Adrian Wrigley (25Feb12)

The money flow is backed by the flow of land value. Money serves its catalytic function only when it flows. And when it gets to the land, it is redeemed. This makes it similar to theatre tickets as a store of value - effective, but time limited. People would like an instrument which is a permanent store of value. But in the real world people can't easily create and maintain permanent stores of value - perhaps the closest of which is a successful business. The medium of exchange function is well served by a flowing, catalytic money, issued by the people, redeemed against the land use, such as I describe. But the store of value function has almost the exact opposite requirements, best served by real economic capital maintained and used by business - in other words real investments. Land, taxation, promises, contracts, credit, bonds do not comprise real investment and shouldn't be put forward as "stores of value" for individuals because they are clearly not stores of value for the economy as a whole.

I think the confusion on this issue may arise because "money backed by land" makes people think of a *stock* of money backed by a *stock* of land. Since the land can be bought or sold for a lump-sum of given value, then the stock of money representing it also has this value, people might think. Indeed this was the thinking behind the Assignats of Revolutionary France, 1790s. The Assignats "backed by land" taken from The Church rapidly hyperinflated ( http://en.wikipedia.org/wiki/Assignat ). This is in sharp contrast to the Rentenmark ( http://en.wikipedia.org/wiki/Rentenmark ), mentioned in my recent interview. The Rentenmark issue flow was backed by the flow of land value from German property, and immediately halted the hyperinflation of the tax-backed Papiermark (which followed the stock of gold-backed Goldmark). Moneys purportedly backed by a stock of something are likely to serve a store of value function better than a currency (medium of exchange) function, but are prone to fraud, hoarding, depression, bubbles. Moneys backed by a definite flow are continually validated reducing fraud and tend to avoid hoarding (eg "Paradox of Thrift"), serving as a medium of exchange, not a store of value. Money today is backed in the first instance by the indefinite flows of income/sales taxes and mortgage service, serving poorly either as a medium of exchange or a store of value.

What Greece needs is a land backed currency (and so does New Zealand)

Posted on February 23, 2012 by Deirdre

I have just been listening to the most informative and important interview by Adrian Wrigley of the Systemic Fiscal Reform Group in Cambridge, UK. Here it is: http://podcast.3cr.org.au/pod/3CRCast-2012-02-22-19953.mp3

Karl Fitzgerald of Earthsharing Australia interviewed him on the radio station http://3cr.org.au on a programme called The Renegade Economist.

To address the problems of Greece, and for other reasons, Adrian is studying the economic history of Germany during the early 20th Century, and says it is tragic that Economic History has been dropped from economics departments of universities because in history lies a lot of wisdom and knowledge. He describes what happened leading up the period of hyperinflation in 1923 and then what the German government did to solve it. They banned the private reserve bank from issuing currency for profit, formed a new reserve bank which issued paper money backed by mortgages and this stopped hyperinflation really quickly. It was called the Miracle of the Rentenmark. However, (as with Gesell inspired currency in Wørgl Austria some ten years later), the banks quickly stepped in. The Rentenmark was a danger to the status quo. A land backed currency is the big danger for the ruling classes.

However, like the other miracle, Wørgl, it only lasted a very short time. Soon the banks stepped in to have their way.

This is quite a long interview but full of fascinating facts. Well worth the time out of your day. It makes me realise that noone who really cares about monetary reform can turn a blind eye to the fact that the owners of banks will do anything to squash land backed currencies and kill them instantly. It reminded me of a time when I was writing my book and discovered that land tax went out at the same time as the private banks insisted that the NZ government use income tax instead. Before then we were reliant on just excise taxes and land taxes. And since then we have assumed that income tax is normal! Our money system is backed by income tax, not by land. The private banks, creating money for profit, have got that windfall. No wonder they are falling over themselves to lend to farmers.

It also reminded me of the struggle within the complementary currency movement to invent a currency backed by land. Everyone has talked about it, but to my knowledge it has never been done. It remains a dream. Now I can see why.

I hope you enjoy the interview. A lot of history in it. It is great on Greece too.

This entry was posted in Creating our national money and tagged currency, Earthsharing Australia,Germany, Greece, hyperinflation, land, land-back currency, Wrigley by Deirdre. Bookmark the permalink.