Bernard Lietaer - The future of money

just as today's decision of which national currency is to be used for an international payment.

Finally, the store of value function would not be played by the GRC. It could be played by instruments in conventional national currencies, or by new specialised financial products which would create liquidity, from investments in productive assets.

This functional specialisation shows how the ORC plays a role complementary to the conventional national currencies.

The behaviour dynamic that a GRC induces is similar to the 'goad' aspects of inflation while avoiding its 'bed' ones. Economists have noted that a moderate amount of inflation can actually have a good impact on the economy. For instance, the 1980s inflation in the US provoked a negative net return on rued income instruments, thereby encouraging investment in productive projects. However, inflation also implies regressive effects such as the erosion of all price agreements and the redistribution of wealth from the financially unsophisticated majority to a sophisticated minority.

The demurrage fees of the GRC therefore obtain the positive effects of inflation, while avoiding its negative ones.

Fisher's classical velocity of money equation provides another way to illustrate the impact of the GRC. T = Sum (PG) = QV (where T = total economic exchanges; P = prices; G = goods and services exchanged; Q= quantity of money end V = velocity of money circulation).

For a given quantity of money in circulation (a given Q), the demurrage feature of the GRC increases V. To the extent that the