CH. 23

357

NOTES ON MERCANTILISM, ETC.

of what is needed, though it is not feasible in the formin which he proposed it. He argues that the growthof real capital is held back by the money-rate of interest,and that if this brake were removed the growth ofreal capital would be, in the modern world, so rapidthat a zero money-rate of interest would probably bejustified, not indeed forthwith, but within a compara-tively short period of time. Thus the prime necessityis to reduce the money-rate of interest, and this, hepointed out, can be effected by causing money to incurcarrying-costs just like other stocks of barren goods.This led him to the famous prescription of “stamped”money, with which his name is chiefly associated andwhich has received the blessing of Professor IrvingFisher . According to this proposal currency notes(though it would clearly need to apply as well to someforms at least of bank-money) would only retain theirvalue by being stamped each month, like an insurancecard, with stamps purchased at a post office. The cost ofthe stamps could, of course, be fixed at any appropriatefigure. According to my theory it should be roughlyequal to the excess of the money-rate of interest (apartfrom the stamps) over the marginal efficiency of capitalcorresponding to a rate of new investment compatiblewith full employment. The actual charge suggested byGesell was 1 per mil. per week, equivalent to 5-2 percent, per annum. This would be too high in existingconditions, but the correct figure, which would have tobe changed from time to time, could only be reachedby trial and error.

The idea behind stamped money is sound. It is,indeed, possible that means might be found to applyit in practice on a modest scale. But there are manydifficulties which Gesell did not face. In particular,he was unaware that money was not unique in havinga liquidity-premium attached to it, but differed only indegree from many other articles, deriving its import-ance from having a greater liquidity-premium than any