The Elusive Perfect Currency Model

I have often heard people who are content with the current monetary system suggest that you can’t do better than the one we’ve got- the Fed issuing dollars. I think they base their opinion partly on the disproportionate benefits they have personally received from the current system as well as benefits to business and product development and entrepreneurship and a perceived overall rise in the standard of living. However, they miss the points that: their lives might be enriched in many ways by alternative currencies, that small business and entrepreneurship are actually quite limited by the current money and credit issuing system which is skewed towards big business and monopolies, and that most people’s overall standard of living in the world and especially quality of life has gone down partly due to the centralized monetary system and it’s symbiotic relationship with capitalism.

When you realize that encouraging alternatives to a corporate/government monopoly on the monetary system might be a very healthy thing, the next question is which would be a better system? I don’t believe there is a perfect system that solves all of our economic and social problems. Some currencies are better at addressing some problems than others and some currencies can create new problems. Although I think we could do a lot better than the current system for 90% of our economic activity or more. There are also lots of reforms that need to be done if we should keep the current system for that last 10%. There are good suggestions for monetary reforms coming out of the American Monetary Institute, which should be passed and enacted as soon as possible.

However, the bulk of the work needs to be done at the local, regional and perhaps some at the state level. Bioregional planned economies make an assessment of the local ecology, culture, etc. and design an economy that will heal the earth, foster a sustainable relationship of reciprocity with the earth, meets people’s needs (not superfluous wants) and creates more equitable and healthy economic relationships between individuals and groups. At the local level, we design economic systems that allow for maximum participation in economic decision-making and self and community sufficiency. At the neighborhood level, we design villages that create strong relationships, networks of trust, and attempt to meet most of our needs through improving diversity of economic services and goods. Rather than making long, fossil fuel consuming car trips to access service or goods specialists located far away and from whom we may never see again, hence exacerbating alienation, we try to provide interesting, empowering and diverse job opportunities within each town and neighborhood.

The ability to reshape our economy in this way and relocalize can be greatly facilitated by creating new local currencies. Our federal reserve notes facilitate long distance trade well, but are not good for creating sustainable, self-sufficient, relationship-based, and fair local economies. Local currencies encourage us to buy local, provide abundant means of exchange that support local employment and import replacement, and can support community development projects.

There are many different kinds of currencies to choose from but few have stood the test of time. Before the Civil War it is estimated that there were thousands of scrips in the US. During the Great Depression, there were several hundred. In Worgl Austria at that time, the municipality developed the Wara paper stamp scrip currency, which reduced unemployment by 30% in one year before it was shut down. In Argentina during the 2001-2005 crash, the Global Red de Trueque currency system, provided 1/6 the population or 6 million people with basic sustenance before it collapsed. The WIR bank mutual credit system of Switzerland, has kept small and medium sized businesses afloat since the Great Depression and is still thriving and growing. Some newer experiments like Berkshares in Massachusetts, which is a paper currency backed by the US dollar, and the Cheimgauer, a paper stamp scrip currency in Germany have also proven to be a formidable challenge to the monopoly of national currencies in those regions. Timebanks USA now boasts over a hundred small timebanks throughout the US and other countries and LETS (Local Employment Trading Systems) though also relatively small, number in the thousands throughout the world.

Recently, I surveyed some of the top currency experts in the world about where the currency movement is headed and which are the most promising models. Thomas Greco is encouraging small business to business mutual credit clearing as a foundation for any viable currency alternative wishing to gain significant ground in the local economy. Paper currencies and other systems can be added on later, but the bulk of our currency based trading remains business to business and business to consumer and not between individuals. And a system that desires business involvement might be wise to design a system that is easy and beneficial for small businesses to use before anything else. Also, if we can provide support to local businesses with low or no cost mutual credit and increase trading boosted by alternative currencies, we might save many local jobs, which provide real paychecks that can pay for real needs.

There are a number of platforms being developed for business to business mutual credit clearing with progressive aims, like GETS from Richard Logie in Scotland. However, like many of the other systems and like Timebanks USA, these software platforms come with an ongoing cost to provide the entrepreneurs who designed them with a substantial living. Thomas Greco’s suggestion- buy the best one out and make it open source. Not a bad idea. I’d hate to promote an alternative currency platform that you have to spend lots of national currency notes to maintain, especially when you are trying to support struggling small businesses and poor individuals that cannot afford that cost to passed on to them. That makes no sense.

Stephen DeMeulenaere of the Complementary Currency Database pointed towards STRO’s work in Latin American, which Miguel Hirota of Complementary Currency Labs of Japan has also noted many times. It is difficult to find information on the mechanics of these programs. However, the Banco Palmas project in Brazil is an interesting success model. In a poor area of Brazil, locals are given currency by card or paper as credit to start businesses or to purchase goods either on credit alone or for work. This dramatically stimulates the local economy in an area where many people have no ability to earn national currency on a reliable basis to meet basic needs. The system works and people pay back their small loans simply because people know each other and it is tight-knit community. However, STRO has chosen to limit their assistance in designing currencies models to developing countries, primarily in Latin America.

Both official Timebanks USA and other online time exchanges are taking off. Timebanks USA claims 70+ new timebank start-ups this year in 28 states, and 188 set-up kits were sent off. These projects are simple to start and relatively low risk. However, they have a difficult time capturing a significant portion of the economy. This may change as federal currency because more scarce and people need to save their few dollars for necessities that can only be paid in federal currency like medicine, rent and insurance. When you use timebanks, you spend and earn hours for things that don’t necessarily require federal currency to flow. Though they have failed so far to capture a large portion of the local economy, their viral spread throughout the world without any concerted effort and significantly large world-wide numbers of individual participants is a testament to the desire to organize at least the informal economy in this way and to reconnect alienated communities, especially in the West.

LETS and some other kinds of time exchange and barter, like RICH Hours and Swapcove also don’t require federal currency, but encourage trading of some things that you might otherwise have to pay federal currency for because their unit of account is linked to the dollar. RICH Hours, Dibspace, LETS and local discount programs (like on Village Networks website and the Go Local Sonoma card) are linked to the US dollar so they are easier for businesses to adapt to and feel confidence in. It appears the more like the current system, the easier the business buy in. This is also proven by the success of the Berkshares and Cheimgauer models, which are both linked to and backed by national currencies.

In the long run for sustainability, stability and local control, it would be best to these currencies to have a different backing or at least linking to a different unit of account. Though I see little harm in starting with a system that is very much like the current currency system with the explicit of intention of a collectively guided transition to a significantly different model over time, just to get things started and get business buy in. It is my understanding that Berkshares does have the intention of moving towards a more transformative system eventually and they are being strategic in starting out conservative.

All of these systems have their advantages and disadvantages and work best at solving certain problems more than others. So which is a community to choose? Well it depends on your goals and which sector of the economy you want to work on. If businesses in your community are doing fine, but your community is completely alienated and miserable in their 9-5 corporate jobs or people are struggling to make ends meet with low paying jobs, you may want to start a time exchange. If businesses are dropping like flies or unemployment is sky high, you may want to start a business to business mutual credit system, or in a relatively low population and isolated area, perhaps a paper stamp scrip. If you are simply trying to rebuild a self-sufficient local economy but are not in dire need, a buy local rewards program may suffice as a starting point. If your municipality is bankrupt and people are dying of poverty, I think it may be time for the local government to create an emergency local currency program through plastic cards or paper local currency and jumpstart it by funding local services and community projects to provide basic necessities. Both Oakland, CA and Portland, OR have recently put out RFPs for municipal currencies. Preferably this sort of municipal program would be overseen by a community coalition to make sure it is actually meeting the needs of the community. If no one is responding in community and you want to do something fast and simple, host a neighborhood weekly or monthly swap meet or free market to share goods, food, skills and services. All it takes is a location, some flyers, door to door canvassing and one outgoing, friendly organizer.

There is no one answer. Perhaps your community needs an amalgam of different currency systems. Many communities already have some that go unnoticed- babysitting clubs, rideshare programs, customer rewards programs. The possibilities are limitless, but first you need to start from where you are. What does your community actually need and what are its resources and potential? Pick something and try it for a while with the intention of really making it work, then change it or scrap it if it’s really not working. But try something! It is obvious to most now that a one-currency system does not work for everything.