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.
(USATODAY.com)
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?
This system worked great for years in the coal minning industries. Miners were paid in “script” and they spent it at the “company store.” I think the goal or the motive there was different than what you mentioned above. Although I don’t know for sure but I believe it was to isolate the miner and keep them “bound” to that particular mine and keep them from wandering off to “greener pastures”.
All valid questions with easy answers.
Berkshares, along with Toronto Dollars, NC Plentys and a few other local currencies, are backed by US dollars and can be exchanged though local credit unions or banks. The scrip is literally NO GOOD anywhere outside of the region or the geographic area drawn by the community so you can’t spend it but on local merchants. The reason you cannot really organize a ‘spend USD local’ is several fold. Local currency can only be used locally but that means local business NO chains stores like Wal-mart, Walgreens, Pizza Hut, McDonalds etc. So a local campaign of spend USD local, would also have to include “don’t spend at these corporate establishments” etc. Not sure if the concept works.
Second, the % difference in exchange is different for the communities, but generally works like this. Retail users can buy local currency at a discount. $9.50 USD gets you 10 Berkshares. You spend 10 Berkshares and actually make .50 on the purchase like a coupon, use Berkshares and get 5% off. That is easy to comprehend, now the merchant accepting the bills can then give them back to shoppers in change and not lose any % on his transactions. However, if a merchant takes in way too many Berkshares than he can give in change, and he needs to restock shelves, he can take a haircut of 5% and exchange Berkshares back into USD at the same local credit union. So the Merchant gives up 100 Berkshares and gets only $95 USD. There is NO money left over, the 5% is what merchants will give up on a sale to attract more local users. No on banks any extra. Do you understand?
Toronto dollars that 5% goes to local charity such as feed the homeless, in that case there is 5% take out, but it goes to local charities.
Other community currency like Ithaca Hours, River Hours (you see these are usually called “Hours” because the currency converts to local labor amounts) is based on one hours wages in the local area, usually $10 so one hour= face value on a retail spend 10$ however there is NO exchange back and forth into USD, if you take in Ithaca Hours as a merchant you must respend them or give them back in change. No other way to get rid of them thus these types of local currency while effective in certain communities are not workable in others.
We have a local currency coming out later this year backed by silver and the notes are denominated by weight. “Silver Bullion Marks” as in Deutsche Marks
I don’t know what backs the Detroit Cheers yet, that one is brand new.
Mark
editor of Community Currency Magazine
I generally understand it now. Thanks for the info: you answered a lot of my questions.