Confessions of a Supply-Side Liberal

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More on the History of Thought for Negative Nominal Interest Rates

Thanks to a tweet from Migeru, I learned this morning of Willem Buiter’s post on negative nominal interest rates, "Negative interest rates: when are they coming to a central bank near you," which discusses in detail the idea of paper currency that depreciates relative to electronic currency (with the electronic currency serving as the unit of account), which plays such an important role in my post "How Subordinating Paper Money to Electronic Money Can End Recessions and End Inflation," (which is primarily a link to my Quartz column "E-Money: How paper currency is holding the US recovery back.")

I consider paper currency that depreciates relative to electronic currency when there is a need for a negative nominal interest rate, and then gradually appreciates back to par when it is OK to have positive nominal interests to be superior to Silvio Gesell’s proposal of currency that is stamped after interest is paid on it. I would be glad to know more of the history of thought for the idea of paper currency that depreciates relative to electronic currency in low-interest-rate periods and then gradually appreciates back to par in higher-interest-rate periods.

Brendan Bowen champions Gesell’s proposal in his post "The case for negative interest rates now." I learned that from Donald Pretari’s comment to Willem’s post (the second comment). Donald also refers to a Martin Wolf comment with the reference to Brad DeLong’s post on Gesell: "Silvio Gesell and Stamped Money: Another Thing Fisher and Wicksell Knew That Modern Economists Have Forgotten."

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