In Times of Crisis, Why Not Create Your Own Currency?
In light of the Greek referendum and the “No” vote, Greece’s financial system is uncertain to say the least.
11 million people face, at best, a highly volatile period until the banking and financial system is consolidated and can establish a clear direction as to what currency and system of exchange will be used. While we wait and see whether the European Central Bank will be forthcoming with emergency aid to Greek banks, it is worth exploring alternatives to the current situation. In times of crisis such as this people start to reassess current models and mediums of exchange, as national currencies either become worthless or redundant. When a currency completely fails and people lose faith and trust in national currencies, alternative currencies come into their own. Alternative currencies, also known as community or complimentary currencies, are mediums of exchange used as an alternative to national or multinational currency systems.
They can be created by an individual, corporation, or organizations, and used either in conjunction with or as a substitute for local, state, or national currencies. Most complementary currencies are developed as local currencies and are limited to certain regions. Throughout history there have been numerous alternative currencies, globally today it is estimated there are at least 4,000 in use. (1) The idea behind local currencies is to facilitate trade, keeping the flow of money within local communities. This helps establish an internal trade barrier, as the currencies are useless outside the city or region of issue. Local currencies are not backed by national governments and are strictly intended for use in a specific geographic area. Bitcoin is an example of an alternative currency which allows owners to make transactions without going through a financial intermediary such as a bank. As well as no (or minimal) transaction fees, Bitcoins can be used to purchase goods and services anonymously through various merchandisers without being tied to any currency. Rob Hopkins, founder of the Transition movement, suggests the current monetary system is dependent on constant economic growth: “Instability and loss of faith in national currencies could lead to economic paralysis, potential resources and labour going to waste simply because of a lack of reliable trading systems. Local currencies can provide solutions while stimulating local trade and re-localization efforts.” (2) Dubbed a “great economic experiment” by The New York Times, BerkShares are a local currency for the Berkshire region of Massachusetts. Federal currency is exchanged for BerkShares at seven branch offices of four local banks and spent at more than 400 locally owned participating businesses.
The circulation of BerkShares encourages money to remain within the region, building a greater affinity between the local business community and its citizens. BerkShares serve as a tool for community economic empowerment and development toward regional self-reliance.
The currency distinguishes between the local businesses which accept the currency from those that do not, fostering stronger relationships between the responsible business community and the citizens of the region. Anyone in the Berkshire Region may spend BerkShares or accept BerkShares for payment. BerkShares can be obtained at participating bank branches in exchange for U.S. dollars at a rate of 95 cents per BerkShare.
These federal dollars remain on deposit at the BerkShares Exchange Banks in order to allow citizens to redeem them for dollars at the same exchange rate. For example, 95 dollars yield 100 BerkShares and 100 BerkShares yield 95 dollars. BerkShares can be spent at face value to pay for the goods or services offered by participating businesses—for example, 10 BerkShares can be used for a $10 purchase. Every business listed in the BerkShares Directory and displaying the “BerkShares Accepted Here” sign has committed to taking full or partial payment in BerkShares. (3) The circulation of BerkShares encourages money to remain within the region, building a greater affinity between the local business community and its citizens. BerkShares serve as a tool for community economic empowerment and development toward regional self-reliance. Under the current high energy, long supply chain globalized model of economics, we see an outflow of funds from local communities to centralized hubs where wealth is concentrated. This centralization results in loss of circulation of funds within local communities and a further concentration of wealth to a few. Liquidity escapes from the local system by means of debt funding. When debt is repaid, often to larger centralized financial intermediaries controlled by shareholders, this creates a vacuum. Funds are removed from local economies and distributed to remote lenders who usually have little or no connection and involvement in the local community. Re-localization is often cited as a primary objective of local currencies.
The Bristol Pound, launched in 2012, states their key objectives as supporting local independent traders (“keep our High Street diverse and distinct”), and boosting the local economy, since “spending Bristol Pounds stops money leaking from the area.” These are objectives shared by all local economies (and arguably by any sub-economy with an identifiable identity such as a developing country). (4) Unlike traditional currencies issued by governments or central banks, the potential advantages of this kind of alternative currency is in its decentralization.
The lack of faith in both central banks and financial institutions will help promote a gradual shift in the way we manage and store value, hence it is likely we will see more local and alternative currencies popping up. There are currently thousands of local currencies in circulation around the world outside the national money supply, from Africa, through Asia to Oceania, to Europe to North America. Various communities have taken a stand and established successfully working local currencies. Other communities are experimenting with the idea to help exert greater control over their economies. Local currencies help build support, community, and resilience by fostering re-localization. While alternative currencies are not a cure all, they do enable local communities to continue to exchange and transact when national currencies fail. Source: excerpts from Rethink...Your world, Your future. (1) http://www.hillsdale.edu/document.doc?id=1987 (2) http://www.resilience.org/stories/2006-01-30/local-energy-local-currency-local-power (3) http://www.berkshares.org/how_to_spend (4) http://www.resilience.org/stories/2012-02-17/challenge-re-localisation .
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