The Worgl Shilling

[Stalin]

I am currently writing an article on cannabis as an alternative currency ( i.e. growing your own money ) and in the course of my research came across this delightful story.

Can someone please supply a pithy moral ?

Wörgl was the site of the "Miracle of Wörgl" during the Great Depression. It was started on the 31st of July 1932 with the issuing of "Certified Compensation Bills", a form of currency commonly known as Stamp Scrip, or Freigeld. This was an application of the monetary theories of the economist Silvio Gesell by the town's then mayor, Michael Unterguggenberger.

The experiment resulted in a growth in employment and meant that local government projects such as new houses, a reservoir , a ski jump and a bridge could all be completed, seeming to defy the depression in the rest of the country. Inflation and deflation are also reputed to have been non-existent for the duration of the experiment.[citation needed]

Despite attracting great interest at the time, including from French Premier Edouard Daladier and the economist Irving Fisher,[3] the "experiment" was terminated by the Austrian National Bank on the 1st September 1933 on the basis of the "Certified Compensation Bills" being a threat to the Bank's monopoly on printing money because there were other cities in Austria willing to join the experiment (Linz, Steyr and more).[4][5]

In 2006 milestones were placed, beginning from the railroad station through the downtown, to show this history, on top of questioning the authenticity of never-ending exponential growth triggered by the compound interest.

http://en.wikipedia.org/wiki/Worgl

Freigeld has several special properties:

• It is maintained by a monetary authority to be spending power stable (no inflation or deflation) by means of printing more money or withdrawing money from circulation
• It is cash flow safe (a scheme will be put in place to ensure that the money is returned into the cash flow - for example, by requiring stamps to be purchased and attached to the money to keep it valid)
• It is convertible into other currencies
• It is localized to a certain area (it is a local currency)

The name results from the idea that there is no incentive to store the money as it will automatically lose its value after some time. It is claimed that as a result, interest rateswould drop to almost zero.

According to Gesell, all human-produced goods are subject to expensive storage, whereas money is not: Grain loses its weight, metal products rust, housing deteroriates. Therefore money has a supreme advantage over all other goods. John Maynard Keynes gave a name to another concept articulated in Gesell's The Natural Economic Order: liquidity preference. Being "liquid" with money is a great advantage to anybody, much more so than having comparable amounts (past utility) of any product. The result is that people will not even provide zero-risk, inflation corrected credits unless a certain interest rate is offered. Freigeld simply reduces this 'primordial' interest rate, which is estimated to be somewhere around 3% to 5%, by an absolute, in order to lower the average interest rate to a value around 0.

http://en.wikipedia.org/wiki/Freigeld

Comrade Stalin

 

[Stalin]

more ...

One of the best-known applications of the stamp scrip idea was applied in the small town of Wörgl in Austria in 1932 and 1933. When Michael Unterguggenberger (1884-1936) was elected mayor of Wörgl, the city had 500 jobless people and another 1,000 in the immediate vicinity. Furthermore, 200 families were absolutely penniless. The mayor-with-the-long-name (as Professor Irving Fisher from Yale would call him) was familiar with Silvio Gesell‘s work and decided to put it to the test.

He had a long list of projects he wanted to accomplish (re-paving the streets, making the water distribution system available for the entire town, planting trees along the streets and other needed repairs.) Many people were willing and able to do all of those things, but he had only 40,000 Austrian schillings in the bank, a pittance compared to what needed to be done.
Instead of spending the 40,000 schillings on starting the first of his long list of projects, he decided to put the money on deposit with a local savings bank as a guarantee for issuing Wörgl’s own 40,000 schilling’s worth of stamp scrip. He then used the stamp scrip to pay for his first project. Because a stamp needed to be applied each month (at 1% of face value), everybody who was paid with the stamp scrip made sure he or she was spending it quickly, automatically providing work for others. When peoople had run out of ideas of what to spend their stamp scrip on, they even decided to pay their taxes, early.

Wörgl was the first town in Austria which effectively managed to redress the extreme levels of unemployment. They not only re-paved the streets and rebuilt the water system and all of the other projects on Mayor Unterguggenberger’s long list, they even built new houses, a ski jump and a bridge with a plaque proudly reminding us that ‘This bridge was built with our own Free Money’ (see photographs). Six villages in the neighborhood copied the system, one of which built the municipal swimming pool with the proceeds. Even the French Prime Minister, Édouard Dalladier, made a special visit to see first hand the “miracle of Wörgl.”

It is essential to understand that the majority of this additional employment was not due directly to the mayor’s projects as would be the case, for example, in Roosevelt’s contract work programmes described below. The bulk of the work was provided by the circulation of the stamp scrip after the first people contracted by the mayor spent it. In fact, every one of the schillings in stamp scrip created between 12 and 14 times more employment than the normal schillings circulating in parallel. The anti-hoarding device proved extremely effective as a spontaneous work-generating device.
Wörgl’s demonstration was so successful that it was replicated, first in the neighboring city of Kirchbichl in January of 1933. In June of that year, Unterguggenberger addressed a meeting with representatives of 170 other towns and villages. Soon afterwards 200 townships in Austria wanted to copy it. It was at that point that the central bank panicked and decided to assert its monopoly rights. The people sued the central bank, but lost the case in November 1933. The case went to the Austrian Supreme Court, but was lost again. After that it became a criminal offence in Austria to issue “emergency currency.”
… does it sound familiar? Only a central authority saviour can help people who are not allowed to help themselves locally. Ans as all economists will point out, when there is enough demand, supply always manifests in some way. Even if you have to import it. During the Anschluss of 1938, a large percentage of the population of Austria welcomed Adolf Hitler as their economic and political saviour. The rest is well known history.

http://www.lietaer.com/2010/03/the-worgl-experiment/

Comrade Worgl-Stalin

 

[Stalin]

Capitalism means a monoploy on capital by the corporate and financial elite.

Comrade Stalin