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Local Economy Web Research Report

The Case for a Local Currency

1. Is it practical for an area to have its own form of currency?
2. What examples of alternative currency are there?
3. What about Fairfield? (Discussion)

1. Is it practical for an area to have its own form of currency?

Yes, according to the articles I read researching this topic. Here is how a local currency can be practical:

• Increase employment
• Local projects that need to be done can be done
• Local goods and services are purchased and given
• Easier than the barter system
• Keeps local wealth in the community
• Increases local commerce
• affords greater use of recycled materials
• locally available material
• renewable resources
• Decreases the distance between producers and consumers, thus reduces the need for long-range transportation and resulting pollution.

Conditions for making a local currency practical:

• Unemployment
• Scarcity of official currency
• Local projects that need to be done
• People need things done but don’t have money to pay for it: like repair a roof

Widely used in the United States in the early 1900s, local currencies are a legal, but underutilized tool for citizens to support local economies. Local currencies build a regional economy by creating a network that is defined by the currency itself. Local businesses that accept the currency are distinguished from chain stores that do not. This builds a greater affinity between citizens of the region and their local merchants. Individuals choosing to use the currency make a conscious commitment to buy locally first, and take personal responsibility for the health and wellbeing of their community. A local currency must meet three criteria:

1. Have a US dollar equivalent (for tax purposes),
2. Not look like US currency
3. Be equal to at least $1 in value.

Federal tax law requires that all earned income be declared to the IRS. Regardless of the local currency used, treat it as if it were dollars, if it is earned income.

http://www.ncplenty.org The North Carolina Plenty began circulation in October 2002. It has 3 denominations: $10, $5, and $2.50. It is a strictly volunteer organization. Their web site has one of the best evaluations of the practical nature of a local economy, which I duplicated here:

Spending Local Currency

1. Promotes buying from local stores and from neighbors, keeping jobs here.
2. Fosters the local production of a greater variety of goods and services to meet local demands.
3. Makes our economy more dependent upon ourselves. We have greater control.
4. Keeps money within the local economy.

How This Affects The Environment

1. Encourages use of local resources and local production.
2. Results in less pollution and less energy used for shipping.
3. Ensures that materials will be used in line with local laws and values.
4. Favors disposing of waste in environmentally sound ways.
5. Makes consumers aware of the impact of their consumption.

How This Affects Fair Wages

1. Provides support for local labor.
2. Distributes wealth more evenly.
3. Makes small-scale production viable.
4. Creates new jobs at home.

Spending US Currency

1. Promotes buying from distant locations, including the Internet, catalogues, and chain stores.
2. Forces local production of only those things that are competitive in a global market.
3. Makes our economy more dependent on people and events outside of our control.
4. Lets money quickly leave the local economy.

How This Affects The Environment:

1. Encourages use of global resources and distant production.
2. Results in more pollution and more energy used for shipping.
3. Allows use of materials from places with unknown practices and values.
4. Favors disposing of waste by cheapest means possible
5. Keeps consumers unaware of the impact of their consumption

How This Affects Fair Wages

1. Forces labor to compete globally.
2. Concentrates wealth
3. Encourages industry-scaled production.
4. Demands a mobile labor force.

2. What examples of alternative currency are there?

http://www.ncplenty.org The North Carolina Plenty(as described above)

Ithaca Hours: a description by Paul Glover: http://www.ithacahours.com/ Paul Glover. (1995) Hometown Money: How to Enrich Your Community with Local Currency, 100 pp. paul5glover@yahoo.com

Excepted from: Ithaca Hours: a description by Paul Glover: http://www.ithacahours.com/
“Here's how it works: the Ithaca HOUR is Ithaca's $10.00 bill, because ten dollars per hour is the average of wages/salaries in Tompkins County. These HOUR notes, in five denominations, buy plumbing, carpentry, electrical work, roofing, nursing, chiropractic, child care, car and bike repair, food, eyeglasses, firewood, gifts, and thousands of other goods and services. Our credit union accepts them for mortgage and loan fees. People pay rent with HOURS. The best restaurants in town take them, as do movie theaters, bowling alleys, two large locally-owned grocery stores, our local hospital, many garage sales, 55 farmer's market vendors, the Chamber of Commerce, and 300 other businesses. Hundreds more have earned and spent HOURS who are not in the HOUR Town directory. “

The theory, history, and practice of the Schumacher Society's work with local currencies is detailed in Local Currencies: Catalysts for Sustainable Regional Economies. by Bob Swann, founder of the E. F. Schumacher society in the United States. E.F. Schumacher Society has pioneered local currency in the U.S. since 1980.

In Exeter, New Hampshire, the economist Ralph Borsodi and Robert Swann of the Schumacher Society,issued a currency that was based on a standard of value using thirty different commodities in an index similar to the Dow Jones Average. It was called the Constant because, unlike the national currency, it would hold its value over time. When asked by a reporter if his currency was legal, Borsodi suggested that the reporter check with the Treasury Department where he was told: "We don't care if he issues pine cones, as long as it is exchangeable for dollars so that transactions can be recorded for tax purposes."

This is all that the government requires of a local currency, that its transactions be recorded for taxes.

What does a local currency require? Trust from the local people.

Deli Dollars, a single store scrip issued in Great Barrington, Massachusetts in 1989 with help of E. F. Schumacher Society staff, helped renew public interest in local currencies as a tool for community economic revitalization.

http://www.schumachersociety.org/publications/essay_currency.html

(The SHARE micro-lending program is part of the Schumacker Society.) Here is the story: Frank Tortoriello owns a popular deli on Main Street in Great Barrington. He turned to SHARE when the bank refused him a loan to move his restaurant to a new location.. SHARE suggested that Frank issue Deli Dollars as a self-financing technique. The notes would be purchased during a month of sale and redeemed after the Deli had moved to its new location. A local artist, Martha Shaw, designed the note, which showed a host of people carrying Frank and his staff-all busy cooking-to their new location. The notes were marked "redeemable for meals up to a value of ten dollars." Since The Deli would not be able to redeem all the notes at once after the move, SHARE advised Frank to stagger repayment over a year by placing a "valid after" date on each note. To discourage counterfeiting Frank signed every note individually like a check.

SHARE recommended that the notes be sold for ten dollars each, but Frank thought that would be too good a deal for the Deli. With his customers in mind he sold ten-dollar notes for eight dollars and raised $5,000 in thirty days: contractors bought sets of Deli Dollars as Christmas presents for their construction crews; parents of students at nearby Simon's Rock College knew Deli Dollars would make a good gift for their kids; the bankers who turned down the original loan request also bought Deli Dollars. The notes even showed up in the collection plate of the First Congregational Church because church-goers knew the minister ate breakfast at the Deli. Regular customers were pleased to help support what they saw was a sure thing-they knew firsthand how hard Frank worked and believed in him. Frank repaid the loan, not in hard-to-come-by federal notes but in cheese-on-rye sandwiches.

Jennifer Tawczynski worked at the Main Street Deli. She carried the idea home to her parents Dan and Martha Tawczynski, who own Taft Farm, one of two farm markets in the area. The Tawczynskis came to SHARE with the idea of issuing "greensbacks" to help them meet the high cost of heating their greenhouses through the winter. Customers would buy the notes in the late fall for redemption in plants and vegetables come spring and summer.

At around the same time the other farm market in town, the Corn Crib, was damaged by fire. Customers of the Corn Crib came to SHARE with the idea of issuing notes to help owners Don and Ruth Zeigler recover from the ravages of the fire. SHARE suggested that the two farms together issue a Berkshire Farm Preserve Note. Martha Shaw designed the note with a head of cabbage in the middle surrounded by a variety of other vegetables. The notes read "In Farms We Trust" and were sold for nine dollars each. The Massachusetts Commissioner of Agriculture traveled from Boston to purchase the first Berkshire Farm Preserve Note, and five national networks reported on Berkshire ingenuity on how to survive a difficult winter. The Berkshire Women with Infants and Children (WIC) program purchased Berkshire Farm Preserve Notes in order to give them to families, part of a local initiative to supplement the federal food program. The notes do not carry the food-stamp stigma, and the Berkshire agency knows it is supporting local farmers at the same time it is supporting local families.

The notes could be purchased at either farm and were redeemable at either farm. At the end of the redemption period SHARE acted as the clearinghouse for the notes. The farmers received the income (ranging from $3,000 to $5,000 per farm per year) from the sale of the notes, and they found a committed base of customers who would travel out of their way to buy from their local farms rather than purchase the jet-lagged vegetables from supermarket chains. Deli dollars started a consumer movement in the Berkshires. The Berkshire Farm Preserve notes, Monterey General Store Notes, and Kintaro Notes that followed gave Berkshire residents a way to vote for the kind of small independent businesses that help make a local economy more self-reliant.

BerkShares (www.berkshares.org) are a local currency for the Southern Berkshire region of Massachusetts. They were issued on September 29, 2006 by BerkShares, Inc. also in cooperation with the E. F. Schumacher Society and the Southern Berkshire Chamber of Commerce. BerkShares are exchanged for federal dollars at participating regional banks and circulate at a wide variety of local businesses.

http://www.schumachersociety.org/publications/essay_currency.html

BerkShares makes low-cost loans to people who are unable to secure normal bank financing but have a small, locally-owned enterprise that produces quality goods and services for local consumption. Some of these businesses could get bank loans but only at high rates of interest.

Sue Sellew of Rawson Brook Farm makes a soft chevre cheese from the milk of her dairy goats and the herbs she grows on her organic farm. She borrowed $5,000 from BerkShares to bring her milking parlor and cheese room up to state standards. This has enabled her to sell the cheese to stores and restaurants.

Bonnie Smith had never borrowed money, but she had a knitting machine which took bulk-weight yarn, and she had a talent for designing clothes. She knits sweaters, tights, leg-warmers, and scarves in whimsical, colorful designs. Her small loan bought a bulk supply of wool yarn, which lowered her overall costs and established credit with suppliers. She borrowed again for a second knitting machine when the first loan was repaid. Her business kept on growing, and she applied a third time to buy a machine for an employee, which was readily approved.

3. What about Fairfield?(Discussion)

Are we ready for a local currency? Would the local folks accept a community currency?

• What form would it take?
• What are the obstacles?
• What about interest-free banking?