The Most Revolutionary Act

Diverse Ramblings of an American Refugee

Dr Stuart Jeanne Bramhall

Dr Stuart Jeanne Bramhall
New Plymouth, New Zealand
December 02
Retired psychiatrist, activist and author of 2 young adult novels - Battle for Tomorrow and A Rebel Comes of Age - and a free ebook 21st Century Revolution. My 2010 memoir The Most Revolutionary Act: Memoir of an American Refugee describes the circumstances that led me to leave the US in 2002. More information about my books (and me) at

MAY 10, 2012 8:09PM

The Case for Negative Interest Money

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Charles Eisenstein

Charles Eisenstein

Sacred Economics

Charles Eisenstein

2011  Evolver Editions

Book Review – Part II

This review is divided into two parts. The second half covers some exciting solutions Eisenstein proposes for our broken economic system in Part II: The Economics of Reunion and Part III: Living the New Economy.)

The only weakness of Sacred Economics are some mistaken and contradictory assumptions Eisenstein makes about Marxism. He makes it really clear in Part I that capitalism needs to be replaced, but not in a “Marxist” way that removes any monetary incentive for people to produce goods and services that are useful to the community. In later chapters, he contradicts himself by arguing for the restoration of the gift economy, in which people are rewarded with public recognition, status and esteem for their contributions to the community. That being said, Einstein clearly believes that violent revolution to dismantle capitalism is unnecessary. He makes the case that major economic change can be accomplished through gradual evolution, pointing out that the process as already started via the global economic relocalization, Open Source and Creative Commons movements.

Eisenstein proposes to base his new “Sacred Economy” on the creation of local commons-based “negative interest” currency, something that worked very successfully during the Great Depression in Germany, Austria and Switzerland, and a relocalization of economic and political power to cities and regions and away from central government.

Negative interest money was first proposed by Delvio Gisell in 1906 in his book Natural Economic Order. Gisell called it “free money” because it allowed people to exchange goods and services without paying interest to the owners of money (banks) for the right to do so. A negative interest system involves “demurrage” or natural decay in the value of money. If you know that a $100 bill will only be worth $90 in a year’s time, you have a powerful incentive to stimulate the economy by exchanging it for goods and services.

In the 1920s a negative interest currency called the Wana circulated in Germany. Towns that used the Wana had plenty of money for business expansion, workers salaries and public infrastructure and services – in contrast to towns that relied on the Deutschmark, which owing to deflation, was in extremely short supply. Austrian and Swiss communities introduced negative interest currencies (the Worgle and the WIR) in 1932. Owing to the threat these alternative curries posed to banks and wealthy elites, the German and Austrian governments banned the Wana and the Worgle in 1932-33. The WIR is still in circulation in Switzerland but no longer operates as a negative interest currency. During the post-World War II boom, the demurrage was eliminated to prevent the Swiss economy from overheating.

In the US more than 100 cities were preparing to launch demurrage currencies – to stimulate local communities ravaged by the Great Depression – when Roosevelt came to power in 1932. Roosevelt, who recognized the enormous threat this posed to central government, banned all “emergency currencies” by executive decree (as Thaddeus Russell writes in A Renegade History of the United States, Roosevelt set the dangerous and unconstitutional precedent of circumventing Congress to enact laws by executive order).

The main advantages of commons-based negative interest currency are

  1. Money ceases to be scarce. As it becomes easier for small businesses to access money, jobs are created and people resume purchasing goods and services. Because the new currency is commons-based (see below), higher prices for ecologically harmful products serve as a brake their production.
  2. The ready availability of money eliminates the fear of never having enough, reducing greed to acquire more, one of the main causes of income inequality.
  3. Debts become easier to repay. People only pay back the original loan, without the compound interest.
  4. There ceases to be any incentive for corporations to convert natural resources to profit, as cash profits rapidly decline in value.
  5. Banks have more incentive to fund ecologically and socially productive projects with a low rate of return. They lose less by lending negative interest money than by allowing it to accumulate.
  6. As money loses its value and importance, there is gradual resurrection of both the gift economy and the commons, in which people work for a “social dividend” in the form of public recognition. Eisenstein sees this process already beginning with the thousands of volunteers who donate their time to create and upgrade Open Source software, Wikipedia and books, films, songs and blogs they share freely as part of the Creative Commons.

The Relocalization of Economic and Political Power

Eisenstein would like to see all local, regional and state governments issue commons-backed currencies to stimulate local business development and job creation, just as the Wana, Worgle and WIR did during the Great Depression. He applauds Ellen Brown’s work in campaigning for publicly owned state banks. At present. seventeen states have introduced legislation to create publicly owned state banks funded by interest free tax revenue rather than Wall Street. The latter would be in an ideal position to issue negative interest complementary currency.

How a Commons-Based Currency Would Work

Rather than being backed by gold or silver, Eisenstein proposes that these local negative interest currencies work like bearer bonds and be redeemable for the right to deplete the commons. Businesses could use them, in other words, to purchase the right to create an agreed amount of pollution or to deplete an agreed amount of a natural resource. Because these pollution/resource depletion quotas would be extremely expensive, corporations would be forced to internalize” (i.e. absorb the cost) of environmentally harmful production, rather than “externalizing” it (and making the public pay) as they do currently.

New Zealand economist Deirdre Kent has also proposed using land to back locally created negative interest currencies. Under her proposal, local government would issue negative interest vouchers as a “loan” to prospective home buyers. The vouchers could be used to repay these “loans,”  pay property taxes (known as “rates” in British commonwealth countries ) or purchase goods and services from local businesses.This would offer new home buyers a far cheaper alternative than a bank mortgage, as well as discouraging property speculation, stimulating local businesses and producing additional revenue for local government.

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[r] Stuart, this sounds really compelling. talk about thinking outside of the box. I like Ellen Brown's push for state banks!!! Interesting that FDR over-extended executive order to squash this experiment. Wow. I like the sound of a Sacred Economy and a peaceful evolution of a paradigm shift. Humanism paradigm of partnership and cooperation to replace the competition and power and control gamesmanship of patriarchy. The bit about spending money before it reduces made me pause at first but then I got what a real incentive to pass it around rather than hoard -- to STIMULATE which we are not getting now since less money and the confidence in money and economy in the crapper!

thanks for the consciousness raising as always! best, libby
I heard about negative interest money for the first time several years ago and was totally blown away by it. I never looked into it past that initial discovery, but I will definitely look for this book, as well as The Renegade History. Thanks, Doc!