= German concept for depreciating currencies (see Demurrage
"Schwundgeld is a form of currency that actively discourages hoarding/savings through aggressive rates of depreciation -- as in, notes issued at the start of January depreciate by 2% per month, meaning it is worth 98% of face value in February and 96% in March. This rate of depreciation incentivizes immediate use, or demand, in depressed economies. It also minimizes societal stratification due to financial accumulation, discourages hoarding, and minimizes non-productive behavior." (http://globalguerrillas.typepad.com/globalguerrillas/2009/03/rc-journal-schwundgeld.html)
"The arguments against Schwundgeld and regional currencies in general, as outlined in "Regional currencies in Germany - local competition for the Euro" by Gerhard Rosl and commissioned by the German Bundesbank, fall into the following categories:
- It depresses trade with global system, reducing total potential wealth generation.
- Users of the system are not indifferent to immediate vs. delayed demand. While this does stimulate demand in the short term, it limits growth of the currency and its ultimate stimulative effect.
- Profits from the system are misused.
In short, according to this analysis, depreciating currencies don't work as well as the theoretical models of national fiat currencies in stimulating economic growth. Of course, the theoretical models in question don't reflect our current experience, since we are now in depression/deflationary economic environment with accelerating hoarding/income stratification. In light of this development, the response to the critique is that potentially sub-optimal solutions are often better than no solution at all (as in Churchill's famous dictum: "democracy is the worst form of government, except for all those other forms that have been tried from time to time").
- Local currencies ensure that minimal local needs can be met in the absence of a functioning or available global system. In this respect, it minimizes or hedges against catastrophic downside risk and reduces uncertainty. This is an aspect that the national system fails to address. National systems are indifferent to local malfunction.
- While depreciating currencies don't enable rapid monetary growth and accelerating stimulation, they are very effective at dampening excesses (everything from stratification, hoarding, and non-productive behavior). Currencies of this type aren't designed as a store of value over the long term. Alternatives exist for that, and savings are accomplished either through conversion to national currencies, assets, or fungible commodities. The system does what it is designed to do.
- Cui bono? The most telling critique is the issue of, "how is the excesses generated by administering the system spent?" This can be addressed by limiting administration costs to a fixed percentage of the system and allocating the remainder to public platforms -- everything from maintaining an electrical microgrid (in order to eliminate/lower transaction costs) to baseline production of food/energy/etc. "