Local or Alternative Currency in a Community for Higher Economic Sustainability

On the ride home from my boss’s office on Mon­day evening this week, I was think­ing about the econ­o­my, and the ram­i­fi­ca­tions of eco­nom­ic col­lapse.  I thought about how it would effect where I live in NJ today, and I thought about how it might effect my home town, a small town in rur­al Penn­syl­va­nia.  I thought about the game of Monop­oly, and I thought about how mon­ey changes hands and how it flows from con­sumer to busi­ness to finan­cial insti­tu­tion to man­u­fac­tur­er or ven­dor.  I thought about how a com­mu­ni­ty could iso­late itself and pro­tect itself from eco­nom­ic col­lapse, and it hit me. Monop­oly mon­ey.  Yes, I said Monop­oly mon­ey.  But, not real­ly.  By that I mean that a com­mu­ni­ty of any size can add an addi­tion­al form of cur­ren­cy.  What?  isn’t that ille­gal?  Don’t we have to use the “dol­lar” as cur­ren­cy for trade? The answer is no, absolute­ly not.  There is no law on the books that makes it ille­gal to use an alter­na­tive form of cur­ren­cy to pur­chase goods and ser­vices if the vendor(s) in ques­tion are using that alter­na­tive cur­ren­cy as a barter item in doing busi­ness.

Know­ing this, I came home and did a lit­tle bit of research.  Did you know that the Birk­shire’s in west­ern Mass­a­chu­setts has their own alter­na­tive cur­ren­cy called “Berk­shares?” It has it’s own Web­site to dis­cuss how the Berk­shares are used, in fact.  The Berk­shares are issued by Berk­shares, Inc.  a non prof­it orga­ni­za­tion that works with “par­tic­i­pat­ing local banks,” busi­ness­es, and oth­er non prof­it orga­ni­za­tions.  The beau­ty of this mod­el, who’s detail I will try to dig into here a bit, is that it is a work­ing mod­el today, pre-col­lapse of any kind.  They use their Berk­shares to do “local” busi­ness with those that par­tic­i­pate.  Giv­ing it some thought, if you have a “local butch­er, local doc­tor, local den­tist, local farms, etc.  Then essen­tial­ly, the alter­na­tive form of cur­ren­cy can remain local, pri­mar­i­ly because no one out­side the com­mu­ni­ty will accept it, but also because it cre­ates econ­o­my in a cycli­cal fash­ion.  For exam­ple, I go to work, earn dol­lars.  At my par­tic­i­pat­ing finan­cial insti­tu­tion, I trade in some of those dol­lars, hypo­thet­i­cal­ly, for Berk­shares, or the local cur­ren­cy.  I then take that local cur­ren­cy to the local gro­cer.  I pur­chase chick­en, steak, eggs, bread, and milk with my alter­na­tive cur­ren­cy.  All of those prod­ucts were processed and han­dled by the local farmer(s), butcher(s), and baker(s).  In turn, the gro­cer pays for all or a por­tion of his prod­ucts in this alter­na­tive cur­ren­cy to the farmer, bak­er, etc.  The farmer, Bak­er, etc. then takes their local cur­ren­cy, and uses it to gro­cery shop, eat out at a par­tic­i­pat­ing restau­rant, or go see a movie.  At some point all these peo­ple and / or busi­ness­es deposit some or all the alter­na­tive cur­ren­cy in the par­tic­i­pat­ing local bank.  The bank assigns the cur­ren­cy to the appro­pri­ate accounts and holds it in their vault until there is a with­draw­al.  Maybe even your employ­ees choose to have a per­cent­age of their pay­check payed in this alter­na­tive cur­ren­cy allow­ing them to save or deposit in that for­mat imme­di­ate­ly upon pay day.…  It is an inter­est­ing thought, and it makes you inde­pen­dent of the declin­ing dol­lar and of infla­tion, per se.

Now for the hard ques­tion.  How is the local cur­ren­cy backed?  What is it real­ly worth?  Is an arbi­trary num­ber assigned to it?  Is it backed by the dol­lar?  Is it backed by deposits or real invest­ments?  Does it have to be backed by any­thing?  I need to do more research.

One of the advan­tages that I see for an alter­na­tive form of cur­ren­cy is that a depressed area due to plant clos­ings, job loss, etc. could give those in need a medi­um to help sus­tain them­selves by being able to pur­chased local­ly pro­duced prod­ucts and ser­vices.  Some might call this a wel­fare sys­tem and may sound eeri­ly like a food stamp pro­gram, but the cur­ren­cy should be good for much more than that.  It pro­vides a new sys­tem for the “local sys­tem” to thrive on.  Maybe the eco­nom­i­cal­ly stressed fam­i­ly or indi­vid­ual goes to work for a farm and gets paid in the local alter­na­tive cur­ren­cy.  This cir­cum­vents pay­roll tax­es, as well as, many oth­er fees that the farmer might incur.  How­ev­er, it also gives the farmer extra hands to get his job done more effi­cient­ly, and also gives the dis­tressed indi­vid­ual the cur­ren­cy they need to put food on the table for their fam­i­ly and more.  They may be able to take the alter­na­tive cur­ren­cy to the local par­tic­i­pat­ing finan­cial insti­tu­tion and trade it in for real dol­lars if an exchange rate is set, allow­ing them to free them­selves to begin free­ing them­selves of the finan­cial dis­tress they have been under, allow­ing them to cir­cu­late out­side their local com­mu­ni­ty should they wish to.  To be clear though, I am not sure how the tax laws work regard­ing local cur­ren­cies, so that is also a point of inves­ti­ga­tion… I am pure­ly spec­u­lat­ing…

Per­son­al­ly I am fas­ci­nat­ed by this con­cept.  Salt Springs Islands, British Colum­bia is anoth­er com­mu­ni­ty that has a local cur­ren­cy called the Salt Springs Dol­lar.  You can pur­chase it direct­ly from their Web­site, and they have a list of par­tic­i­pat­ing insti­tu­tions there as well.  Just fas­ci­nat­ing.

Now, in a SHTF sit­u­a­tion or a sur­vival sit­u­a­tion, where you may find your­self with­in an orga­nized com­mu­ni­ty of prep­pers, that has cre­at­ed their own cur­ren­cy, I believe you can cre­ate a win­ning for­mu­la for sus­tain­abil­i­ty with­in the group so that resources can be viewed in much the same way they are with our nation­al cur­ren­cy.  It may take much of the barter sys­tem out of the fold, if actu­al val­ues can be assigned to the prod­ucts and ser­vices pro­duced and offered.

I even found a web­site about cre­at­ing your own local cur­ren­cy that seems to be pret­ty darn good.  Check it out:  http://localcurrencycouncil.org/.  From their “About Us” page, they describe them­selves as: “The Local Cur­ren­cy Coun­cil serves as an advo­ca­cy group ded­i­cat­ed to pre­serv­ing the fun­da­men­tals rights of self-gov­ern­ing local-eco­nom­ic sys­tems. We pro­vide a com­mu­ni­ca­tion plat­form for devel­op­ers and sup­port­ers of local cur­ren­cy sys­tems.”  Pret­ty inter­est­ing.

Here is anoth­er web­site to check out as well:  http://neweconomicsinstitute.org/content/local-currencies

As I men­tioned, I find this con­cept fas­ci­nat­ing.  I find it intrigu­ing, and I think the con­cept is bril­liant as it sup­ports a more sus­tain­able com­mu­ni­ty, and dare  I even say a green­er com­mu­ni­ty that relies less on the car­bon foot­print of those out­side the local area for resources for life.

Please com­ment and let me know your thoughts on such a pro­gram to local­ly aug­ment the econ­o­my, and stim­u­late local growth and finan­cial pros­per­i­ty.