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Copyright, July 2002, All Rights Reserved by the McKeever Institute of Economic Policy Analysis (MIEPA). Contact MIEPA for permission to reprint at:

During their three month summer tour of New Zealand, Professor Dr Margrit Kennedy, German ecovillage member and permaculturalist, spoke to around 30 groups on the topic of "Just Money Just World". She was accompanied by her husband Declan who spoke on ecovillages. The couple, recognising the link between ecology and the economy, believe that is essential that new money systems are created to enable an adequate response to the ecological and social challenges facing the planet and human society.

As I had just completed two years of research for my book on money, I attended several of her presentations, and together we have co-written a manual for those who will implement or support proposed new regional currencies.

Author of Interest and Inflation Free Money, a book translated into 18 languages, Margit Kennedy is soon to take early retirement as a professor of architecture. She will continue her travels, inspiring people all round New Zealand as well as in Cali, Colombia and Auroville, India, to set up currencies based on the one introduced in Wörgl, Austria, during the Great Depression.

Though Green Dollars (supplementary local currencies) were introduced to New Zealand in 1987 the systems have weaknesses, which include dependence on the work of a few central organisers and have not grown beyond small groups with very modest turnover. Time dollars have also been invented recently, being a 'service credit' for voluntary work; these can be spent or given away. But the most successful local currency of all was the Austrian Depression scrip of 1932-3.

A destructive financial system

But first a little background on the current destructive financial system. Margrit shows overheads of exponential growth curves and compound interest growth and believes the global financial system is unsustainable and will self-destruct. For example one penny invested at the birth of Jesus at 5% interest would by 1990 have grown to 134 billion balls of gold the weight of the earth at the 1990 prices. Compound interest - interest on interest - is not sustainable on a finite planet, cyclically causing stresses, which lead either to war or political revolution. The impact of depression in today's global economy will differ markedly in scale from past depressions. What we need to do is set up a variety of economic 'lifeboats' alongside the listing ship in order to test stable and fair money systems, and hopefully ameliorate the worst effects of global economic collapse should it occur.

Unlike other monetary reformers Margrit doesn't spend much time ranting on about how wicked the private banks are, nor on how all money should be created by Governments. She knows that in every modern economy almost all the money is created by banks as interest bearing debt (in our country it is 98% as only 2% is in notes and coins). This has profound and destructive effects. Margrit just gets on with the challenge of inspiring people to create a new money system. She says there is nothing to fear, as all will benefit from the new money system, even those who benefit from the present system.

There is ample evidence that our money system is not working. Both within countries and between countries the gap between rich and poor is widening. Net borrowers are paying money to net lenders. This is because, built into the system of 'lending' by banks is a mechanism to transfer money from the majority, the net borrowers, to the minority rich, the net lenders. According to a Helmut Creutz graph that Margrit shows, in Germany only one fifth of the population benefits from the existence of interest, the rest pay out more in interest than they receive.

For hidden in the prices of everything we buy is the cost of interest. For capital-intensive goods and services like public housing this percentage is as high as 77% but for labour intensive services like garbage collection it is only 12%. The German average is estimated at 50% and New Zealand figures are currently being researched.

Usury, or the paying of interest, is a practice outlawed by most major religions throughout history until about 500 years ago, but now is forbidden only by Islam, (who comprise about a sixth of the world's population). It is the interest charged by banks that is the hidden engine behind the drive for continuous economic growth; because the only way we can collectively pay the bank's interest is to borrow more. So total debt keeps rising, and our total interest costs keep rising and retailers and manufacturers have to raise their prices or go out of business. This means inflation.

Since each cycle requires more money than the last, debt grows exponentially and the money supply grows exponentially. New Zealand's money supply doubled in the nineties, increasing at $14 million every day.

The ongoing push for economic growth has already brought serious environmental and social degradation including global warming, species loss, genetically modified food and crime. Unfortunately, while we lack an analysis of the financial system, which is damaging the planet, and while we suffer from widespread monetary illiteracy, well meaning politicians and NGOs do little about it. They end up treating the symptoms not the cause. Despite nearly thirty years of environmental parties in New Zealand and the growth of the Green Party, other politicians, aided by the corporate owned media, appear to attract votes by repeating the mantra of 'economic growth'.

Drowning in red ink.

What appeals in Kennedy's interest and inflation free money is a soundly researched and simply explained stable money system. But first let's see some results of the present money system.

The result of allowing creation of money as interest-bearing debt by banks is that there is growing debt in every category - corporate debt, housing loans, hire purchase, student loans, credit card debt. These are all growing exponentially. (Our overseas debt grew from $16 billion in 1983 to $123 billion now, most of it in corporate debt. These corporates include State Owned Enterprises and vital infrastructure corporations like Air New Zealand, which our Government had to bail out at the cost of nearly $1 billion during 2001)

This ballooning debt causes hardship for all but a privileged few. Many working poor are entrapped in debt, forced to borrow, often at savage interest rates in order to repay former loans. Whereas the average NZ household in 1978 had a debt that was less than half the household's net income, by the year 1998 it had grown to 110%.

The global financial system is also perilously unstable. Since the 1970s there has been an exponential growth of speculation in currencies, and according to Bernard Lietaer, author of The Future of Money, 98% of foreign exchange transactions are now speculative.

New Zealand also has a growing balance of payments deficit, as money in interest payments pours out of the country (now $5.2 billion a year) to the net lenders. A trend since the mid 1990s is that more and more of our foreign debt is now denominated in US dollars, and our currency is therefore vulnerable to 'attack' by currency traders. A weak currency means we are joining the ranks of the debtor nations, as we have to pay so much of our interest in precious US dollars.

Now for some solutions. For a just, sustainable and abundant economy, we need interest-free currencies at every level of organisation - international, national and local. But the best is a currency with a 'circulation fee'.

Silvio Gesell

A German businessman living in Argentina during the turn of the century, Silvio Gesell, noticed that in times of high interest rates his goods moved very slowly but in times where interest rates were low they moved faster. He observed that those with money had an advantage over those with goods. If one businessperson had a pile of deteriorating apples he would be worse off than one who had a pile of money that would keep its value. So Gesell proposed a currency, with similar properties to goods - decaying, rotting or rusting at a rate of 5% per year. Many Gesell societies sprang up in Europe during the years after publication of his book The Natural Economic Order in 1916. (His book is now on the web at The negative interest rate on the currency has been variously called a 'hoarding tax', a 'circulation fee', a 'circulation incentive' or a 'demurrage charge'.

The Wörgl Work Certificates

During the Great Depression, the Mayor of Wörgl, a small town in Austria, had been influenced by Gesell. Desperate for solutions to a sluggish economy, unpaid taxes and widespread poverty, the town issued its own Work Certificates in 1932. They designed the currency to be 'rusting money' since a stamp of 1% had to be placed on the note every month to keep it valid. Work certificates were accepted by most local businesses and for local taxes. The result was dramatic. The local certificates circulated eight times as fast as the national currency, circulating 416 times in the thirteen months whereas the national currency changed hands about 50 times. The first thing the town noticed was that taxes were paid early. Because of their rapid circulation pace, only 12,500 Work Certificates were issued but they created goods and services worth 2,547,360 schillings.

The Mayor and Council had put aside an equivalent amount of Austrian schillings, so at any time the work certificates could be redeemed for national currency - but at a 2% loss to discourage this practice. Banks accepted them as deposits without changing them into national currency.

In 13 months unemployment was reduced from 25% to 10%, whereas in the rest of Austria it had risen to 35%. There was an increase in public works of 220%. Long term investment spending occurred in Wörgl, with houses being painted, forests planted, streets paved and bridges built. Revenue from taxes went up 35%.

Naturally there was great fascination with the 'miracle of Wörgl' from surrounding towns and even from America. 130 towns wanted to copy it but the Austrian National Bank saw its own monopoly threatened and prohibited the currency. Though it went right to the Supreme Court the case was eventually lost.

Legal issues in New Zealand

So could the Wörgl experiment be repeated today? We think yes, provided it is electronic currency.

One of the legacies of Roger Douglas was to make the Reserve Bank more independent from Government. The 1989 Act says they are responsible for monetary policy, while the Government is responsible for economic policy.

Section 25 (1) of the Reserve Bank Act 1989 states 'The Bank shall have the sole right to issue bank notes and coins in New Zealand'. Like other credit arrangements, regional currency would be legal if it were an electronic smart card or a dual currency eftpos card.

Applications and calculations for New Zealand

Given adequate preparation and enough public support, the 'Miracle of Wörgl' could be reproduced. Any community wanting more employment or concerned about growing debt and wealth disparity could easily calculate how many work certificates they need to print.

To do this we need to find the real cost of relying on an interest-bearing debt currency. Margrit quotes a German study showing that interest on borrowed money represented around 30-50 percent of the prices of all goods and services, depending on whether you owned your own house without a mortgage or not, as housing is such a big factor. There needs to be a similar study for our country.

In Wairarapa each household could save an estimated $2796 a year.

Here are the calculations done for the Wairarapa whose new currency has tentatively been called the Rapa.

We start with six working assumptions:

1. $22,000 per household per year income average.
2. 20,000 households
3. 30% local autonomy in the economy (this needs to be calculated for each region)
4. Rapas circulate200 times a year i.e. half as fast as in Wörgl.
5. Apply a circulation incentive of 12% per year.
6. All households spend all their money and save none.

Amount per household spent in the local economy is $7000 per year

Total turnover of local money is the number of households multiplied by the amount spent per year i.e. 20,000 times $7000 = $140 million per year

The amount of currency to be created is the total annual turnover divided by the number of times per year it circulates. 140 million divided by 200 = $700,000

We can now work out the circulation fees that will be collected i.e. 12% of $700,000 million or $84,000. Probably we will start by creating less and build it up to this.

Circulation fees per household will be only 84,000 divided by 20,000 or 4.2 Rapa Hours per household per year.

(From that we can work out how much on average each household has in its pocket over a period of a year, or 4.2 divided by 12% or 35 Rapas.)

Compare this with paying 40% of $7000, which is $2,800 per household per year, in interest as they do now! In the new money system they will pay $4.20 per year per household to have a local money system.

Savings per household are $2,796 a year.

Possible benefit to the region is very nearly $56 million per annum.

Who can I contact and how can I help?

A trust has been set up and key regional organisers have started reading and communicating. Some will train to be presenters; some will visit Wellington decision makers. There will be a newsletter and a funding application is being finalised. A manual containing Margrit Kennedy's slides and comments has been written.

What you can do

Read more about Wörgl and Silvio Gesell and other money books. Margrit's book is available from Helen Dew for ($30 for hard cover and $25 for soft cover) 12 Costley St, Carterton or e-mail

Talk to others about it, formulate questions, do research, and find people who will help. Besides Wairarapa, there are groups setting up in Golden Bay/ Motueka/Takaka and in Dunedin, and other people all over New Zealand who are keen to support the pilot projects. It is greatly hoped that we can persuade a progressive Maori group, hopefully an iwi (tribe) or a rohe (an area) to set up a pilot scheme.

To find how you can help or how to have someone present the case to your group, contact Ivan Sokolov at PO Box 9274, Greerton, Tauranga or e-mail or contact him 09 353 1505.


Lietaer, Bernard The Future of Money 1999.

Kennedy, Margrit Interest and Inflation Free Money 1989

Douthwaite, Richard Short Circuit Strengthening Local Economies for Security in an Unstable World 1996

Hans Eisenkolb, studies Worgl and has several articles on his site at

February 2002

Deirdre Kent of Wellington is the author of the forthcoming book Healthy Money Healthy Planet.

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