METHODS OF APPLYING THE PRINCIPLE OF FREE-MONEY

(Translator, 1958). There are many methods of applying the principle of Free-Money, the most important being: Tabular Free-Money, Stamped Free-Money, Serial Free-Money, and Supplementary Free-Money.

Tabular Free-Money was the earliest proposal. In Currency Reform as Bridge to the Social State (1891), Gesell suggests letting the face-value of the Free-Money notes ("rusting banknotes" as he then called them) decrease from 100 at the beginning to 95 at the end of the year, the current value of the note being shown in a table printed on it. This plan, which has advantages from the banker's standpoint, was retained in the first edition of the present work (1906).

Stamped Free-Money, suggested by George Nordmann, a Swiss merchant, was adopted by Gesell in the second (1916) and subsequent editions. The Free-Money notes, instead of losing 5% of their face-value in the course of the year, would be kept at their full face-value by weekly or monthly stamping at the holder's expense.

With weekly stamping, shown in schematic form on page 270 the number of stamps (52) on each note could be reduced to 13 by grouping the stamps in quarters (13 stamps to each quarter) and cutting off each fully-stamped quarter when the note was passing through a bank or public treasury, with the mention: "First (or Second, or Third) Quarter fully-stamped." Or the notes could be re-issued at 6-monthly or quarterly intervals, instead of annually. With monthly stamping and half-yearly note-issues, six stamps would be the maximum number attached to a note.

If the currency stamps were used only for stamping the notes (and not also as small change), they could be printed on cellophane rolls like the self-adhesive tape used for fastening parcels. Or, instead of adhesive stamps, machine stamping could be adopted, as at present with letters and parcels.

Stamped Free-Money has advantages in the market, outside the gathering places of money. In almost all the practical realisations of Free-Money (in Germany by Hans Timm in Gesell's lifetime, and by the mining entrepreneur Hebecker, using Timm's "Wära", at Schwanenkirchen in 1931, in Austria by the Mayor of Wörgl in 1932, and in the many later experiments throughout the United States) stamped Free-Money was the form adopted.

With Serial Free-Money each denomination of the currency notes is issued in four or more series distinguished, by a number and bold marking, for example 1 - 4 red bars across the note. At determined intervals one of the series, drawn by lot, ceases to be legal tender but is exchanged for a fresh series by the Currency Office - after deduction of the legal depreciation for all four series. With some modifications this plan could be applied to small-change coins. Serial Free-Money has the merit of reducing interference with the currency to one-quarter; three-quarters of the currency continues to circulate undisturbed.

With Supplementary Free-Money the legal depreciation is compensated in each transaction by a supplementary payment by the holder of the note, as at present in many countries with the purchase tax (sales tax).

Theoretically the principle of Free-Money could be applied by a continuous regular inflation of prices of 5% annually, with, to protect creditors, a corresponding modification of an long-term money contracts. (For 18 years the continuous irregular inflation, without modification of money contracts, practised by almost all countries, has realised one aim of Free-Money: the elimination of depressions and unemployment - but at the expense of creditors, and with many grave economic disturbances).

During the great American depression of the thirties, when the United States currency, in spite of liberal credit policy, failed to circulate, legislation was introduced in the Senate and House of Representatives (Bankhead - Pettengill Bill, 1933) directing the Federal Treasury to issue $1,000 million in $1 stamped notes. To each of these notes it was proposed to attach weekly a 2-cent stamp, a depreciation charge of 100% which would have made the whole issue self-liquidating within a year, through sale of the stamps.

In Switzerland a Plan for applying the principle of Gesell's Free-Money was proposed in 1948 in the Federal Parliament as an amendment (Bernoulli - Schmid) to the charter of the Swiss National Bank. To forestall depressions, this plan proposes to empower the Bank to counteract any statistically observed slackening of velocity of the currency circulation, by cancelling some or all the higher denominations of the notes, the cancelled notes to be immediately exchanged for fresh notes after a deduction not exceeding, in any one year, 6% of the value of the note.

Gesell rejected the plan of 5% compensated inflation and he also rejected proposals to raise the legal depreciation rate of the notes above what is needed to load money with the carrying costs to which, by their nature, the wares are subject - estimated at about 5% annually. But Gesell did not advocate exclusively any of the other proposals; he held that the technique of Free-Money, like all technique, must be determined in practice, by trial and modification.

(* See Professor Irving Fisher: Stamp Scrip (1933); Fritz Schwarz: Das Experiment von Wörgl (1950); Karl Walker: Die Technik der Umlaufsicherung des Geldes (1952). The New York Public Library has an immense collection of material relating to the American local realisations of Free-Money.)