Natural Money After Five Years

Independent Researcher & Writer
September 18, 2013

Interest on money causes financial instability and contributes to economic cycles. Governments and central banks try to reduce financial instability and economic cycles. Because of their measures, many people think that they are safe. This introduces a moral hazard because the measures of governments and central banks enable financial institutions to take more risks. Ultimately, this moral hazard weakens the financial system and undermines the value of money. All this happens at the expense of the real economy.

Banning interest on money causes problems because interest on money also reflects the return on capital. Nevertheless, it is possible to have negative nominal interest rates that do not exceed zero if the value of money can rise. This provides a real return on money that reflects the return on capital. Banking without positive nominal interest rates can lead to a more efficient economy because interest does not contribute to economic crises any more. The increased efficiency ensures that there will be a financial system without interest in the future.

Starting point

It has been nearly five years ago since I published an article on Gold Eagle about Natural Money. In short, the idea is that money with a holding fee combined with a ban on charging interest could, under specific circumstances, produce a more efficient economy. If this is correct then the implications are far-reaching. Natural Money may become the predominant type of money in the future, simply because it is more efficient. Efficiency is not a matter of desire or preference. Practically nobody wanted capitalism at first, but it emerged as the dominant economic system because it was more efficient. The same may apply to Natural Money.

Five years ago I only had a vague idea, but over time this idea has been developed further into an economic theory that is a good starting point for more research. This article on Gold Eagle explains Natural Money in plain terms and gives a few examples from history. Five years ago this was the starting point of my investigations. In the complete report, the economic theory of Natural Money is explained in more detail. This requires considerable economic knowledge. For people who have little knowledge of the field of money and finance, it may be difficult to comprehend. Links to the complete report are provided at the end of this article.

Natural Money

Compound interest is infinite in the long run. Assume that a 1/10 oz gold coin was put in the bank in the year 1 AD on 4% interest. How much gold would there be in the account by the year 2000? The answer is: 3.6 * 10^31 kilogramme of gold weighing 6,000,000 times the complete mass of the Earth. Compound interest must be paid from debts so debts tend to grow until interest payments cannot be met. When that happens, there is a financial crisis and this often precedes an economic crisis.

Governments try to get the economy on track by spending that increases government debts. Central banks try to solve a crisis by lowering interest rates or printing money. Those measures are meant to offset the effects of compound interest payments. Without interest on money it may be possible to have a more efficient economic system. If interest on money is to be abolished, how can there be credit and how is it possible to have a return on money that reflects the return on capital? These are questions that have to be answered otherwise money without interest will not work.

Natural Money is money with a holding fee and a ban on charging interest. By putting money in a savings account, savers are rewarded with not having to pay the holding fee. As interest is a reward for risk, a ban on charging interest will curb risk taking in the financial system and those risks will be taken by investors. The absence of interest on money mitigates economic cycles, which further reduces the risks of banking. In such a situation government and central bank support may not be needed. Stable economic growth, without the distorting effects of government and central bank interventions may make the economic system more efficient.

The Twelve Steps

In the following twelve steps it is explained how Natural Money can help to create a more efficient economy:

  • It is not allowed to charge interest on Natural Money.
  • There is a tax on holding Natural Money. This is not a tax on wealth, so shares, real estate and money lent, are not subject to this tax.
  • Banks and governments are not allowed to create Natural Money so inflation will stop.
  • The holding fee on Natural Money is an incentive to use the money for investment, consumption or lending without interest.
  • Because interest is also an allowance for risk and no interest can be charged on Natural Money, the following will happen:
    • Money will only be lent to reliable people and companies.
    • Less money will be lent and more money will be directly invested in equities and real estate.
  • There will be fewer economic crises as Natural Money will be spent or invested directly and there will be fewer debts.
  • There are fewer economic crises so the economy grows more steadily.
  • As the economy grows steadily, while no additional Natural Money is created, prices will fall.
  • There will be sufficient business activity and work so we can live without fear for economic crises.
  • Improved economic growth causes zero percent Natural Money loans to have real returns that are better than returns in the interest based financial system.
  • If Natural Money is applied somewhere, it will cause a capital flight to the interest free economy because of the higher returns.
  • This will force the rest of the world to adopt Natural Money.

The holding fee combined with the restrictions on credit appear to make Natural Money more efficient. There is a constant stimulus that is sustainable because it is not caused by the expansion of debt. More efficient systems will replace less efficient systems in competition so Natural Money may become the dominant type of money in the future. It seems too good to be true. But is it?

The Miracle Of Wörgl

On July 5, 1932, in the middle of the Great Depression, the Austrian town of Wörgl introduced a complementary currency. Wörgl was in trouble and was 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.

Rather than spending the 40,000 Austrian schillings 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 type of complimentary currency known as stamp scrip. The Wörgl money required a monthly stamp to be stuck on all the circulating notes for them to remain valid, amounting to 1% of the each note’s value. The money raised was used to run a soup kitchen that fed 220 families.

Nobody wanted to pay the monthly stamps so everyone receiving the notes would spend them as fast as possible. 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. Of all the businesses in town, only the railway station and the post office refused to accept the local money. Over the 13-month period the project ran, the council not only carried out all the intended works projects, 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 in turn increased trade, creating extra employment. At the time of the project, unemployment in Wörgl dropped while it rose in the rest of Austria. Six neighbouring villages copied the system successfully. The French Prime Minister, Édouard Daladier, made a special visit to see the 'miracle of Wörgl'.

In January 1933, the project was replicated in the neighbouring city of Kitzbühel, and in June 1933, Unterguggenberger addressed a meeting with representatives from 170 different towns and villages. Two hundred Austrian townships were interested in adopting the idea. At this point the central bank panicked and decided to assert its monopoly rights by banning complementary currencies [1].

Joseph In Egypt

The Bible contains a story about the Pharaoh having dreams that he could not explain. The Pharaoh 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 was able to explain those dreams to the Pharaoh. He told the Pharaoh that seven good years would come and after that seven bad years would follow. Joseph advised the Egyptians to store grain on a large scale. They followed his advice and built storehouses for grain. In this way Egypt survived the seven years of scarcity.

What is less known, because it is not recorded in the Bible, is that the storage of grain resulted in a financial system. The historian Friedrich Preisigke discovered that the Egyptians used grain receipts for money and had built a sophisticated banking system based on this 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. This may have prompted them to invent an alternative currency.

It may not have taken long before the grain receipts were accepted as money. The degradation of the grain and mice eating from it, caused the value of the receipts to decrease steadily over time. This stimulated people to spend the money. The grain receipt system lasted for many centuries. It made sense to store food to provide for hard times. The actions of Joseph may have created this system as he allegedly proposed the grain storage and took all the money from the Egyptians. When Joseph came to Egypt, the country had already passed its zenith and the time of the building of the great pyramids was centuries earlier.

A few centuries later, during the reign of Ramesses the Great, Egypt became again a leading power [3]. Some historians suggested that the wealth of Egypt during the reign of Ramesses the Great was built upon the grain financial system [4]. The grain money remained in function in Egypt after the introduction of coined money around 400 BC until it was finally replaced by the Roman currency. The money and banking system were stable and survived for more than a thousand years without collapsing, possibly because the storage fee made people more willing to lend out money without charging interest. It seems therefore possible to have a sophisticated banking system with Natural Money.


So why does this supposedly efficient money with a holding fee not dominate the world already? Similar experiments like the one in Wörgl did not produce similar results. The success of the Wörgl currency has been inflated by the payment of taxes in arrears that could be spent by the town council [5]. Maybe it is too good to be true after all, but the theory suggests that it isn't. Making the idea work in practise is a major challenge. Many assumptions behind community currencies and interest-free money conflict with accepted economic theories on interest. This may explain their limited success until now.

If interest free money is more efficient then it must be provable and it must be possible to discover the preconditions that need to be satisfied for interest free money to become a success. If the proof is there and the preconditions are uncovered then it may still be a long way to the moment that the idea is first put into practise, unless an economic crisis occurs. This could happen any time because interest on money is unsustainable in the long run. During a crisis people may be willing to try out new ideas. Out of the experiments, the most efficient system may emerge. Most likely this will be Natural Money.

The unsustainability of interest on money and the effects of demurrage are both not mainstream economics. There is little thought on the consequences of interest on money for risk taking in the financial system and the effects of interest on the stability of the financial system, which are both core issues in the theory of Natural Money. As a consequence there is some ground breaking theory making in the economic model of Natural Money and there is not much reference material to back it up.

A common mistake is that a ban on interest is a ban on business profits. Within the theory of Natural Money capital deserves a reward to be employed. Another mistake is that credit is not available with Natural Money. It is likely that credit will be restrained and that debts cannot grow out of control, but there will be credit with Natural Money. It may also be difficult to understand that Natural Money can emerge as the dominant type of money because a ban on charging interest on money may cause interest rates to be higher in real terms.

Self-interest is the basic driver for economic development. The pursuit of self-interest does not always lead to desirable outcomes but government interventions in the economy tend to make problems worse. The political debate now focuses on economic freedom versus government regulation and intervention, but ancient economic thought has produced at least one great achievement that may help to reduce this tension, which is identifying the problematic nature of interest on money.

Economic thought is an important development as it is about making the best out of limited resources. Without organisation and trade it would not be possible to have the standard of living we have nowadays. On the other hand, economic thinking is about to create a disaster of unprecedented proportions. The growth of economic activities will hit the limits of our planet in the foreseeable future.

With Natural Money it may be possible to achieve most of the goals aimed at by government intervention without the need for government intervention as the economy may be able to achieve the desired policy objectives on its own. Many economists assume that government interventions make the economy less efficient so Natural Money may enhance the efficiency of the economy. Natural Money may also help to make the economy sustainable as negative interest rates discount future income at a higher price, hence it becomes more economical to save resources for the future.


I have worked on a research paper that explains how an economy based on Natural Money will operate. It is too long to publish here on Gold Eagle. The paper has three sections. The first section named Main Tenets Of the Theory explores the relationship between interest and economic crises, economic policies and risk taking in the financial system. It also clarifies the concept of Natural Money in more detail, as well as the consequences of Natural Money for economic stability and economic efficiency. The first section can be accessed via the link: The second secion called Money, Interest And Cycles discusses money, interest and the causes of economic cycles. The second section can be accessed via the link:

The third section named Macro Economic Views explains the merits and limitations of different influential schools of economic thought, such as classical economics, Keynesian economics, monetarism, rational expectations and supply side economics. Some other schools of thought are also explained, such as the Austrian School, the community currencies movement, Socialism and steady state economics. Those approaches have all contributed to the theory of Natural Money. Finally an outline is given of the expected effects of Natural Money on the economy. Natural Money may help to produce a more efficient market economy. The third section can be accessed via the link:


1. Laboratory readings: Wörgl's Stamp Scrip – The Threat of a Good Example?, Martin Oliver,, 2002:

2. A Strategy for a Convertible Currency, Bernard A. Lietaer, ICIS Forum, Vol. 20, No.3, 1990:

3. Ramesses II - Wikipedia:

4. This was mentioned on Discovery Channel or National Geographic but I was unable to recover the source

5. A Free Money Miracle?, Jonathan Goodwin,, 2013:

Bart Klein Ikink

Bart Klein Ikink is an independent researcher living the Netherlands. In 2008 he discovered that demurrage currency combined with a ban on charging interest could improve the economy. This design is called Natural Money, named after the Natural Economic Order of Silvio Gesell. If this is correct then Natural Money will be the money of the future.

After receiving his Masters in Business Information Technology at the University of Twente in 1992, Bart took up interest in interest-free money with a holding tax. Over the years I have discussed these ideas on financial message boards and took keen interest in the arguments of people opposing such an idea. Feasibility is the main angle of my research.  Bart Klein Ikink’s website is

In 1792 the U.S. Congress adopted a bimetallic standard (gold and silver) for the new nation's currency - with gold valued at $19.30 per troy ounce

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