Stimulus Stamps - Alternative Currency

February 27th, 2009 by Grady Cash

Last year, consumers received a tax refund to stimulate spending, but much of the funds were saved, so the desired impact was not achieved. This effect could be eliminated by issuing an immediate tax refund to all adults of $1,000 that would not be a check, but a form of alternative currency that I’ll refer to as stimulus stamps.  The cost would be approximately $200bn. These stimulus stamps could be used at any retailer like cash, but they would expire 90 days from issue. Retailers would deposit these stamps in their business accounts with banks, which would redeem them from the government. There would be safeguards to prevent stimulus stamps from being deposited into personal accounts. The funds would have to be spent or they would become worthless in 90 days.

This would have a significant stimulus effect — $200bn would need to be spent within 90 days or it would be lost.  There would also be a multiplying effect. Every dollar spent typically generates one dollar in additional spending. That would be an increase of $400bn in spending in 90days. In the case of complimentary currency, the multiplying effect could be even higher. Some people would take the stimulus stamps as payment for jobs done off the books, perhaps taking only 90 cents on the dollar, but then they would have to spend the stamps before the expiration.  For example, a household might pay a gardener $110 in stimulus stamps for $100 worth of work. The gardener always gets paid in cash and does not  pay taxes o that money, but with stimulus stamps, he must spent them with a retailer before they expire.

The beauty of this approach is that  all the rebate money gets spent… fast…. stimulating the economy. The money goes where consumers want it to go, potentially saving those good businesses that might otherwise go under.

Grady Cash

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One Response to “Stimulus Stamps - Alternative Currency”

  1. bceconomist Says:

    I am not sure why a business would accept this currency. Or if they did, it would be at a negotiated discount, and that would bring us back to bartering.

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