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The use of local currencies are flourishing amongst an economic crisis.
Last month, the US reported that the GDP dropped at an annualized rate of 33% in the 2nd quarter, the biggest drop in American history. With small businesses closing in the tens of thousands and the unemployment rate reaching numbers not seen since the Great Depression, small towns and cities are looking to complementary currency to combat their economic strife during the Covid-19 crisis.
This alternative form of currency, most often not legal tender, is used to supplement or complement national currencies. More specifically, community currency is a type of complementary currency used within a specific region that has certain social and economic goals paired with its usage. Participation in a local currency program can be determined by obtaining a membership or going through an approval process, or is sometimes awarded in exchange for services. Often valued at the same rate as the national currency, a local currency is restricted to the confines of the region, and the most common usage is to purchase local goods and services that have agreed to participate within the program.
Over 4,000 systems of complementary currency have been recorded in the world to date. Two of the most successful modern programs are the Bristol Pound, used in Bristol, UK, and the BerkShare, used in Berkshire County in Massachusetts. Obtained at local banks by exchanging USD at a rate of 95 cents per BerkShare, the BerkShare can be spent at face value at over 400 participating businesses in the region (i.e., 10 BerkShares can be used for a $10 purchase), and in exchange, locals receive a 5% discount on their purchases.
The use of a complementary currency can help increase cash flow throughout the community and boost local commerce by keeping capital within the region. It can also increase philanthropy, as some programs grant their currency to those that participate in volunteer work, such as the Japanese Fureai Kippu, or “Caring Relationship Tickets.” This time-based cooperative sectoral currency is awarded to those who provide services to the elderly not supported by insurance or government funded programs. Participants can then use these tickets to obtain care for themselves when they get sick, or transfer them to the use of elderly relatives.
BitCoin is considered an alternative currency, though it is not considered to fall under the umbrella of complementary currencies, as no social or economic goal is explicitly being pursued through its creation and usage. Cryptocurrencies generally fall into the same category of Bitcoin, though as programs evolve, that may be changing.
In the past few years, the general decrease in the use of physical cash has caused some complementary currency programs to slow. To combat this, the city of Hull in northern England has created the first fully digital complementary currency, the HullCoin, for citizens to earn through completing volunteer work and spend at local businesses, and more programs are sure to follow suit.
As Government Aid Slows, More Towns are Printing their Own Money
As the Covid-19 crisis wreaks havoc on local economies and the fate of upcoming federal aid remains in limbo, more and more cities are looking to take matters into their own hands. Tenino, Washington is using a local currency in a grant program similar to food stamps, giving up to $300 a month in the Tenino “wooden dollar” to families that are experiencing economic hardship due to the current crisis.
The Tenino wooden dollar originated during the Great Depression, when the city’s only bank failed and all accounts were frozen. The town’s local newspaper publisher thought to use his printing press to create their own currency, and as Tenino was a logging town in the Pacific Northwest, wood was more readily available than paper and the wooden dollar was born.
Today, the Tenino wooden dollar is being printed in $25 “bills”, using the same 19th century letterpress that was used in the original production and currently resides in the town museum. The use of wood in the 2020 reboot is a nod towards the city’s history and its use of the currency in times of hardship.
Many US cities are following Tenino’s lead and starting their own local currency programs, and cities around the world are doing the same. Castellino del Biferno, a small town in southern Italy with only 550 residents, has been printing and using their local “Ducati” banknotes since the spring, encouraging its residents to spend locally in an effort to save their local economy and provide hope and camaraderie within the community. Every two weeks, the local businesses can exchange their Ducati at the town council for the corresponding amount in euros.
As the use of complementary currency often coincides with economic downturn, its current prevalence may fade as the global economy improves. However, there are many other kinds of complementary currency that exist today and contribute to the well-being of a community at any economic state. Bartering programs have long been used in different societies, and certain European companies use a cap and trade system for regulating the legal use of carbon.
Here are some other examples of complementary currency around the world and their unique programs:
Most of the problems that have arisen for complementary currency programs involve funding and operating costs. Some programs are able to counter these costs by charging transaction fees to the consumers or businesses that take part in the program, or by paying their employees in the complementary currency itself.
The Philadelphia Equal Dollar was once a successful, nineteen-year program that eventually shut down when it could no longer maintain its $300,000 annual expenses, and the Ithaca HOUR program stopped when Paul Glover, the community organizer who created the program and oversaw its operations, moved away from the region.
The fluctuating usage of some currencies also end up being their downfall. When enough people are not participating in a program and the currency stops circulating within a community, the program can no longer work at its fullest potential, and will most likely fold.
As the entire purpose of complementary currencies is to spend them within a specific region, and are only exchangeable for USD in specific circumstances set by the program, these currencies essentially have no worth outside of their borders. However, some complementary currencies that have historical or social significance have gained the interest of collectors and are now worth much more than their initial value.
The Tenino wood dollar, for example, has been a coveted rare collectible for years, and interest in obtaining one of the elusive wooden dollars has peaked now that it has returned to production. Some recipients of the current grant program have reported receiving offers for their $25 wooden notes as high as $300, twelve times their value.
So, the next time you’re planning a trip, be sure to do your research and see if there’s a local currency in place that you could try to get your hands on. You never know what will become an important part of history and be a jewel in your collection!
Recent news of coin shortages around the country have joined the list of unexpected side effects of the current COVID-19 crisis. You might be wondering what these coin shortages actually mean.
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