We will be creating local currencies, beginning in Nashville, Tn., to help stimulate local economies and provide additional income opportunities for people underserved by the existing economy. You may already be familiar with successful local currencies that have been developed in places ranging from Ithaca, NY, to Peidmont, NC, to Madison, WI, to Berkeley, CA. A good introduction or review of the fundamentals of a local currency is provided in the form of a 14 min. video on the homepage of Common Good Bank.
Local currencies, also known as “alternative currencies,” “complimentary currencies” and “community currencies” are all perfectly legal, with some states placing certain restrictions. Although every local currency developed so far has evolved into unique forms in their respective communities, they all have one primary characteristic and mission in common: Currency is exchanged among voluntary participants in a network of merchants and individuals with the intent of keeping a greater share of wealth within their community.
Each community sets the value of their “scrip” and determines the amount of it that should be in circulation at any given time. They also decide whether the currency should be “backed-up” by a set of local commodities, for example, and/or if it should be directly exchanged for U.S. dollars at a certain exchange rate (e.g.Berkshares, in Great Barrington, MA. are exchanged .95 on the dollar). There are distinct advantages to each approach, most local currencies neither back their scrip or exchange it for U.S dollars, and they function quite well.
Several established local currencies have begun to grant money and offer micro-loans to encourage new independent businesses and to support existing enterprises.
Most Americans don’t understand how money is created by the Federal Reserve and assume that any system of creating and circulating money would be rather complex. Actually, the main prerequisite is simply to provide enough currency to enable the buyers in an economy (demand) to purchase the available goods and services (supply). Too much money in circulation results in inflation, where already existing money becomes less valuable, which is the main problem to avoid.
Sound management of a local currency, where there is a known number of participants in a given network, is accomplished by increasing the amount of scrip in circulation as the network grows. The key to overall success is preventing money from getting “stuck,” wherein a given merchant, particularly, has too much scrip and nowhere to spend it on something they want or need.
We want to take the concept and practice of a local currency to the next level by utilizing many volunteers, as well as “staff” paid in the local currency, to act as “exchange agents” to facilitate the flow of money within the network and prevent it from getting stuck. Servicing the network effectively in this way should help the network grow and continually increase the amount of scrip needed in circulation. This is very important and exciting, because money is “spent” into circulation akin to the recent Federal stimulus package (except without the debt!) In other words, people locally can decide on priorites for their community and then fund them independently with the issuance of additional local currency, giving individuals in need additional income in the process.
The Common Good Bank model includes a dynamic implementation of local currencies that would be exchanged 100% for U.S. dollars. Local currencies that may be in place prior to the opening of Community Divisions in a given city or town could then be folded into them, which would most probably be an attractive option.
You can be part of making the creation of a local currency in your community a reality. The possible new forms and dynamic applications are compelling and may be limited only by our imaginations and efforts.