Freiwirtschaft (German for free economy) is an economic idea founded by Silvio Gesell in 1916. He called it Natürliche Wirtschaftsordnung (natural economic order). His Idea has not been put into practice by any state since then. An idea (Greek: ιδέα) is a specific concept which arises in the mind as a result of thought. ... Jean Silvio Gesell (March 17, 1862–March 11, 1930) was a merchant and finance theoretician. ... 1916 (MCMXVI) is a leap year starting on Saturday (link will take you to calendar) // Events January-February January 1 - The Royal Army Medical Corps first successful blood transfusion using blood that had been stored and cooled. ...

Main differences to current economic systems:

• Freigeld (free money)
  • All money is issued for a limited period by constant value (neither inflation, nor deflation).
  • Long-time saving requires investment in bonds or stocks.
• Freiland (free land)
  • All land is owned by public institutions and can only be rented, not purchased (see also Henry George).

The (proposed) results include: In the theory of Freiwirtschaft, Freigeld (German for free money) is a monetary (or exchange) unit. ... Deflation (economics) Deflation (data compression) Deflation is the removal of loose soil by eolian (wind) processes This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ... In finance, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon). ... See stock (disambiguation) for other meanings of the term stock In financial terminology, stock is the capital raised by a corporation, through the issuance and sale of shares. ... This article contains information that has not been verified and thus might not be reliable. ...

• More private spending for consumption and investment
• Consumers invest surplus money in expanding companies
• Full employment: Work for everyone who can work
• Rate of economic growth can be set by the society
• Interest rates drop to almost zero percent in the long run
  • Freiland prevents high real estate prices
• Tremendous social disparities will cease
• Less working hours per week for everyone in the long run

There seems to be an attempt to realize Freiwirtschaft in a small area in Canada, based on artificial money called Gogo that loses its value after one year. Consumption is the using up of a resource. ... Investment or investing is a term with several closely-related meanings in finance and economics. ... Employment is a contract between two parties, one being the employer and the other being the employee. ... Accumulated GDP growth for various countries. ...

Flaws of the money system

Freiwirtschaft claims that current monetary systems are flawed. According to Adam Smith, prices convey information. For example, dropping prices mean that there is less demand or more supply. This leads to a buyer buying more, or a seller starting to produce something else. As a reaction, the price rises again. So, the price, together with the market participants, builds up a feedback loop around a stable, "ideal" price. At this stable price, the market is ideal, no one pays too much or earns too little, and there are no tendencies from either party to change that price. The "wobbling" around that ideal price is called self-stabilizing. Adam Smith, FRSE (baptised June 5, 1723 – July 17, 1790) was a Scottish political economist and moral philosopher. ... Feedback is (generally) information about actions. ...

This is not the case on the finance market. Without the continuous increase of the amount of money in circulation by the central bank, the demand would continuously drop, since the circulation speed decreases. Dropping demand forces companies to lower their prices to make any money at all. When prices start dropping, potential customers put off their purchase as long as possible to get the lowest price, resulting in the demand decreasing even more. The feedback loop spirals down to a point where the company does not make any money at all. That, eventually, results in layoffs and even the bankruptcy of the company. Workers in other companies tend to be even more cautious in spending money, ultimately resulting in the breakdown of the economy.

The key error of the system is the ill-transported information in the price. Money is nothing but claim for goods and services from the economy that accepts the money. In a weak economy, money is worth less in goods. But instead of an inflation, the result is a deflation as described above, and less money can now buy the same goods. The market players do not realize that they are destroying the very economy that should ensure the value of the money. This feedback loop is self-destabilizing. According to Freiwirtschaft theory, this is the reason for the cycle of crisis in world economy. In economics, deflation is a decrease in the general price level, or a rise in the purchasing power of money with respect to a large class of consumption goods or services, over a period of time. ...

Criticism

As the whole doctrine is based on Irving Fisher's quantity equation, theoretical discussion is linked with macroeconomic theory. Critics state that circulation speed does not decrease but remains stable. However, numbers show a decreasing circulation speed for the USA and Japan after 2001. Irving Fisher (February 27, 1867 Saugerties, New York — April 29, 1947, New York) was an American economist, health campaigner, and eugenicist. ... 2001: A Space Odyssey. ...

Critics following Karl Marx argue that measures of Freiwirtschaft just hit capitalist financial companies whereas capitalist manufacturing companies benefit from cheap credits and increase their profit. This bias is intended. Karl Heinrich Marx (May 5, 1818 Trier, Germany – March 14, 1883 London) was an influential German philosopher, political economist, and revolutionary organizer of the International Workingmens Association. ...

The most common arguments against Freiwirtschaft are:

• the periodical exchange of money causes administration costs
• Central bank must set the optimal money exchange charge which is as difficult to find as the optimal interest rate
• can only boost economic growth, but cannot resolve tradeoff between economic growth and inflation
• The system appears to require a sudden extreme change to completely implement, since bad money drives out good, and thus any transitional system operating two forms of currency would be unstable since one form would inevitably be preferred to the other.

Accumulated GDP growth for various countries. ... A Tradeoff usually refers to losing one quality or aspect of something in return for gaining another quality or aspect. ... Accumulated GDP growth for various countries. ... Greshams law is stated as: Bad money drives good money out of circulation. Greshams law applies specifically when there are two forms of commodity money in circulation which are forced, by the application of legal tender laws, to be respected as having the same face value in the...

External links

• For a theoretical example of Freiwirtschaft, see [1] (in German).
• For an English version of Silvio Gesell's major book on the issue see The Natural Economic Order
• http://geldreform.de (in German, partly English)
• http://www.inwo.de (in German, partly English)