Demurrage drives the velocity of money up, and the interest rates down. These have other beneficial effects, such as easy access to credit (as long as you're creditworthy).
More noteworthy, demurrage is assessed immediately whereas inflation is delayed. Under a demurrage system, this places an incentive to invest in assets which lead to longer-term sustainable growth. Inflation can instead incentise nearsighted short-term growth (and all the ramifications that has).
This is irrelevant if people don't want to use your currency. When you invent a currency, you can't just think about monetary policies but also incentives for using it.
Some groups have had success in introducing local currencies with similar features. One path we've looked at is getting communities of people (perhaps starting with some #occupy groups and their supporters) to use it and convince local businesses to accept it, hence the subtitle of being the worlds first “global-community currency”.
Indeed. And how does a currency with demurrage prevent users from investing in gold and storing it in a vault instead of investing in something that provides "longer-term sustainable growth [of the economy]"?
Inflation also drives the velocity of money up, and the interest rate down. And both inflation and demurrage are "continuously assessed," it's just that losses to inflation aren't immediately measurable.
Even if the timing of inflation/demurrage costs were different, could you explain more about the link between the timing of fees and the sustainability of investments? I don't see how the two are related.
> Inflation also drives the velocity of money up, and the interest rate down. And both inflation and demurrage are "continuously assessed," it's just that losses to inflation aren't immediately measurable.
No, inflation is measurably delayed and hurts the poor and middle class more than it does the wealthy because insiders have preferential access to credit, allowing them to benefit from inflation. Instantly and continuously assessed demurrage would remove that preferential treatment.
> Even if the timing of inflation/demurrage costs were different, could you explain more about the link between the timing of fees and the sustainability of investments? I don't see how the two are related.
Demurrage reduces interest, where interest can have negative/short-sighted effects. As the value of an investment is calculated by discounting future cash flows by the expected interest rate, a lower interest rate means investments generating sustainable cash flow are more likely to be preferred than a one-time ROI.
The classic example being clear-cutting a forest vs. sustainably harvesting it. The incentive is to clear-cut the forest when there are high interest rates, as the cash can be re-invested, whereas a sustainable logging model makes more sense as the long-term interest rate approaches zero.
No, inflation is measurably delayed and hurts the poor and middle class more than it does the wealthy because insiders have preferential access to credit, allowing them to benefit from inflation.
The same applies under demurrage. You're just shifting the loss of value form the real variables to the nominal variables.
I've read a lot of advocacy for demurrage, but somehow nobody is ever able to put a finger onto where the difference is supposed to be exactly.
Demurrage reduces interest, where interest can have negative/short-sighted effects.
Perhaps it reduces the nominal interest rate. Why should it reduce the real interest rate? (Unless you suppose that after introducing demurrage inflation stays the same; but then you might as well go ahead and increase inflation to achieve the same effect)
Can you provide that measurement, then? How long is the period between the moment I pick up a dollar bill and the moment inflation starts to reduce its value? A month? A week? A day? If I pick up two dollar bills, 24 hours apart, is the former bill worth more than the second bill, since inflation hasn't reduced its value since I picked it up?
More noteworthy, demurrage is assessed immediately whereas inflation is delayed. Under a demurrage system, this places an incentive to invest in assets which lead to longer-term sustainable growth. Inflation can instead incentise nearsighted short-term growth (and all the ramifications that has).