Joseph interpreting the Pharaoh's dream

Joseph in Egypt

There is a story in the Bible about a Pharaoh having bad dreams his advisors could not explain. He dreamt about seven fat cows being eaten by seven lean cows and seven full ears of grain being devoured by seven thin and blasted ears of grain. Joseph explained those dreams. He told the Pharaoh that seven years with good harvests would come followed by seven years with poor harvests. He advised the Egyptians to store food. They followed his advice and built storehouses for grain. In this way Egypt survived the seven years of scarcity.1

The food storage resulted in a financial system. The historian Friedrich Preisigke discovered that the Egyptians used grain receipts for money.2 Farmers bringing in the food received receipts for grain. Bakers who wanted to make bread, brought in the receipts which could be exchanged for grain. According to the Bible, Joseph took all the money from the Egyptians.3

As a consequence the grain receipts may have become money instead. Farmers bringing in grain did get receipts for the grain they brought in. Bakers who wanted to make bread, returned the receipts for which they received grain. The storage costs were settled when the receipts were exchanged for grain, hence the receipts lost value over time. The effect was similar to buying stamps to keep the money valid as happened in Wörgl. The actions of Joseph may have created this money as he allegedly proposed the grain storage and took all the money from the Egyptians.

During the reign of Ramesses the Great, Egypt became a leading power again. Some historians have suggested that Egypt’s wealth during the reign of Ramesses was built upon the grain money. The money remained in circulation after the introduction of coins around 400 BC, until the Romans conquered Egypt. The grain money was stable and survived for more than a thousand years. This suggests that negative interest rates can create a stable financial system and that it may be possible to have negative interest rates forever.

Featured image: Joseph interpreting the Pharaoh’s dream. Illustrations for La Grande Bible de Tours. Gustave Doré (1866). Public Domain.

1. Genesis 41 [link]
2. A Strategy for a Convertible Currency. Bernard A. Lietaer, ICIS Forum, Vol. 20, No.3, 1990 [link]
3. Genesis 47:15 [link]

Wörgl bank note with stamps. Public Domain.

The miracle of Wörgl

In 1932, in the middle of the Great Depression, the Austrian town of Wörgl was in trouble and prepared to try anything. Of its population of 4,500, a total of 1,500 people were without a job and 200 families were penniless. The mayor Michael Unterguggenberger had a long list of projects he wanted to accomplish, but there was hardly any money to carry them out. These projects included paving roads, streetlights, extending water distribution across the whole town, and planting trees along the streets.1 2

Rather than spending the 40,000 Austrian Schilling in the town’s coffers to start these projects off, he deposited them in a local savings bank as a guarantee to back the issue of a currency known as stamp scrip. The Wörgl money required a monthly stamp to be stuck on the circulating notes to keep them valid amounting to 1% of the note’s value.1 2 A businessman named Silvio Gesell came up with this idea in his book The Natural Economic Order.

Nobody wanted to pay for the monthly stamps so everyone receiving the notes would spend them. The 40,000 schilling deposit allowed anyone to exchange scrip for 98 per cent of its value in schillings but this offer was rarely taken up. That was because the scrip could be spent as one schilling after buying a new stamp. The money raised with the stamps was used to run a soup kitchen that fed 220 families.1 2

The council not only carried out all the intended works, but also built new houses, a reservoir, a ski jump and a bridge. The key to its success was the fast circulation of the scrip money within the local economy, 14 times higher than the Schilling. This increased trade and employment. Unemployment in Wörgl dropped while it rose in the rest of Austria. Six neighbouring villages copied the idea successfully. The French Prime Minister, Édouard Daladier, made a special visit to see the ‘miracle of Wörgl’.1 2

In January 1933, the project was copied in the neighbouring city of Kitzbühel. In June 1933 major Unterguggenberger addressed a meeting with representatives from 170 different Austrian towns and villages. Two hundred Austrian townships were interested in the idea. At this point the central bank decided to assert its monopoly rights by banning scrip money.1 2

The local currency of Wörgl demonstrates that the economy can do well without more debt if money keeps circulating. Negative interest rates can make that happen. Stamps on money like in Wörgl make negative interest rates possible as you can avoid paying for stamps by lending out money. For instance, lending out money at a negative interest rate of 2% per year would be more attractive than paying for the stamps. Negative interest rates might have prevented the depression or ended it once it had started. So if scrip had been money in the 1920s and 1930s, World War II might never have happened.

Natural Money

Introducing negative interest rates in the global financial system may have great benefits. The website Naturalmoney.org features an in-depth research of the feasibility and consequences of negative interest rates.

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Featured image: Wörgl bank note with stamps. Public Domain.

1. The Future Of Money. Bernard Lietaer (2002). Cornerstone / Cornerstone Ras.
2. A Strategy for a Convertible Currency. Bernard A. Lietaer, ICIS Forum, Vol. 20, No.3, 1990. [link]