Expiring Money

Whilst investigating community currency design - I considered a system whereby equal periodic deposits were made into each users account. Strangely perhaps - a monetary system of this type would function perfectly well for a time.

It became apparent that it is not the creation of money that is the problem in the system - but the removal of the money created, in order to avoid inflation.

I toyed with the idea of 'expiring money' - such that money would simply disappear at some future date. The problem here is, that by recursion, as the money has no ultimate redemption value - it might not be accepted in the first place.

Finally - I arrived at a type of money that expires, but has an ultimate redemption value - unfortunately it is not suitable for community currencies.

Expiring Tax Certificates

Any tax authority, such as local government or town council, can issue money in equal quantity to a matching future tax. The date of expiry of the money should be clearly marked - and match the due date of the tax bill issued concurrently.

All money issued in this way, will ultimately be removed from the system when the matching tax bill is paid. The money supply can be manged (if necessary) - by adjusting how far in advance tax bills are issued - and therefore how long money remains in circulation.

I imagine that the money would retain its face value until the expiry date approached - and then become discounted before passing to a tax payer. The effect is of a demurrage upon money - but without the need for periodic attachment of a stamp.

The money created by local government in this way - could be spent upon public works and services, or distributed by way of a citizens income.

Here is a similar design with a different mechanism:

http://www.solidar.lir.be/tiki-index.php

Interesting, but way too detailed and complex, I think, for our purposes here and now. Others may have a different take though. More comments are invited.

This thread may be abandoned, or not. I agree with Matabele that the trouble is not in the amount of money creation, but quite prominently in how to remove it from circulation to avoid inflation. I would also add the stipulation that the money is distributed fairly (i.e. the wealth does not land in the pockets of a few, but is put to 'good use'). Short-suiting the money supply can potentially lead to short-suiting even a resource-rich market.

The opposition that I see is that money is 'fungible'--that is, it does not matter which particular piece of money you have, it is worth the same value (a dollar is a dollar, so to speak). This is the same ideal as the principle of anonymity in voting--it does not matter who casts the vote, all votes are equal. How, then, is it decided which money goes back? The only answer I can see that the money is taxed back out of circulation proportionately from the population, which means that specific money is never 'end-dated'.

[Although this thread is separate to the National Provision thread, I find it interesting to state that spending by government or council bodies, and taxing the money out of circulation are both integrated into this idea. The only reason that tax exists in the National Provision is to provide, as you say, a way to remove excesses of money from circulation.]

Sorry about the double posting - did not notice that posts are now censored.

For the market to work efficiently - currency issue should be from the bottom up. This ensures an equitable distribution of voting rights in the market (at least initially.) The National Provision (Citizens Dividend in Europe), goes some way towards achieving this - although in a truly global economy this principle should be applied on a global scale rather than a national scale.

The correct amount of such currency issued can be easily controlled by basing the tax system upon land taxes, and issuing a quantity of currency equal to total tax receipts due. This is best done at local government/authority level, for reasons outlined here:
http://inord.laurentian.ca/6_02/Henry_George.htm
http://inord.laurentian.ca/Toolkit/CT7-Henry_George2.htm

If currency is issued top down, and financial wealth is overly concentrated, then no matter how the currency is removed from circulation - its flow will be short circuited.