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?