Wednesday, July 15, 2009

What is a Community Currency?

A community currency is a means of exchange that has a localized value, usually restricted within a geographical region. This structure keeps the wealth created by the exchange of goods and services within the local community -- it cannot be extracted, exported, or benefited by entities outside of the community. If they are constructed properly, local currencies can insulate communities from the rollercoaster market economy and create greater sustainability, equality, connection and self-determination. Community currencies represent real value created by our communities rather than market value and as such promote a different economic paradigm.

There are over two thousand communities across the world and hundreds of regions in the United States using their own monetary systems—the most well-known in the US being Ithaca Hours of Ithaca, New York. Started in 1991, this fiat paper currency works on the hours model, which means that an hour’s work is used as the unit by which the value of goods and services are compared. Berkshares paper currency in Massachusetts is currently backed by the US dollar and has been very successful in getting businesses (360 currently) and banks participating with over two million Berkshares in circulation. Timebanks USA is a group of over 120 local time banks that pool community resources and issue credit to their members in an hour-for-hour time exchange that is considered tax-exempt by the IRS. LETS or Local Exchange Trading Systems (also known as Local Employment Trading Systems) operate by mutual credit, a system in which the currency necessary to mediate a transaction is created at the time of the transaction as a corresponding credit and debit in the balances of the two parties. There are currently over 140 LETS systems. Another successful mutual credit system is the WIR Bank which has supported small and medium businesses within Switzerland since 1934 and traded CHF 1.65 billion in 2004. Other types of community currencies in use today include business or government-issued scrips, commodity-backed currencies, plastic local discount cards, reputation currencies, and bartering systems.

1 comment:

  1. When the local currency is pegged to the Time Standard of Money (how many dollars per unskilled hour child labor) Hours earned locally can be intertraded with other timebanks globally! In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours. U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.