Demurrage Currency: Could Money That Loses Value Encourage Spending?

Demurrage currency is money deliberately designed to lose value over time. Unlike inflation, where purchasing power falls as prices rise, demurrage applies a built-in cost to holding money. Its aim is to encourage spending and keep money circulating rather than being hoarded. The idea was strongly promoted by German-Argentine economist Silvio Gesell through his Freigeld, or “free money,” proposal. Supporters argue that it could increase the speed of transactions, reduce unemployment and limit recessions. Critics, including John Maynard Keynes, found parts of the idea interesting but questioned its wider implications. Versions of demurrage money have appeared in ancient Egypt, medieval Europe and emergency local-currency schemes during the Great Depression. Most were later restricted because central banks protect national control over currency. A few local examples still exist, including Germany’s Chiemgauer. Could a currency that loses value over time work in Nigeria, or would it create more problems than it solves?

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