Two links to think about together:
First, Peggy Nelson’s interview with Douglas Rushkoff over at HiLoBrow. In general I find Rushkoff pretty tendentious in this conversation, but I can’t deny that his reading of Middle Ages economics is provocative (emphasis mine):
PN: They didn’t get money from Rome to fund their cathedrals?
DR: They did not. The Vatican and central Rome did not build the cathedrals. The funds came from local currency, which was very different than money as we use it now. It was based on grain, which lost value over time. The grain would slowly rot or get eaten by rats or cost money to store, so the money needed to be spent as quickly as possible before it became devalued. And when people spend and spend and spend a lot of money, you end up with an economy that grows very quickly.
Now unlike a capitalist economy where money is hoarded, with local currency, money is moving. The same dollar can end up being the salary for three people rather than just one. There was so much money circulating that they had to figure out what to do with it, how to reinvest it. Saving money was not an option, you couldn’t just stick it in the bank and have it grow because it would not grow there, it would shrink. So they paid the workers really well and they shortened the work week to four and in some cases three days per week.
Now I have no idea if this is true, but it is true that many of our modern economic woes arise when money doesn’t move, and the vision of a marketplace full of dollars getting spent and spent and spent again—use ‘em or lose ‘em—especially within real communities, is pretty enticing.
Now cross-reference that with Matt Yglesias’ pitch for a cashless economy. By way of background: nowadays, when money doesn’t move, central bankers’ primary lever to get it going again is the interest rate. Lower the interest rate, and you make it cheaper for banks and companies to “buy” money, which means (you hope) more money gets spent by those companies, which means more people get paid, which means more money gets spent by those people, and so on.
But sometimes you push the interest rate all the way down, close to zero, and… nothing happens. Your lever is slammed to the bottom of the slot and you’re still not getting the effect you expected. Orthodox economics doesn’t really have a solution to this problem… but Yglesias does (again, emphasis mine):
Now we come to the miracle of the cashless society. Stop for a moment and ask yourself why the interest rate can’t be reduced much below 1 percent. The trouble is cash. At any given time, relatively little paper currency circulates in the United States. Instead, most of the American money supply consists of bank accounts and other electronic stores of value. People prefer to keep money in bank accounts because it’s convenient and because you get interest on it. If the rates were driven below zero—in effect a tax on holding cash in the bank—people would just withdraw money and store it in shoeboxes instead. But what if you couldn’t withdraw cash? What if all transactions were electronic, so the only way to avoid keeping money in a negative-rate account was to go out and buy something with the money? Well, then, we would have solved our depression problem. Too much unemployment? Lower interest rates below zero, Americans will start spending and investing again, the economic will grow, and unemployment will go back down to its “natural rate.”
There’s a lot of good detail in his piece, and he does a good job explaining all the mechanics, so it’s worth a read. The important thing is: he’s serious. Let’s keep that money moving.
Update: Or see also Louis C.K.:
I never viewed money as being “my money” I always saw it as “The money” It’s a resource. if it pools up around me then it needs to be flushed back out into the system.