Demurrage (currency)

[1] Unlike inflation, demurrage gradually reduces only the value of currency held: it functions as a negative interest (a tax) on currency held versus inflation that also reduces the value of savings or retirement funds and increases (CPI).

This led some such as German-Argentine economist Silvio Gesell to propose demurrage as a means of increasing both the velocity of money and overall economic activity.“Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron, evaporates like ether, is capable of standing the test as an instrument for the exchange of potatoes, newspapers, iron and ether.

On the other hand, influential British economist John Maynard Keynes contended that Gesell's proposed demurrage fees could be evaded by the use of more liquid competing forms of money and that therefore inflation was a preferable method to achieve economic stimulation.

Local scrip systems, many of which incorporated demurrage fees, were also used across the United States during the Great Depression, and the Bankhead–Pettengill bill of 17 February 1933 was introduced in Congress to institutionalize such a system at the national level under the US Treasury, as documented in Irving Fisher's book Stamp Scrip.

[4] The major central banks' post-World War II policy of steady monetary inflation as proposed by Keynes was influenced by Gesell's idea of demurrage on currency,[3] but used inflation of the money supply rather than fees to increase the velocity of money in an attempt to expand the economy.

If the currency in question is run by the government, the demurrage fee can contribute to general tax revenue.

One Schilling note with demurrage stamps from Wörgl