of exchange. Money would no longer be preferred to physical capital. The result, he foresaw, would be an end to the artificial scarcity and economic depression that happens when there are plenty of goods to be exchanged but a lack of money by which to exchange them. His proposal would force money to circulate. No longer would the owners of money have an incentive to withhold it from the economy, waiting for scarcity to build up to the point where returns on real capital exceed the rate of interest. This is the second reason for calling it “free-money”: freed from the control of the wealthy, money would circulate freely instead of coagulating in vast, stagnant pools as it does today.
Gesell saw the interest-bearing property of money as a brake on prosperity. As soon as goods become so abundant that returns on capital investment go lower than the minimum rate of interest, the owners of money withhold it from investment. The money to perform transactions disappears from circulation, and the familiar crisis of overcapacity looms, with its paradoxical accompaniment of scarcity of goods for the vast majority of people.
The money system in 1906 was quite different from that of today. Most currencies were still, at least in theory, backed by precious metals, and there was nothing like the vast expansion of credit over the monetary base that we have today. Indeed, Gesell viewed credit as a substitute for money, a way for businesses to conduct transactions in the absence of currency. But today credit and money are nearly identical. Current economic theory sees the use of credit as money as a positive development, in part because it allows the money supply to expand or contract organically in response to the demand for a medium of exchange. However, as we have seen, interest-bearing credit not only responds to, but also compels, the growth of the money economy. Moreover, in its present form it is no less subject to scarcity than was money in Gesell’s time.
Although virtually unknown through the second half of the twentieth century, Gesell’s ideas enjoyed a wide following in the 1920s and 1930s and came to influence prominent economists such as Irving Fisher and John Maynard Keynes. Fisher promoted Gesell’s ideas vigorously in the United States, and Keynes offered uncharacteristic praise, calling him an “unduly neglected prophet” and his work “profoundly original.”7 In the turmoil following World War I, Gesell was even appointed Minister of Finance of the ill-fated Bavarian Republic, which lasted less than a year. In the 1920s, a stamp scrip currency—the wara—issued by a friend of Gesell’s, circulated in Germany, but there as elsewhere it took an economic depression to launch it in earnest. Whether in collective life or personal, real change rarely comes in the absence of crisis.
In 1931, a German coal mine operator decided to open his closed mine by paying his workers in wara. Because he also agreed to redeem the scrip for coal, which everyone could use, local merchants and wholesalers were persuaded to accept it. The mining town flourished, and within the year at least a thousand stores across Germany were accepting wara, and banks began accepting wara-denominated deposits.8 This put the currency on the radar screen. Feeling threatened, the German government tried to have the wara declared illegal by the courts; when that failed, it simply banned it by emergency decree.9
The following year, the depressed town of Wörgl, Austria, issued its own stamp scrip inspired by Gesell and the success of the wara. The Wörgl currency was by all accounts a huge success.10 Roads were paved, bridges built, and back taxes were paid. The unemployment rate plummeted and the economy thrived, attracting the attention of nearby towns. Mayors and officials from all over the world began to visit Wörgl until, as in Germany, the central government abolished the Wörgl currency and the town slipped back into depression.
Both the wara and the Wörgl currency bore a demurrage rate of 1 percent per month. Contemporary accounts attributed to this the very rapid velocity of the currencies’ circulation. Instead of generating interest and growing, accumulation of wealth became a burden, much like possessions are a burden to the nomadic hunter-gatherer. As theorized by Gesell, money afflicted with loss-inducing properties ceased to be preferred over any other commodity as a store of value. It is impossible to prove, however, that the rejuvenating effects of these currencies came from demurrage and not from the increase in the money supply, or from the economically localizing effect of a local currency such as the Wörgl.
Another currency that emerged around this time, and that is still in use today, was the WIR in Switzerland. The currency is issued by a cooperative bank and is backed only by the mutual agreement of its members to accept it for payment. Founded by adherents of Gesell’s theories, the currency originally bore a demurrage charge that was eliminated during the high-growth period after World War II.11 As I shall explain, negative interest is unnecessary in a very high-growth environment; today, as we approach a steady-state economy and enter a new phase of development, it may be attractive once more.
In the United States many “emergency currencies,” as they were called, were issued in the early 1930s. With the national currency evaporating through an epidemic of bank failures, citizens and local governments created their own. The results were mixed, and very few of them incorporated Gesell’s design, but rather imposed a fee per transaction rather than per week or per month.12 This has the opposite effect of demurrage because it penalizes circulation rather than hoarding. However, in 1933 at least a hundred cities were preparing to launch stamped currencies of their own, many of the correct, Gesellian, type.13 Moreover, with the backing of Irving Fisher, a bill was introduced in both the House of Representatives and the Senate that would have issued one billion dollars of stamp scrip nationally. This and many of the proposed state and local currencies would have had a much, much higher demurrage rate—2 percent per week—that essentially would have made the currency self-liquidating in one year. This is an entirely different animal from the Wörgl currency and most modern proposals, but it shows that the basic concept was being seriously considered.
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Today we are at the brink of a similar crisis and face a similar choice between temporarily shoring up the old world through an intensification of centralized control or letting go of control and stepping into the new. Make no mistake: the consequences of a free-money 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 civilizational shift that did not involve a fundamental shift in money as well.
Modern Application and Theory
The idea behind free-money, so popular in the early twentieth century, has lain dormant for sixty years. It is resurgent now, as the economic crisis demolishes the sureties of the past half-century and calls forth the thinking that came out of the Great Depression. Part of this is a Keynesian revival, since the monetarist prescription of lowering interest rates and purchasing government securities to stimulate the economy has hit a limit—the “zero bound” beyond which central banks cannot lower interest rates. The standard Keynesian response (based, however, on a partial reading of Keynes) is fiscal stimulus—the replacement of flagging consumer spending with government spending. President Barack Obama’s first economic stimulus was a Keynesian measure, although probably insufficiently vigorous even within that paradigm.
The zero bound problem has gotten some mainstream people thinking about negative interest rates: my research for this chapter uncovered a paper by a Federal Reserve economist,15 a New York Times article by a Harvard economics professor,16 and an article in The Economist magazine.17 When Keynesian stimulus fails (ultimately, for the reason of the depletion of the commons, as I’ve discussed), the far more radical solution of decaying currency may be on the radar screen. Presently, the economy is in mild recovery, and the delusional hope of a return to normal still possible to maintain. But because of the near-depletion of the various forms of common capital, the recovery will probably be anemic, and “normal” will recede into the distance.
The first obvious failure of Keynesian stimulus came in Japan, where massive infrastructure spending starting in the 1990s failed to reignite economic growth there. There is little room in any highly developed economy for further domestic growth. The solution for at least twenty years has been, in effect, to import growth from developing countries by using the monetization of their social and natural commons to prop up our own debt pyramid. This can take several forms: debt slavery, where a nation is forced to convert from subsistence production and self-sufficiency to commodity production to make payments on foreign loans; or dollar hegemony, in which highly productive countries like China have no alternative but to finance U.S. private and public debt (because what else are they going to do with those trade surplus dollars?). Eventually, though, the solution of importing growth must fail too, as developing countries, and the planet as a whole, reach the same limits that developed countries have.
Official economic statistics have hidden the probability that the Western economies have been in a zero-growth phase for at least twenty years. Whatever growth there has been has come largely from such things as real estate bubbles, the prison industry, health care costs, insurance and financial services, educational costs, the weapons industry, and so forth. The more expensive these are, the more the economy is assumed to have grown. In areas where there has been growth, such as the internet, much of this is actually a covert form of importing growth. Internet-based revenue comes mostly from sales and advertising, not from new production. We are more efficiently greasing the wheels of the conveyor belt of goods from China to the West. In any event, developing countries cannot keep the growth machine running forever. The more it slows, the more it will be necessary to get around the zero bound.
While the idea of fixing stamps onto currency seems quaint, recently several prominent economists have proposed modern alternatives. Since most money is electronic anyway, the key measure is some kind of liquidity tax (as proposed by Irving Fisher as early as 1935) or, equivalently, a negative interest rate on deposits in the Federal Reserve. The latter measure was proposed by Willem Buiter, then a professor of economics and now chief economist at Citibank, in a 2003 paper in the Economic Journal and then in the Financial Times in 2009 (see the bibliography). It has also been broached by Harvard economics professor Greg Mankiw and American Economics Association president Robert Hall,18 and even discussed by Federal Reserve economists.19 I hope these names make it clear that this is not a crackpot proposal.
Of course, physical currency would need to be subject to the same depreciation rate as reserves, which could be accomplished either through Gesell’s method, by having expiry dates on currency, by replacing it with (or redefining it as) bearer bonds with a negative interest rate, by using cash currency that is distinct from the official unit of account, or by letting the exchange rate between bank reserves and currency fluctuate.20 Another option would be to ban official physical currency altogether, which could vastly increase the power of government since every electronic transaction could be recorded. Frightening as that is to those (including myself) who are wary of the surveillance state, my response to that concern is, “Too late.” Already today nearly all important transactions are done electronically anyway, with the notable exception of those involving illegal drugs. Cash is also used extensively in the informal economy to help people avoid taxes, a motive that would disappear if taxation were shifted away from incomes and onto resources as I propose.
Moreover, there is no reason why unofficial currencies shouldn’t thrive alongside the official, negative-interest electronic currency. Whether these are electronic or paper depends on the application: probably commercial barter rings and credit-clearing cooperatives would use electronic money while local, community-based currencies might prefer paper. Either way, transactions using these currencies would be outside the purview of the central government. Their community of use would decide what level of record-keeping to exercise over the currency. People who operate completely in a local economy, such as hippies, back-to-the-landers, and other people I love, would lead economic lives invisible to the central authorities. There are, however, other reasons to make all transactions and financial records open, not only to the government, but to everyone. This, indeed, has been proposed more generally as an antidote to the surveillance state—make surveillance technology public and ubiquitous—and it is happening already with the proliferation of video cameras in cell phones, hand-held gaming consoles, and other devices. When the activities of government are just as transparent to the people as the activities of the people are to the government, we will have a truly open society.
I want to emphasize the practicability of the modern negative-interest proposals. While Gesellian stamp-scrip currency seems like an anachronistic pipe dream that would involve massive economic disruption, levying a charge on reserves would require almost no new financial infrastructure. Indeed, it is an extension of where monetary policy has already been headed. The same Federal Reserve, the same central banks, the same basic banking system could remain intact. Of course, profound changes would follow, but they would be evolutionary changes that would spare society the disruption of scrapping the financial system and starting anew. As I wrote in Chapter 5, “Sacred economics is part of a different kind of revolution entirely, a transformation and not a purge.”
Some central banks have already flirted with negative interest. In July 2009 the Riksbank (Sweden’s central bank) went negative, levying a 0.25 percent charge on reserve deposits, a level at which it remained as of February 2010.21 This is negligibly different from zero, but the justification for lowering the rate that far also applies to lowering it still farther. The Riksbank, Buiter, Mankiw, and other mainstream advocates of negative interest rates see them as a temporary measure to force the banks to restart lending and make cheap credit available until the economy starts growing again, at which point, presumably, interest rates would rise back into positive territory. If, however, we are entering a permanent zero-growth or degrowth economy, negative interest rates could become permanent too.
The proper rate of interest, positive or negative, depends on whether the economy is to grow or shrink. In the old thinking, monetary policy was intended to spur economic growth or to restrain it to a sustainable level. In the new thinking, monetary policy strives to match the base interest rate to the economic growth (or degrowth) rate. Keynes estimated that it should be “roughly equal to the excess of the money-rate of interest over the marginal efficiency of capital corresponding to a rate of new investment compatible with full employment.” This formula would need to be modified if, as I suggest in Chapter 14, we should no longer and can no longer seek full paid employment as a positive social good (this is a necessary consequence of steady-state economics and not so scary in the presence of a social dividend). Essentially, though, what Keynes is suggesting is that the liquidity tax be set at a level to compensate for the excess of interest over the average return on investment in productive capital. In other words, it must be set at a level so that there is no advantage to holding wealth versus using wealth.
Buiter and Mankiw are no liberals, which is significant because their proposals are contrary to the interests of the creditor class that conservatives typically represent. Liberal economists sometimes advocate a near equivalent to demurrage: inflation. Inflation is mathematically very similar in its effects to a depreciating currency in that it encourages the circulation of money, discourages hoarding, and makes it easier to repay debts. Free-money has several important advantages, however. In addition to eliminating classic costs of inflation (menu costs, shoe-leather costs, etc.), it does not impoverish people on a fixed income.
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The problem is, in a deflationary environment when banks aren’t lending, how can the Fed create inflation? This is the biggest problem with the inflation solution in a situation of overleveraging and overcapacity. Quantitative easing exchanges a highly liquid asset (base money, reserves) for less liquid assets (e.g., various financial derivatives), but that won’t cause price or wage inflation if the new money doesn’t reach people who will spend it.23 Even if the Fed monetized all debt, public and private, the essential problem would remain. Owing to the zero lower bound, the Fed was powerless to inflate its way out of the debt trap in 2008 and 2009. Here we return to the original motivation for free-money: to get money circulating.
In a negative-interest reserve system, banks would be anxious not to keep reserves. If the negative rate were on the order of 5 to 8 percent (which is what Gesell, Fisher, and other economists thought it should be), then it would even be in banks’ interest to make zero-interest loans, possibly even negative-interest loans. How would they make money, you ask? They would do it essentially the same way they do it today.24 Deposits would be subject to a negative interest rate, too, only smaller than the reserve interest rate. Banks would take demand deposits at, say, –7 percent interest, or time deposits at perhaps –5 percent or –3 percent, and make loans at –1 percent or 0 percent. (You can see now why cash would need to depreciate as well; otherwise who would deposit it at negative interest?)
Negative interest on reserves is compatible with existing financial infrastructure: the same commercial paper markets, the same interbank money markets, even, if we desire it, the same securitization and derivatives apparatus. All that has changed is the interest rate. Each of these institutions has a higher purpose that lurks within it like a recessive gene, awaiting the time of its expression. This is equally true of that most maligned of institutions, the “heart” of the financial system: the Federal Reserve (and other central banks).
Contrary to orthodox belief, the heart does not pump blood through the system, but rather receives it, listens to it, and sends it back out again.25 It is an organ of perception. According to what it senses about the blood, the heart produces a vast array of hormones, many of them only recently discovered, that communicate with other parts of the body, just as its own cells are affected by exogenous hormones. This listening, modulating role of the heart offers a very different perspective on the role of a central monetary authority: an organ to listen and respond to the needs of the system, rather than to pump money through it. The Fed is supposed to listen to the pulse of the economy to regulate the money supply in order to maintain interest rates at the appropriate level.26 The injection of new money into the economy could be done the same way it is today—open market operations—or through government spending of fiat money, depending on which version of commons-use rents are employed. Generally speaking, money lost to demurrage must be injected back into the economy; otherwise the level of reserves would shrink every year, regardless of the need for money to facilitate economic activity. The result would be the same pattern of defaults, scarcity, and concentration of wealth that threatens us today. Therefore, we still need a financial heart that listens to the blood and signals for the creation of more (or less) of it.
The alert reader might object that if currency and bank deposits were subject to negative interest, people would switch to some other medium of exchange that served as a better store of value: gold, for instance, or commercial paper. If you have raised this objection, you are in good company. Writing in praise of Gesell’s ideas, John Maynard Keynes issued the following caveat: “Thus if currency notes were to be deprived of their liquidity-premium by the stamping system, a long series of substitutes would step into their shoes—bank-money, debts at call, foreign money, jewelry and the precious metals generally, and so forth.”27 This objection can be met on several fronts (nor did Keynes see it as an insuperable obstacle, but merely a “difficulty” that Gesell “did not face”). Bank money would, as described above, be subject to the same depreciation as physical currency. Debts at call require a risk premium that offsets the liquidity premium.28 Commodities, jewelry, and so forth suffer high carry costs. Most important, however, is that money is ultimately a social agreement that, through legal tender laws, customs, and other forms of consensus, can be consciously chosen and applied. Ultimately, Keynes judged, “The idea behind stamped money is sound.”
As a practical matter, everything in the material and social world has carry costs, as Gesell pointed out with his examples of newspapers, potatoes, and so on. Machinery and equipment break down, require maintenance, and become obsolete. Even the very few substances that don’t suffer oxidation, such as gold and platinum, must be transported, guarded, and insured against theft; precious metal coinage can also be scraped or clipped. That money is an exception to this universal law, the law of return, is part of the broader ideology of human exceptionalism relative to nature. Decaying currency is therefore no mere gimmick: it is an acknowledgment of reality. The ancient Greeks, unconsciously drawing on the qualities of this new thing called money, created a conception of spirit that was similarly above nature’s laws—eternal, abstract, nonmaterial. This division of the world into spirit and matter, and the consequent treatment of the world as if it were not sacred, is coming to an end. Ending along with it is the kind of money that suggested this division in the first place. No longer will money be an exception to the universal law of impermanence.
Keynes’ “difficulty” highlights the importance of not creating artificial stores of wealth that, like money today, violate nature’s laws. One example is property rights on land, which historically were the vehicle for the same concentration of wealth that money has brought us today. Negative interest on currency must accompany Georgist or Gesellian levies on land as well, and indeed on any other source of “economic rents.” The physical commons of land, the genome, the ecosystem, and the electromagnetic spectrum, as well as the cultural commons of ideas, inventions, music, and stories, must be subject to the same carry costs as money, or Keynes’s concern will come true. Thankfully, we have a serendipitous convergence of rightness and logic, that the social obligation entailed by use of the commons doubles as a liquidity tax on any substitute store of value. Fundamentally, whether applied to money or to the commons, the same principle is at stake: we only get to keep it if we use it in a socially productive way. If we merely hold it, we shall lose it.
Not everyone would benefit from free-money, at least in the short run. Like inflation, depreciating currency benefits debtors and harms creditors.
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Holders of wealth are its caretakers, its stewards, and if they do not put it to socially beneficial use, then eventually that wealth should flow away to others who will.
Revolutionaries past, recognizing that illegitimacy of most accumulations of wealth, sought to sweep the slate clean through confiscation and redistribution. I advocate a gentler, more gradual approach. One way to look at it is as a tax on holdings of money, ensuring that the only way to maintain wealth is to invest it at risk or, shall we say, to make wise decisions on how to direct the magical flow of human creativity. Certainly, this is an ability that deserves reward, and herein lies an essential missing piece of Marxist theories of value that ignore the entrepreneurial dimension to the allocation of capital.
While the bold yet still mainstream economists I’ve mentioned see negative interest as a temporary measure to promote lending and escape a deflationary liquidity trap, its true significance runs much deeper. A liquidity trap is not a temporary aberration caused by a bubble collapse; it is an ever-present default state originating in the declining marginal efficiency of capital,30 itself a result of technological improvement and competition.
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As I have argued already, this eventuality has been delayed for a long time as technology and imperialism have transferred goods and services from the commons into the money economy. As the commons is exhausted, however, the need to remove the interest rate barrier intensifies. Presciently, Keynes opines, “Thus those reformers, who look for a remedy by creating artificial carrying-costs for money through the device of requiring legal-tender currency to be periodically stamped at a prescribed cost in order to retain its quality as money, or in analogous ways, have been on the right track; and the practical value of their proposals deserves consideration.”32 Such a measure (and the modern equivalent I’ve discussed) would allow capital investment with a negative marginal efficiency—in other words, banks would willingly lend money to enterprises that make a zero or slightly less than zero return on investment.
Given that the root cause of our economic crisis is the inevitable slowing of growth, and given that we are transitioning to an ecological, steady-state economy, decaying currency proposals offer more than a temporary fix for a stagnant economy; they promise a sustainable, long-term foundation for a permanently nongrowing economy. Historically, economic contraction or stagnant growth has meant human misery: economic polarization, a sharpening of the divide between the haves and the have-nots. Free-money prevents this from happening by providing a way for money to circulate without needing to be driven by growth-dependent lending.
Combined with the other changes in this book, free-money will have profound effects on human economy and psychology. We have gotten so used to the world of usury-money that we mistake many of its effects for basic laws of economics or human nature. As I shall describe, a money system embodying a new sense of self and a new story of the people—the connected self living in cocreative partnership with Earth—will have very different effects. The intuitions developed over centuries will be true no longer. No longer will greed, scarcity, the quantification and commoditization of all things, the “time preference” for immediate consumption, the discounting of the future for the sake of the present, the fundamental opposition between financial interest and the common good, or the equation of security with accumulation be axiomatic." (http://www.realitysandwich.com/sacred_economics_chapter_12)