What is it and would it be good for Fayetteville?
By Shelley Buonaiuto
What do you know about local currency?
Wikipedia defines it as: “A currency not backed by a national government (and not necessarily legal tender), and intended to trade only in a small area. These currencies are also referred to as community currency, or complementary currency. They encompass a wide range of forms, both physically and financially, and often are associated with a particular economic discourse.”
Paul Glover, who founded Ithaca Hours, one of the most successful local currency systems in the country, will be in Fayetteville next month to talk about the system. He will speak at 7 p.m. May 9 at the Unitarian Universalist Fellowship, 901 W. Cleveland St. in Fayetteville.
Glover says that while domestic jobs are being lost to globalization, the U.S. is being rebuilt by grassroots initiatives and practical programs that create jobs dedicated to ecology and social justice. How is this being done? By creating wealth locally, and producing what people need.
Ithaca Hours began in 1991 in Ithaca, New York, when a massage therapist wrote his name at the top of the first sign up list of people agreeing to accept Ithaca Hours. The currency is called “hours” because it is based on an average 1991 wage of $10 an hour, and is worth roughly $10.
Ithaca Hours come in several denominations from a quarter hour up to two hours. It is printed on paper made of cattails or hemp with thermal ink, is numbered and signed, and is said to be more difficult to counterfeit than the dollar. It is taxable, deductible and as long as it doesn’t look like the dollar, is legal.
Two thousand individuals and 300 businesses are in the Ithaca Hours network. There are monthly barter potlucks where decisions are democratically made about the amount of Ithaca Hours to issue. They also offer grants totaling 9 percent of the total currency to local non-profits, and democratically decide the recipients. Beyond being a venue for handling managerial questions, the barter potlucks are a way to deepen the sense of community and negotiate new bartering arrangements.
Micro-loans of Ithaca Hours are also offered and a health insurance plan has been initiated. The currency can be bought from a local credit union, and those who participate are given an “hour” when they join the network.
Local Currency in the 1930s
During the Great Depression in the 1930s, local currencies in the form of stamp scrip sprang up. This scrip had a number of squares on the back where each week a new stamp—which could be bought for 2 percent of the face value of the denomination—had to be placed in order for the scrip to maintain its value. This is called a demurrage charge, and has historically been assessed on local currencies. A demurrage charge also covers cost of managing the system, and increases the rate of flow, since everyone wants to spend it before they have to add the stamp. Modern currencies assessing a demurrage charge could do this with a computer program.
These local currencies were so successful during the depression that a bill was proposed to create a national complementary system, but President Roosevelt wouldn’t allow it because he considered it a threat to the central banking system.
Two earlier presidents, Thomas Jefferson and James Madison, were opposed to central banking. Over the years, experiments in local currencies and central banking were tried. Central banking and the requiring of interest payments on debt led to boom bust cycles, and lack of proper oversight on local currencies led to banks failing.
In 1863, the U.S. Treasury took over the issuing of money, partly to fund the Civil War. In 1913, the Federal Reserve was created in an effort to provide some stability to prevent boom bust cycles. It gave the power to issue money to a private corporation, a group of 12 banks, which centralized the economy, but failed to prevent the boom that led to the 1929 stock market crash and subsequent depression.
Movement Afoot in Fayetteville
After the recent boom that was fueled by speculation, unscrupulous lending and deregulation and the nature of the centralized currency system, the U.S. is again facing a bust, the worst since the Great Depression. People are losing homes and jobs and the U.S. dollar is backed by trillions of dollars of debt.
It is in the nature of local currency to spring up in such times and here in Fayetteville, bartering is starting to flourish. There are organic and impromptu negotiations, trading labor for rent, canning for apples, this for that. A barter club has offered to keep records in a Local Exchange Trading Systems-type setup for $25 a year. LETS are local, non-profit exchange networks in which goods and services can be traded without the need for printed currency.
An exploratory committee has formed in Fayetteville to examine models of local currencies, complementary to the official currency that can extend the ability to meet consumer needs without hard-to-get dollars.
The committee is studying theories of local currency, the types of systems that have been most effective and what could be most beneficial to Fayetteville. The committee is also looking into the pitfalls and difficulties that may be encountered.
Any system would begin with just a few Ozark Hours, develop slowly and experimentally to establish trust among participants and gauge effectiveness.
Why Local Currency
Local currency keeps resources in the local area and encourages a more sustainable attitude toward the environment. Local currency can only be used in the local area and facilitates transactions that may not otherwise take place, connecting unused resources to unmet needs.
According to some economists, since it can’t be used as a store of value, it keeps moving, creating more demand and thus more jobs. It also encourages more long-lasting resources as stores of value.
Economist Bernard Lietaer an economist, money manager and co-author of “The Future of Money: Beyond Greed and Scarcity” has written that “interest on money constitutes one of the most systematic causes of our destruction of the global environment….it literally pays to cut down a tree and put the proceeds in a savings account instead of letting it grow for another decade or so.”
Lietaer says that local currency adds an economic incentive to our already moral, ethical, spiritual and practical need to conserve our resources and that community currencies are the necessary element of diversity that can provide the resilience that is missing in our overly centralized banking system.
Local currency provides opportunities for interactions and interdependencies that work to heal community breakdown. People who are dollar-poor can engage in beneficial trades by monetizing their labor time. These are transactions that might not happen without local currency; no economist would deny that this represents an increase in productivity.
Shelley Buonaiuto is a member of the steering committee studying local currency.
Find Out More
The local currency exploratory committee is a joint project of Fayetteville Friends Meeting, the OMNI Center for Peace Justice and Ecology and the Transition Towns study committee.
Last year the Friends Meeting began collecting “gifts and needs” of the members to prepare for bartering. Some members began studying local currency and discovered that others in the community were also concerned about the economy.
The Friend’s Meeting and OMNI are sponsoring Glover’s visit to Fayetteville to learn more about how to create and manage a local currency system. The Transition Towns committee is studying a model being developed worldwide to transition communities toward sustainability.
Anyone who is interested should attend Glover’s talk and can contact Shelley Buonaiuto at 445-6567 or email@example.com about how to become involved. The exploratory committee is seeking input from people who are experienced with all aspects of local currency systems. There will be a vegetarian potluck at 6 p.m. May 8 at United Campus Ministries at the corner of Maple and Storer streets in Fayetteville.