From:
http://www.community-exchange.org/docs/Gesell/en/neo/part4/5g.htmThis is on the assumption that the prices of commodities are kept at the same level by the Currency Office.
This seems to suggest that a central price-fixing institution will be necessary for ensuring pricing remains stable and doesn't disrupt operation of the demurred money. That means reliance upon a third party to police an unknowable quantity of participants, each engaging in momentary transactions; a command economy - repeatedly shown to fail.
Yes, his freigeld is issued centrally by the state (who spends it into existence rather than borrow it into existence like is done today) and the managers are supposed to provide stable prices.
He explains cycles through interest and recognizes that velocity is more important than quantity.
Freicoin on the other hand has a fixed supply (more fixed than bitcoin's). We think quantity is not important and let prices equilibrate naturally once removed the disruptive effect of basic interest.
Banks are also expected to provide access to pooled investment, dealing with expiring currency and promising to return the full amount deposited. This assumes all the risk involved with demurrage. What incentive does a bank have to assume all risk? There's no room for error or recovery, and again there is reliance upon a third party.
There's nothing legal limit. Banks could offer negative interest and of course can charge more than they pay (or charge fees), which would be their margin. He just assumes that the free market will produce near zero interest rates (without risk) with time.
When he says interest he's refering to the "basic interest" and that doesn't include the risk or inflation premiums. The basic interest is often referred to as "liquidity premium". Austrians usually prefer "time preference".
What happens if birth rates slow and a surplus of currency enters the market? Prices will fluctuate, currency issuance rates will have to change, and banks will be at increased risk for no reason of their own. There would be a greater incentive for the banks to return expiring currency while holding fresh money.
Yes, prices will fluctuate. As said above, banks are free to engage in voluntary trade with their customers as they see fit their business neds.
If an engine must constantly run at high speed, it will fail more quickly than if it could return to idle for a period. As lubricating oil is burned off, having no reserve means seizure is guaranteed to occur. No savings means no buffer against unpredictability.
There are savings, just hoards are gone. You save by lending or by investing. Well, you may want to hoard consumable goods too as some kind of insurance.
Reserves are real goods and functioning production goods (capital), not mountains of paper or shiny metals or bits.
If an imaginary isolated island hoards gold during good years, they won't be more prepared for the bad year or the natural disaster.
Demurrage has no place in Bitcoin.
That's why we need freicoin.
