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Communities Print Own Currencies to Keep Cash Flowing
A small but growing number of cash-strapped communities are printing their own money.
(flickr photo by trontnort used under Creative Commons license) Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.
The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount - say, 95 cents for $1 value - and spend the full value at stores that accept the currency.
Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.
Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.
"We wanted to make new options available," says Jackie Smith of South Bend, Ind., who is working to launch a local currency. "It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace."
About a dozen communities have local currencies, says Susan Witt, founder of BerkShares in the Berkshires region of western Massachusetts. She expects more to do it.
Under the BerkShares system, a buyer goes to one of 12 banks and pays $95 for $100 worth of BerkShares, which can be spent in 370 local businesses. Since its start in 2006, the system, the largest of its kind in the country, has circulated $2.3 million worth of BerkShares. In Detroit, three business owners are printing $4,500 worth of Detroit Cheers, which they are handing out to customers to spend in one of 12 shops.
During the Depression, local governments, businesses and individuals issued currency, known as scrip, to keep commerce flowing when bank closings led to a cash shortage.
By law, local money may not resemble federal bills or be promoted as legal tender of the United States, says Claudia Dickens of the Bureau of Engraving and Printing.
"We print the real thing," she says.
The IRS gets its share. When someone pays for goods or services with local money, the income to the business is taxable, says Tom Ochsenschlager of the American Institute of Certified Public Accountants. "It's not a way to avoid income taxes, or we'd all be paying in Detroit dollars," he says.
Pittsboro, N.C., is reviving the Plenty, a defunct local currency created in 2002. It is being printed in denominations of $1, $5, $20 and $50. A local bank will exchange $9 for $10 worth of Plenty.
"We're a wiped-out small town in America," says Lyle Estill, president of Piedmont Biofuels, which accepts the Plenty. "This will strengthen the local economy. ... The nice thing about the Plenty is that it can't leave here."
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24 Comments so far
Show AllIn view of the inflationary pressure the US government continues to put on the dollar, local currency is a good strategy.
In western Canada we have the Kootenay "Barter Bucks" in Nelson, and Courtney on Vancouver island has co-operative barter systems. I hope we see more develope.
I see the international currency trade as a serious depleting influence on local business. International business wants the freedom to skim and move their profits out of local communities into off-shore locations. When recessions come CEOs from other countries emmediately cut employees to keep down expenses, not interested in how this affects local economies.
Small business creates 80% of employment and ussually tries to hang on to their employees. It is a fallesy that cities buy into, encouraged by international corporations, believing that big business creates big employment. Corporations ussually try to keep wages and benefits low, and discourage union or cooperative efforts of employees to a minimum, prefering to use job insecurity as a presure. They also use presure to avoid paying their fair share of taxes to the community.
These local barter schemes will be resisted by banks and financial institutions, seeing them as competition. In fact the big national banks threatened lawsuits against the first Nelson trading system.
A good way to shift money from the Walmart type stores back to the local economy.
Recall reading about a Brazilian province that kicked out banks and printed their own 'chits', via a barter system. Also, a Brazilian city had too many hungry children, so the new mayor invested in local farms. Ex., farmer got a half city-paid for truck to haul produce to haul food to market, and he feeds three extra children to pay for the help. Will need spark creativity? A way around the sociopaths in gov. and finance? Hope so
Communities are starting common good banks.
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• Not just another bank with a social agenda. This is
a social agenda with a bank!
• All profits go to schools and other nonprofits.
• Depositors decide what the bank should invest in.
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• Micro-loans for new businesses and community projects.
• A full range of secure, FDIC-insured banking services.
• Committed to sustainability and economic justice.
More??? Go to http://commongoodbank.com/index.html
oldcreditiste says; In the 1930's this system was used in Raymond Alberta. The town had no money and the teachers had no money and the merchants had no money.
The town or Raymond printed the script, or scrip. With this it payed the teachers, who thus payed the merchants who thus payed the town taxes. I was told that this scrip could be used as far as 50 miles away to get in to a movie theatre. A similar system was used as early as 1816, in the Island of Guernsey in the English Channel. It may be still used there as I think that they have some sort of unusual arrangement for their finances, and they are very prosperous but I do not know the exact system, now being used.
What these systems do is use money created by the Town government in place of the money created by the Banks, in the process of making a loan. It is open and above board and democratic and does not require interest to make it work.
"The process by which banks create money is so simple that the mind is repelled.
where something so important is involved a deeper mystery seems only decent."
John Kenneth Galbraith. MONEY chapter 3, paragraph 2, sentences 1 and 2.
As it happen over 95% of the MONEY SUPPLY of the United States, and also of Canada, is created by private corporations, not by a government owned Central Bank. There is the reason for our present problems, and there is where the solution will be found.
In Canada we called this 'Social Credit' and we had 2 provincial governments by that name but very determined opposition by the financial powers destroyed those parties and the federal movement as well. WE shall rise again and every financial disaster such as we have recently seen will awaken the population to what would be possible with a sensible and democratic money system.
I don't know how these things work on a macro-economics basis...although it's conceivable that a system can be had where exchange of transactions can be made across regions - between "local currencies" towards other "local currencies"
altogether bypassing the "private corporations" that are the Big Banks and Federal banks today. ...and where eventually the government is forced to get rid of them for being "irrelevant" and just become itself an "overseer" of sorts to just make things run smoothly between regions.
but however it is -- MORE POWER to these communities for finding workable ways to really help themselves and their neighbors - and make an economy be their servant rather than be the servants of an "economy".
Alice's Red Queen said that 'words mean what you want them to mean.'
and "money" means what the Federal Reserve Bank says it means
How very curious.
Off with their heads.
They print up worthless money, and sell it for real money at a 5% discount, and it's controlled by corporations and banks. Sounds like a ponzi scheme, but the article does not really explain it in enough detail.
Maybe if the local town printed up the money, gave 10,000 of funny money to every city resident, and let the money be used to pay property taxes and other city fees it would make sense. Of course a merchant who must get his goods from other cities is unlikely to want to accept it, so it would make more sense if run on a state wide basis, like they did in Pennsylvania at one time (read Ellen Browns article on her web of debt web site). Of course, print too much and you would devalue it and prices would go up.
In Taiwan, the country gave each citizen the equivalent of 125 USD in a scrip called a voucher which everyone would accept since it could be used to pay taxes (VAT). It had to be spent, you could not deposit it in a bank, and it had an expiry date of 9 months. Maybe Obama should visit Taiwan, his people can not think out of the box.
USA Today didn't inform the reader how the system works. Hmm, why would the elite media wish to withhold information from the people? And why didn't those interviewed for the story insist on explaining it? There seems to be cultural restrictions in this country on the free flow of information.
Some trusted entity has to hold the US currency taken in when handing out the local currency. The merchants receive the local currency and exchange it with the entity for the US currency to pay their suppliers. Apparently at this point the merchant takes a 5% loss.
From what I got from the article, the town banks do the exchange, and take a 10% hit for it...they must also exchange the local currency for U.S. currency for shop owners when they have to pay out of town suppliers, utility bills, etc. It works as long as the people believe it had value, and as long as someone is willing to exchange it for the national currency.
edit:
Also, making it initially only available as a purchase by real currency, instead of just issuing a certain amount of it to people as another poster suggested, keeps it from being subject to inflation, and maintains the belief that it has real value.
Inflation is only created when there is more demand than supply. Printing money in a time when there is a shortage of money is not inflationary.
The banks I deal with do not offer the same exchange rate for buy and sell. So if they sell the funny money at a rate of 0.95 real money for 1 dollar of funny money, they will buy it back at a rate of 1 dollar funny money for 0.9 real money. So the banks make 5% (on 1 back and forth cycle of exchange), merchant takes a 5% hit if they must exchange it to real money, unless they pass the cost on to the customers with higher prices who can only pay with real money.
Or he raises his price 5% and those who only have real money (or credit) pay more to cover the credit card fees.
"They print up worthless money, and sell it for real money at a 5% discount, and it's controlled by corporations and banks. Sounds like a ponzi scheme, but the article does not really explain it in enough detail."
How dare they? Don't they know that printing worthless money is the Federal Reserve's job?
The Fed just writes a check to buy US Treasuries, creating real money (legal tender) in the process, and receiving interest to pay dividends to it's member bank shareholders. Its member banks create real money buy making loans which earn them interest (great, money + compound interest out of thin air). Very little of the money that gets created is actually printed (about 3%), they just need a pen and a check, or can just transfer the amount electronically.
This scheme does not really seem to create money, except for those who have real money to buy it.
I participated in Madison, Wisconsin's "Hours" local currency back in the late 1990s, and it's still working, though not as well as Ithaca's program. But guess what? It's not just the US: there's a local currency program that's so far working quite well in the community I lived in last year...in TAIWAN! I moved to a new town to start a new job so I couldn't participate much, but it's working! All it takes is commitment and education. Can you read Chinese? Are you deft with BabelFish? Check it out!
http://flowerpower520.blogspot.com/
For the sincerely curious who want to know a bit more about how such a system might work see:
http://communitycurrency.org/
The organization also has other resources to help those who are serious about this way to disable the thievery of central bank fiat currency (in other words our worthless money) that is being alternately hoarded and then exploded in our very midst and the tyranny of corp-orate rule and exportation of a community's wealth.
The truth be told, this is one of the quickest paths out of our current finnacial crises and towards reclaiming individual soveriegnty over personal affairs available.
Poet
Also, I think it's illegal for (edit: states) to do this...to print their own money...but I don't think it is for communities to do so.
No it's not. At one time though, starting from 1865, the states were subjected to 10% Federal Tax for printing their own money, which put them out of the money printing business. This tax has since been repealed.
I guess I need to read more pre-Constitution history then. I was under the impression that each state printing its own different currency was one of the biggest economic problems under the Articles of Confederation.
When I read articles like this I think back into the past where trade was done with sea shells, beads, feathers, turquoise, and many other items of interest. Any currency is based on agreement and it is coming clear that the current monetary system is not serving the common interest. Self interested corporations are now running the show. It is time we do create among ourselves a trading system that we in groups will be able to use and not have the need to rely on the present monetary system.
It is a constitutional mandate for Congress to print US dollars...
Woodrow Wilson felt regret after signing legislation that charged that duty to the cabal of twelve British and American banks that make up the private Federal Reserve (which is neither federal nor a reserve) to print Fiat money whenever they wished, which devalues the currency through inflation (a form of tax), manipulating interest rates to their own benefit as well as garnering annual interest on the entire economy... the principle is never intended to be repaid, like a loan, the usury we pay is the service charge for using their dollars instead of our own... the reserve notes are not backed by anything real, since Roosevelt and Nixon left the gold standard, and pegged it to trading Saudi Oil... and this Ponzi scheme (as depicted on the back of the One dollar bill... that's the banksters in the "eye" of the pyramid) has been used to inflate and burst every bubble, in manufactured 20 to 30 year cycles of boom and bust...
There are local paper currencies in many communities, which have their own logistical issues... how to keep them from log jamming at the food co-op...?
There are also card systems that work by giving a discount for local businesses, which in time could be like a non-profit credit union co-op...
There are other ways of getting your essential needs met other than dollars...
Like trade, barter, swap, salvage, grow & make your own, volunteer, teach, gift, and share goods and services with neighbors, friends, and family...
Any vibrant local economy has a mixture of these components that supplement and enrich the economic model based on a cash card economy for practical purposes...
This is especially essential for local farms, cottage industries, artisans, entrepreneurs, and Ma & Pa stores who rely on the other locals for more than just money...
I don't understand how communities can print their own currencies to influence the Cash Advance Loans and to keep cash flowing .