How to keep dollars local in a global community? It’s not quite isolationism, but it’s a legitimate concern in these Made-in-China times. During the debate — such as there was — about Bush’s first stimulus plan, many joked that we were borrowing money from China to buy Chinese products. Now consumers are more interested in keeping the resources local, and communities are helping out:
A small but growing number of cash-strapped communities are printing their own money.
Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses. [...]
About a dozen communities have local currencies, says Susan Witt, founder of BerkShares in the Berkshires region of western Massachusetts. She expects more to do it.
Under the BerkShares system, a buyer goes to one of 12 banks and pays $95 for $100 worth of BerkShares, which can be spent in 370 local businesses. Since its start in 2006, the system, the largest of its kind in the country, has circulated $2.3 million worth of BerkShares. In Detroit, three business owners are printing $4,500 worth of Detroit Cheers, which they are handing out to customers to spend in one of 12 shops.
A few thoughts — mostly questions — about this:
First, this shows how utterly arbitrary cash is. BerkShares or Cheers have value because people agree that they do. Dollars, Yen, and Euros, theoretically, work the same way; more people simply agree that they have value. They were willing to agree because currencies represented something tangible: gold, silver, or whatever. Of course the value of gold only arose — in pre-scientific communities — because people agreed it’s valuable.
This leads to the second question: what backs this money? Indeed, we could ask the same of most world currencies, especially the dollar. Does anything, or is it just a dollar surrogate? Is it just pegged to the dollar? If so, that leads to the final thought.
Third, why do they need to do this? Just to keep the cash in the community? Couldn’t they keep the dollars in the community as well — a well-orchestrated campaign to “Keep the Dollars Here” or some such? Would this be happening if the dollar were actually worth something?
Lastly, what of that 5%? Who covers it? Why are banks willing to sell $100 of BerkShares or Cheers or gls-dollars for $95? (This seems to be hinting at what actually backs these currencies.) Is this debt? Do they get something in return from the business that agree to use these local currencies?