TEUN VAN SAMBEEK
	16 FEBRUARY 2025

First we look at the main problem of money, according to Silvio Gesell:

Gesell explained how our systems of money and land ownership give rise to unearned income. In other words, they cause wealth to flow into the pockets of people who have not contributed to the creation of that wealth. And since a significant portion of society’s wealth is siphoned off by people who have not earned it, there is not enough left to adequately compensate those who actually produce wealth. According to Gesell, this is the cause of insufficient wages as well as the economic instability and recurring crises that have plagued all market economies throughout history.

To be more specific, regarding money, Gesell argued that the two primary functions of our existing form of money — i.e. medium of exchange and store of value — are inherently incompatible. In other words, any form of money that is designed to be used as a vehicle for storing wealth will systematically fail to perform its function as a medium of exchange. And since the circulation of our medium of exchange is literally a matter of life & death, the irrational decision to combine these two functions in one instrument is catastrophic for mankind. The only solution to this problem, according to Gesell, is to separate money’s functions and create a medium of exchange that cannot be used as a means to store wealth.

Silvio Gesell (1862-1930)

Like Silvio Gesell suggested, money should deteriorate, like old potatoes ultimately rot away. To make money deteriorate, coins need to be constantly devalued. This is called “Demurrage”. For it, Silvio Gesell advised to use 5.2% depreciation per year or 0.1% per week.

WÖRGL TIROL

During a period of deflation in Wörgl in Tirol Austria 5 July 1932, Mayor Michael Unterguggenberger installed a Emergency Aid program in his village to get money circulating faster. Deflation meant that the money supply was shrinking. As a result, prices of goods went down and the purchase power of money soared. Because of that people started to hoard money instead of spending it, which meant that many factories couldn’t sell their products at a profit anymore and went bankrupt. This is why the Wörgl community had to deal with a lot of unemployed workers. Because the families of these workers didn’t have income, they couldn’t pay taxes, and the community - like the families - ran out of money.

Mayor Michael Unterguggenberger

To still get these workers to work, the Mayor and Municipality created “money coupons” that deteriorated with 1% per month. 1600 Schillings of coupons were created that could be converted to “real“ Schillings at the bank, but at a 2% fee. The reasoning of the Mayor was this:

“Slow money circulation is the main reason for the current economic crisis. Money as a means of exchange slips from the hands of the working population. It ends up in the interest canals and in the hands of a small minority who is not interested in introducing it to the market, but much rather retains it as means for speculation. Since money is an indispensable wheel in the production machine, the accumulation of large sums in the hands of a few is an enormous danger for an uninterrupted production. Each money stoppage results in the stoppage of merchandise and therewith unemployment. Uncertainty on the money market leads to anxiety of those who are holding the money; he/she therefore no longer spends it and distrusts investments. The circulation slows down, the entire turnover of merchandise and output shrinks as the living space of the population within the economic system dwindles. Should this continue like in the present state, there will be not enough bread to feed a nation. Peace and prosperity will be destroyed. Entire populations and states will face ruin. Since we cannot save the world from our vantage point, at least we want to propose some solutions.”

Crucial for the economically invigorating effect of the experiment was not the amount of money spent, but rather the quick circulation of the coupons. The coupons were exchanged about 10 times more than the regular Schillings were in that 13 month period.

While the jobless rate increased continuously in Austria during this time, it decreased in Wörgl by one fourth of it.

Hans Burgstaller wrote 1933:

“Even if it seemed ridiculous that the small Tirol stood up to the power of Napoleon, the spark from Tirol was sufficient to start a major fire in the rest of Europe, thereby destroying an invincible power. We’re no longer dealing with Napoleon today, but the power we’re out to destroy is mightier than Napoleon, it’s the international high finance.”

In June 1933, around 200 Austrian communities like Wörgl, wanted to issue regionally valid Schwundgeld to combat the economic crisis. Newspapers everywhere printed articles, which caused great international interest. Economists and politicians came personally to see the results. Among them Hans Chorssen, employee of the finance theoretician from the United States of America Prof. Irving Fischer, who appreciated Gesell’s concept as an “ingenious idea” and wanted to use it to fight the Depression in America. Many American towns and communities produced Wörgl-style token money, „stamp scripts“. However, the shrinkage was exaggerated -at a rate of 2 % per week the money was not accepted.

The National Bank was however upset about the program and asked the Tirol Government to do something about the resolution, in which it saw a violation of their bank note privilege. Mayors from all over the country sent a petition to the government in order to legalize free money. But on 15 September 1933 the value coupons had to be withdrawn.

THE DEMURRAGE PERCENTAGE

The percentage Silvio Gesell suggested was 5.2% per year or 0.1% per month. A simple calculation shows that 1 - ((100% - 0.1%)^52) = 1-(0.999^52) = 1-0.9493 = 5.07% devaluation per year.

In Wörgl the demurrage was 1% per month or:

1 - ((100% - 1%)^12) = 1-(0.99^12) = 1-0.8864 = 11.36% devaluation per year.

The percentage the American towns used was 2% per week or:

1 - ((100% - 2%)^52) = 1-(0.998^52) = 1-0.3498 = 65.02% devaluation per year.

The percentage 1CoinH (see below) uses is 0.005% per hour or:

1 - ((100% - 0.005%)^8766) = 1-(0.99995^8766) = 1-0.6451 = 35.49% devaluation per year.

It is not clear how Silvio Gesell came to the 5.2% or 5.07% per year factor or why Wörgl used 11.36% devaluation per year and why the towns in the USA decided to use a depreciation factor that was 20 times higher (2% instead of 0.1% per week). It is quite likely all were just guessing and that Wörgl and especially the villages in the USA thought that money would circulate even faster if they would use a much higher devaluation percentage.

When central banks (intentionally) deflate or inflate the money supply, deflation and inflation will hurt people, manufacturers and governments. When these boom and bust cycles occur, people, companies and governments can’t pay their loan obligations, which enables banks to collect the collateral. When money is printed out of thin air and the portion of interest that needs to be paid on the loans is not created and thus is not in circulation, the financial system becomes a pyramid scheme. In a pyramid scheme all wealth ultimately ends up at the people that are allowed to print the money. This is why Central Banks don’t allow governments or Municipalities to create money. Shrinking and expanding the money supply works obviously faster than the pyramid scheme itself to obtain collateral. The fastest way for the owners of central banks to obtain collateral, is by financing governments that go to war, but that is another story.

As you can read in my article about The Two Monopolies of Central Banks, the most important monopoly we need to take away from the central banks, is the monopoly on creating money. Central bank money - after the central banks create it out of thin air - is borrowed to mainly governments with interest. It is unbelievable that the people of the world allow this fraud to still continue.

In our 1CoinH solution we change the way money is created by making everyone participate equally in the creation of money. Contrary of the Silvio Gesell solution (where it still is the government that issues money), the solution that 1CoinH uses is that any money that is created, is immediately distributed over all users of the 1CoinH financial system. This means that there is no government or bank involved in the issuing of money. This also means that there can never be a pyramid scheme around the issuing of money, there cannot be any intentional bull or bust cycle and financing of war efforts by using government properties as collateral becomes quite complicated if the people of a country don’t agree with the war.

Now how can money deteriorate, while at the same time the entire money supply needs to be constant (as an average per participant). How is that possible?

WHAT HAPPENED EXACTLY IN WÖRGL

Let’s shortly take a look at what happened in Wörgl. While the central bank was shrinking the money supply and people were hoarding money (due to the unnatural properties of the Schilling), the Municipality created money for themselves (with an obligation to destroy it) to get the “barter“ of goods and services in the Municipality running again. Like Jacque Fresco said in Zeitgeist 3:

“Then came the crash of 1929, which began what we now know as ‘the great depression‘… I found it difficult to understand why millions were out of work, homeless, starving… While all the factories were sitting there. The resources were unchanged. It was then that I realized that the rules of the economic game were inherently invalid.“

It should be obvious that it is an insane situation that - once we replaced barter with a financial system - we cannot seem to find ways to return to barter when a situation of deflation or (hyper)inflation plunges a society in a depression. That it seems to be impossible to get people working in the factories based on an emergency plan. The waste of time and resources during these factory shutdowns are gigantic.

On top of that, these crisis are also intentional. As was visible in Wörgl, it was the central bank that prefer peoples to be in misery above allowing simple measures like adding money-like coupons into a community to get the production process and all its dependencies going again. It proves that the people that own the central banks are the (only) ones profiting when communities are in a depression.

So the “Wonder of Wörgl“ was first and foremost caused by a small expansion of the money supply. Secondly - because of the demurrage - this small expansion remained active in circulation, as the coupons were not hoarded. The - relative small - demurrage was already sufficient to become the preferable means of exchange (compared to the Schilling).

An important difference between Wörgl and 1CoinH is that the money in Wörgl got into circulation, when the Municipality started paying the workers. It is not clear to me why they refer to the coupons as “Free Money“, as there seems no real reason to call it “Free“. The coupons were printed out of thin air by the Municipality, but were always bound to be destroyed. On top of that a tax (in Schillings) from the bank was deducted when the coupons were returned. So it might look temporarily free money for the Municipality, but it was certainly not free for the workers.

In the 1CoinH system, it is not only the Municipality that can create money out of thin air and use it to finance public projects. In 1CoinH everyone - including the workers - participate in the creation of money. Everyone receives 1 coin per hour, free and without any repayment or interest obligation.

In the Wörgl situation, the effect of the extra coupons on the global money supply is obviously negligible and had no relation to the demurrage of the coupon. In the 1CoinH system however, this one coin that is added for every participant every hour, is very important to the money supply. It has a very strong - let’s call it 100% - relation to the demurrage.

When we add one coin per participant per hour to the money supply, and we have 8 billion participants, then the money supply would increase with 8 billion coins every hour. A forever growing money supply is like the definition of inflation. You don’t want that.

To resolve this forever-inflation-issue, we need to devalue all existing coins in a way, that - together with the new coins - the total money supply remains unchanged. And that is exactly when I started to think about demurrage. Even before I knew about Silvio Gesell’s theory, I already saw that - in case of the 1CoinH concept - demurrage solves not only one, but in fact two issues:

1. Demurrage will keep the money supply constant and

2. Makes money less important.

It quickly saw that demurrage is the best answer to ‘interest‘. It is not by coincidence that the Bible and Koran see ‘interest on money’ as ungodly and criminal. Now I know that also in 1CoinH, people can still take loans from each other and charge interest on these loans. I don’t see too many issues with that in the 1CoinH system. Because I’m neutral on that topic, I would like to leave the choice to legalize or criminalize interest on loans to each different society.

From the beginning, it was very clear to me that “having a monopoly on creating money out of thin air and ask interest on it when you lend it to governments“ is very criminal and ungodly. This practice needs to stop as soon as possible.

Compared to the money creation of central banks, I see the creation of money in the 1CoinH system as the opposite. There is no interest and everyone participates equally. If we need money at all, then the 1CoinH way to create it, should be considered as the only ethical way.

Now how can you use demurrage to eliminate deflation and inflation? The funny thing about creating a pool of money with 1 coin per hour per participant money creation instances, is that you can calculate the total money supply per participant with an incredible simple formula:

Money supply per participant = coins per period / (1 - demurrage factor per period).

In the 1CoinH situation, we have 1 / (1-0.99995) = 1/0.00005 = 20,000 coins per person.

In the Silvio Gesell situation we can use the 0.1% demurrage per month which is equal to a 0.999 factor. and we give everyone (24x365.25/12=) 730 coins per month. In that case everyone would ultimately end up with 730.5 / (1-0.999) = 730,500 coins per person.

We could also do this for Wörgl and the USA villages, but because we would just need to assume an amount of coins per period it would just be confusing.

The point of this comparison is that you can see that the demurrage that Silvio Gesell proposes, is very low. This means that if you add 1 coin every hour, ultimately every participant would have generated 730,000 coins to money supply. Each family of five, globally, would generate 3,650,000 coins!

If we want to make it resemble our current money supply, this is way too much. With this prices would probably increase with a factor of about 20x compared to US$ prices.

When you calculate that the global debt is around USD 250 Trillion and there are 8 billion people on the earth, the debt per person is USD 31,250.

When all money that is in circulation is equal to the debt, there should be about USD 31,250 in circulation.

Much of that money is however stagnant, due to to unnatural properties of our current money. When we assume that about 1/3rd is stagnant, then about USD 20,000 is really in circulation. That assumption is the main reason I choose the factor 0.99995.

Another reason to choose choose the factor 0.99995 is this:

A “nice feature“ of the factor 0.99995 is that the amount of 20,000 coins (we can call that “the equilibrium”) will be reached in about 20 years.

With the Silvio Gesell percentage of 0.1% per month it will take well over 100 years to reach a constant money supply. You want to reach this equilibrium in the not too far distance. In my opinion 20 years is a nice time to make everyone enter the 1CoinH system and get used to the system and give prices time to settle. Then, after about 20 to 25 years, inflation and deflation will have settled and never occur again. This is obvious outside prices changing as a result of higher production efficiency or natural disasters (for example lost crops and other sudden scarcity of particular items).

The way of how the creation of the money supply is organized will have a massive (100%) influence on the percentage setting of the demurrage that is used to devalue the existing money supply. When you create an ethical money creation system, any demurrage percentage will always ultimately lead to a constant money supply per participant. That should also be exactly what you want.

You can change the variables of duration and amounts of coins that are distributed, but it seems wise to aim at prices that mimic the current USD prices.

You also want to reach the equilibrium (a constant money supply) that is well within the lifetime of an average human. The experiment in Wörgl showed how bad and evil the Central Bank system really is, and how easy it actually is to turn societies into prosperous communities. We need to replace the Central Bank system as soon as possible and introduce Ethical Money with an almost godly coin creation and demurrage system. It is the only recipe to get to the “World of Abundance“.

Silvio Gesell

Wörgl in Tirol Austria 5 July 1932

The Two Monopolies of Central Banks

Jacque Fresco in Zeitgeist 3

16 February 2025

Teun van Sambeek MSc, MRE

Creator of: 1CoinH & Copiania