On ‘Rusting’ Money. Silvio Gesell’s Schwundgeld Reconsidered. Part II : The Long Run

Silvio Gesell argued that ‘rusting’ money is economically and socially beneficial;that claim has often been contended. In Part II of the paper I concentrate on thelong-run implications of his ideas. I show that introducing money depreciationin isolation may be economically non-beneficial in typical long-run equilibrium.But money depreciation, when coupled with expansionary monetary policy, is anecessary condition for a positive Mundell-Tobin effect on long-run real variablesand so creates wealth in the model. It is found that this also holds in the transitionto the long-run equilibrium. Hence, the spirit of Gesell’s hypotheses can beverified for a plausible, long-run environment as well, and may, thus, be relevantfor long-run economic policy problems