Thursday, April 15, 2010

BNotes - A Proposal for a Community Currency for Baltimore

Jill Harrison
Friday, March 19, 2010 at 10:47am

I believe that establishing complementary community currencies is the single most important action in addressing poverty in our neighborhoods. For example a currency for Baltimore, which I’ll call BNotes, could be structured to maximize trade, monetize underutilized resources, encourage entrepreneurial development for items currently imported to our region, reduce unemployment, and supply support for local nonprofits and community service organizations chosen by the people using the currency.

My sense that our economy acts as more of a barrier to social growth than an effective tool for equitable exchange of services has been growing since my children were coming out of high school and getting their first jobs. I took in friends of theirs who needed to work through the summer to save money for the next college year and could not afford to stay in the dorms. The first young woman (studying abroad from Japan) was paying 24% on her debt while working and going to school. At that time I learned that my father’s income from the year I was born, in 1952, was less than $4,000 while I was the fourth of five kids and he had a mortgage on a house. The realities of inflation really hit home, and I realized that the minimum wage had not changed since my high school days nearly as much as the cost of living had. With this economic collapse, I find Dennis Kucinich’s statement that “we are at a teachable moment on matters of money and finance” to be prescient. I feel strongly that the single most important institution to address in making Baltimore a stronger community is the monetary system. A sound foundation for a monetary system has less to do with the basis of value for a currency than it does in the trust and cooperative efforts of the people using it.

Bernard Lietaer was a central bank executive in Belgium who believes the structure of monetary systems has a direct influence on the culture of a society. Our expansionary national monetary system and the overwhelming volume of trade being speculative rather than for the exchange of real goods and services leave us with an ever slowing velocity in our currency. To counter this trend our central banking system increases the volume of the currency to increase the flow of real trade. The inflationary result of this pattern harms the poorest segments of society most while wealth tends to accumulate in fewer hands, primarily in those whose investment instruments are growing the fastest. The velocity of money can be increased in a more sustainable way by putting a complementary community currency in place that has a 'holding fee', which will encourage the bearer to spend the currency before it depreciates. Classical economics teaches that money has 3 primary functions: 1) standard of value, 2) medium of exchange, and 3) store of value. The goals of function 2 and 3 have the contradictory effects of encouraging spending vs. saving. In the case of our national currency too much value is placed on the dollar’s function as a ‘store of value’ without sufficient emphasis on encouraging exchange. This has caused the value of the dollar to be considered as greater than the real world commodities it’s meant to be based on. Our society has moved from production of real goods and services to producing financial instruments that have been shown to be based on phantom wealth. This leads to damage of the real world assets in favor of the perceived benefit of hoarding dollars. An example of this false valuation was shown in a comment from Malaysia’s minister of forestry when he observed that Malaysia would be better off once all it’s trees were cut down since the interest on the money grows faster than the trees (p18 David C. Korten, Agenda for a New Economy). A complementary currency can work to encourage new, more sustainable behaviors to balance the effects of the dollar. Currencies that encourage trade over savings have been shown to decrease unemployment, while locally used currencies encourage self sufficient communities over dependence on outside resources. Baltimore could easily and nearly immediately be producing more of its food and energy supply from local businesses.

An important part of the structure of the BNote is the partnership it has with nonprofits or local service providers. The BNote places special emphasis on supporting nonprofits, and more importantly in educating and encouraging those service providers to create ways to include their demographic populations in the BNote exchange network, while helping to establish closed circuits of trade within the communities they serve. This means that in addition to the larger Baltimore community the BNote will support the nonprofits that register in the trading network, as well as the populations served by those organizations. By providing interest free micro-lending and increasing the volume of exchange media, an amplified economic benefit can be channeled to communities with the greatest need.

A brief description of this BNote currency and a scenario for how a circulation system might be established in concert with existing community services is described below. Eventually it would be preferable to make BNotes available to the public at local banking institutions, like the Johns Hopkins Credit Union for example. In addition to recruiting businesses to use BNotes, it will be important to have nonprofits or community service providers establish complete circulation systems that include their target population. The BNote will be more valuable for businesses that do not have to convert them back to dollars, and so establishing complete circuits of trade within the community will be important.

BNotes (modeled on the Chiemgauer in Germany: will be a currency printed in denominations of 1, 5, 10 & 20 dollars. To encourage trade they will have a ‘holding fee’ of 2% per quarter (a negative interest rate, or demurrage fee). The BNote can be purchased either at local banking institutions or from selected business partners. The BNote will be valued at $1USD, and can be purchased for $.95, with the remaining $.05 (on conversion from BNote to USD) going toward administrative fees and for the benefit of a local nonprofit or community service of the customer’s choice. If businesses accumulate too much BNote, they can exchange them for $.95 USD. The 5% fees to the non-profits are like a small tax on imported goods. In the long run prices of regional goods decrease and prices of global goods rise, encouraging local businesses to get their stock from local suppliers. Consumers get a 5% discount on their purchases, and businesses get a loyal customer base with less advertising. With city participation, small businesses may be able to pay a portion of their city bills in BNotes, like water bills, licensing fees, or taxes. The city could then use that fund to pay for summer jobs for young people, or perhaps eventually fund larger projects like a community land trust that would create affordable housing stock.

Non-profits or community organizations that would like to register as recipients of BNote donations will be encouraged to establish a closed circuit of trade in their area. The procedure of establishing such a circuit will involve selling a product or service to the community in exchange for BNotes, as well as looking for underutilized resources available in the community that can be donated by businesses for sale to BNote purchasers. (Note: if methods of administering the demurrage charges are found to be too cumbersome, a similar effect can also be produced by the use of the growth of the interest bearing national currency held in reserve for backing of the BNotes)

An example of establishing a complete circulation system for BNotes, might involve a partnership with a large faith based nonprofit organization which supplies housing and jobs placement for formerly homeless people, which we’ll call GEDCO. The following example was inspired by the experience of the Philadelphia Equal Dollar ( GEDCO could take a 2 year interest free loan of $15,000 in BNote currency and use it to pay $10,000 to certain community members in recognition of some extraordinary contribution they’ve provided, and $5,000 in interest free micro-loans to a number of people in their client demographic. In order to repay this loan GEDCO would have to accept BNote as payment for some service or product. They may collect part of their rental fees from their housing facilities in BNote, or offer certain products for sale requiring some percentage of payment in BNotes. To assist their tenants in earning the BNotes for their rent, they could allow the clients purchasing GEDCO’s services from their jobs programs to make partial payment to the employees in BNotes. While at the other end of the chain, to provide value for the people they’ve rewarded with the $10,000 BNote gift, GEDCO will seek out businesses that will accept the BNote for their products, like local bookstores or restaurants. Underutilized resources might include local coffee shops and restaurants that have products that are aging out of their commercial value which they could offer at a discount to BNote customers. Searching for underutilized resources and making them available at discount to BNote customers will be an important part of strengthening the value of the BNote network. It is important that closed loops of trade are created for the demographic populations served by the nonprofit organizations to help maximize availability of a medium of exchange in these fragile communities.

There are solutions waiting to be born from the collaborative efforts of our community which no single institution could create alone.


  1. Jct: Sure, cash buy-in local Baltimore Bnote currency are good chips but so are time buy-in Ithaca Hour $10 bills. Why not use both features? Let people buy-in with their time like at timebanks and let them buy-in with cash for a premium too. Use both bases for collateral for your chips!!! Green for cash, blue for time. Best of all, when your Bnote is pegged to the Time Standard of Money (how many dollars per volunteer hour child labor) Bnotes earned locally, like Hours, 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. I'll take 50 Baltimore Bucks = 5 Hours if you'll take my mine.

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