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Dollars with Good Sense: DIY Cash

Local currencies value time, build community, and keep business moving even when credit dries up.
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BerkShare board member Asa Hardcastle visits Berkshire Bank in Great Barrington, Massachusetts, to exchange his federal dollars--95 cents for each $1 BerkShare. Photo by Jason Houston
BerkShare board member Asa Hardcastle visits Berkshire Bank in Great Barrington, Massachusetts, to exchange his federal dollars—95 cents for each $1 BerkShare. Photo by Jason Houston, jasonhouston.com

Total dependence on one currency is like total dependence on one crop, or, for that matter, a single energy source: there’s always the risk that crop failure or a cutoff in supply will topple the whole system. This is the scenario we’re seeing now—credit has dried up and unemployment is soaring. In small pockets throughout the world, in rural areas and inner cities, and spots as far-flung as Bavaria and Thailand to Massachusetts and Michigan, people are responding by launching their own currencies. Such monetary renegades are not simply thumbing their noses at the dollar (or the mark, or the euro, or the baht…) They are making a carefully considered choice to promote the well-being of their communities.

“From the beginning we had two objectives—to promote the region and promote local charities,” says Christian Gelleri. In 2003, Gelleri and a group of his students at a Waldorf School developed the Chiemgauer currency in the Lake Chiemsee region of Bavaria, Germany. Since then, some 3 million Chiemgauer notes (equivalent in value to the euro) have been placed in circulation. The currency, accepted by 600 businesses in the region, typically is spent and spent again 18 times a year—three times more than the Euro. This means that the currency is encouraging trade and cooperation in the region, which keeps the shops and restaurants and artisans active. Think of this faster rate of use (what economists term “velocity”) as a kind of reinvestment in the community.

Local currencies can help a community counter some of the problems with conventional money. For example, bank-issued currency tends to flow toward the money centers for investment. If you shop at a chain store, the profit gets whisked out of town and into the corporate coffers and then, often, to the speculative market. A local currency stays in the community, encouraging local business and trade, adding value to local products and services, and supporting the local infrastructure.

Reliance on national currency means being at the mercy of the national credit situation. As we’ve recently seen, credit constriction can paralyze local economies. Despite the availability of goods and the need for business, when there’s no money, consumers don’t buy. Stores don’t sell. Start-ups can’t get a toe-hold. An alternative currency gives people another way to buy, sell, lend, and borrow. If the community creates its own currency, local business can go on even if the supply of national currency dries up.

At the most basic level, currency functions as a means of exchange (I give you a dollar and you give me an ice cream cone), a unit of value (a dollar, pound, etc.) and a store of value (you can hold onto a dollar as it maintains its worth). It’s also a source of information about relative value, and about what is needed to keep trade flowing, for instance, by adjusting the supply of money or the exchange rate so that those in other markets can afford your goods.

With local currency, a community can meet currency needs that the national tender isn’t fulfilling. If the idea seems fanciful, there are models up and running—some for many years.

A now-common sign around town, this one at Rubi’s Cafe. Photo by Jason Houston
A now-common sign around Great Barrington, this one at Rubi’s Cafe. Photo by Jason Houston, jasonhouston.com

BerkShares
Author and urban activist Jane Jacobs’ work was one inspiration for the monetary experiment called BerkShares—considered the best-designed and most successful local currency in the United States, with more than $2.4 million-worth passing from bank to hand to till and around again since fall 2006. The attractive paper bills—one BerkShare is worth $1, but is sold into circulation for 95 cents—are accepted at more than 400 businesses in the Berkshire region of western Massachusetts.

Jacobs pointed out that national currencies cover such broad geographical areas that they provide no local feedback. The way our system is now, regions subsidize each other, and weaknesses are not corrected. Local currencies, however, have clear feedback loops so that trade and production imbalances can be addressed more quickly.

As Susan Witt, executive director of the E.F. Schumacher Society, explains, “Whenever a BerkShare must be returned to the bank [instead of recirculated], that means there is not a source or product available locally to fill that business’s needs.” For example, say a toy store finds itself stuck with the currency. This presents an opportunity for a local craftsperson to provide the store with wooden figures, games, or puzzles to be purchased with BerkShares.

Witt, co-founder of the BerkShares program, took to heart Jacobs’ belief that regional economies need their own currencies to grow and thrive. “Businesses are now trading with other local businesses, so that they’re sourcing their printing, accounting, and food products locally rather than out of the area,” says Witt. “People are getting off Amazon.com and back to the local bookstore and camera store. They like the personal exchanges and the ambiance, so they stay.”

The currency belongs to the community, Witt stresses. And its use has been a valuable exercise in community empowerment. “The use of BerkShares is educating people on the importance of supporting local businesses. With that comes a sense of empowerment—that people can make positive changes in the local economy. The fact of BerkShares raises questions like: Can we issue currency that is not backed by the U.S. dollar? It’s prompting people to think about other ways of thinking about money.”

Hardcastle buys food with BerkShares from Rubi’s Cafe worker Kate Van Olst. Photo by Jason Houston
Hardcastle buys food with BerkShares from Rubi’s Cafe worker Kate Van Olst. Photo by Jason Houston, jasonhouston.com

On a recent visit to Great Barrington, Massachusetts, I purchased Berkshares at Lee Bank and spoke to Branch Manager Paula Miller, who expressed enthusiasm about the currency. “Customers love it. We’ve gotten to know other businesses better,” she said, adding that it’s always fun when clients recognize the work of local artists who designed the bills. “It makes it a little more real.”

Time Banking
Time Dollars, now used in settings as varied as small towns, retirement homes, schools, and prisons, respond to conventional currency’s limited capacity to measure worth. “Dollars don’t measure value very well,” says David Boyle, a Fellow at the New Economics Foundation in the United Kingdom. They are good, he says, at measuring “the instantaneous value of Microsoft or currencies on the international exchange. But not the value of, say, a local shop, or of me if I’m very old or young. I might have skills, but not those that are conventionally marketable.”

Time Dollars were developed in 1980 by law professor Edgar Cahn, who lamented that crucial work to improve people’s lives—such as child and elder care—is much needed but little valued. He saw that many who could do these tasks were idle and felt useless. To get people economically engaged, Cahn proposed a system where people earn credit according to the number of hours they work. These Time Dollars can then be “cashed in” for services, like yard work, tutoring, etc.

Not only does Time Banking promote social justice by connecting people, promoting reciprocity, and improving neighborhoods—it has also proved quite versatile: People have exchanged Time Dollars for wool spinning, “rune making,” and having a baby delivered by a midwife. And there’s always an ample supply since no community is going to run out of hours.

TimeBanks USA offers a start-up kit that includes instructions and software for starting a Time Bank anywhere. Rose-Marie Pelletier is working on launching a Time Bank in her town of Pownal, Vermont, an economically diverse rural community of 3,500. At a town meeting, Pelletier looked at the listings of delinquent taxes over recent years and saw that they had increased geometrically. She’s a math teacher, and the numbers spoke to her; she saw the extent to which people were hurting. “People want to help each other—when we know how to do it,” she says. “I see Time Banking as a way of building community, one hour at a time.”

Chiemgauer Regional Currency
Conventional currency excels at serving as a store of value—so much so that use of money for actual trade slows down, leaving some local economies stuck. Coin and paper currencies do not lose value like the products one buys with them can, which makes hoarding and speculation attractive, particularly with the enticement of interest. Argentine economist Silvio Gesell described this phenomenon in 1913 and said that money also should lose value: that it should “rust” or go moldy like other commodities, and suggested a penalty, or demurrage fee, for holding onto it. Nearly 75 years later, then-teenager Christian Gelleri read Gesell’s work and was fascinated. As a high school teacher, he saw the chance to test the model with a local currency. This is how it works: Each quarter, every Chiemgauer bill loses 2 percent of its value. In order to spend the money later, the consumer needs to put a special sticker on the paper currency.

In the beginning, Gelleri got complaints. Then people figured out how to make the model work for them. For instance, one cinema owner said that business went way up at the end of the quarter when people wanted to shed their currency. Increased cash flow at quarter’s end was helpful for accounting, he said. The 2 percent loss, he added, was insignificant compared to the advertising he’d have to buy to secure the same level of customer loyalty he has from accepting the Chiemgauer.

A consumer can exchange euros for Chiemgauers at 50 offices in the region.Three percent of the purchase price goes to a nonprofit the buyer chooses. So far, more than $100,000 euros have gone to charities such as school athletic programs and environmental groups. The “good cause” component reinforces people’s investment in the currency, and in their community.

Maybe we’re asking national currencies to do too many things. As Thomas H. Greco, Jr. points out in his new book, The End of Money and the Future of Civilization, some functions are inherently contradictory: If money is for trading, you want to use it; if money is to store value, you want to save it. Greco and others such as David Boyle say that people could be better served by separating out the functions of money—and using different currencies, depending on whether you are, say, meeting friends at a local café or saving for college.

Back on Main Street in Great Barrington, Matthew Rubiner, of Rubiner’s Cheesemonger & Grocers, says the issue of local currency has shifted quickly from the theoretical to the here and now. “When BerkShares started we talked about what would happen if the economy falls apart and we were really forced to look local.” The economic downturn, he says, has “brought the question into bolder relief.”


Judith D. Schwartz wrote this article as part of The New Economy, the Summer 2009 issue of YES! Magazine. Judith is an author/journalist in Bennington, Vermont now writing about alternative/complementary currencies and localization movements. www.judithdschwartz.com

Interested? Read “The Local Multiplier Effect

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