Local Currency

Over the weekend, I attended a presentation by Steve Burke, the man who invented Ithaca Hours– a local currency advocate on the virtues of a local currency. Its an interesting move to medievalism. It disturbed me enough into blog posting.

A local currency is not a new concept. historically every medieval european potentate issued his own currecny. most indian royalty isuued currecny local to them. Every credit card transaction..and every virtual money transaction is a fungible(transferrable into US dollars) local currency. So what is so different about ithaca hours?

 

Ithaca Hours

The concept is very simple. Ithaca hours are issued by a central issuer in Ithaca(New York) and promises to pay  one hour of the issuer’s labor in exchange for the note of “an Ithaca hour”. I can therefore take an hour’s bill to , say, a plumber , who will work for an hour at my home and take the ithaca hour as currency. now that he has the ithaca hour, he can go to a restaurant in Ithaca , that accepts the ithaca hour, and eat a meal, the restaurant can then use it to get its pipes fixed..or its washing done …or its deliveries taken care of.

The economic fundamentals of a local currency

The effect of having a local currency work for a city is that the barter trade is monetized effectively. most small towns function on a barter system that have economics independant from the dollor and cent economies that include credit cards and instalment payments(and inflation). Often my need for a loaf of bread,which can be locally supplied, is independant of what I can charge for my labor, In other words, no matter who pays me what, I still need to be able to feed myself and am willing to work for this . also, if I can accumilate enough earned “subsistence barter wages” I am safe in a hyperinflationary world.

 

Hyperinflation 

 The textbook case for hyperinflation goes back to the weimar republic when a well and truly screwed up german central bank, in the Mid 30’s issued currency which , between the morning and the afternoon lost half its value. people went back to barter trade and the money became worthless as it was printed.

Are there fears that this will happen in the united states with the latest administration taking on enoromous quantities of debt?

US federal debt

 

America’s federal debt is expected to grow to $ 11 trillion at the end of Obama’s Stimulus bill. with this, the Government component of the gross domestic product is likely to be about $ 5.4 trillion.(about half the US GDP- of every dollar spent in america the federal government is a counterparty EVERY SINGLE TIME) The fear in the boonies, therefore is a legitimate one. with the government controlling so much , it is easy for value to be manipulated stolen taxed or converted into federal ownership. Obama is , after all, a “tax and spend liberal” an anti rush limbaugh . maybe the anti christ.

The virtue of a local currency

a local currency is , however much more than the sum of all our fears. It is a way to price a local economy of goods and services independantly of the national economy for them. An national Angies list of plumbers is useless if I only want a plumber within the 25 mile radius of my house. A functioning local currency provides me not only a benchmark for local apples and local restaurant meals, it also gives me an indication of what local labor and services are higher priced and which available. A valuable guide for living locally.

And local is a misnomer. Walmart can issue a local currency for its shoppers/suppliers and it would be a functioning universe complete with a central bank and currency fluctuation. A group of university town can issue a local currecny to price the value of books services and lodging it can provide to its students(who might pay in “university hours” for tution). A tourist map may provide the local currecny for a backpacker working hiw way through a round the world trail….thus a local currency in an increasingly global world is an idea well worth pursuing if only to maintain economies independant of supply and demand shocks that need not directly impact them.

 

The question of legality This comes up not only on count of the central bank’s ability to regulate a local currency (if a mexican drug cartel issued a local currecny, would it be an illegal one?) and taxation(how would you tax and pay taxes in a local currency? would you work off your tax burden by cleaning the IRS toilet for two hours?)  but also in terms ot the legality of small things.  who prices the value of labor? what is the quality of labor certified in the local currency? there is also the question of how one person/ business that is much in demand being able to wipe out the currency from the city by , quite suddenly owning all of it, and the inevitable question of how a corrupt local central bank can enrich itself and pretty much enslave all it’s constituents by flooding the market with spurious “ithaca hours”

 

Takeaways

The takeaways from the thought experiment about local currencies is that it is possible to develop a sense of the local by promoting them as a tool to monetizing the local economy and pricing local goods and services. It helps keep local goods valuable in times of economic stress and hyperinflation, and maybe seperate out needs and suppliers that are local (where economic interdependencies are unnescesary) from those that call for nescesary interdependancies with a national economy. They also encourage the formation and maintanance of local market structures and in the age of the Internet, they can be used to maintain markets that are local to an Idea and an interest rather than merely to a geography.

A local currency can also be a guide to which part of our mega economies are overheating and can be a valuable tool used to isolate the problems caused by crisises such as the mortgage crisis, pretty soon. People could go dollar bankrupt with more ease , because they could subsist on their labor hours.

 

Interesting times call for interesting strategies.

Advertisements

About rameshram

Name : Ramesh Ram... Email Address : Cdrakenc@gmail.com (don't even ask) Blog: (never updated) http://ramesh.journalspace.com Height/ Weight: 6'1 175 (varies between 160 and 185) Color of hair/ eyes black/ brown Bald? Nope (not yet, but give me 20 years.) Interests: Film (Bollywood/international indie), Travel (Germany/Japan/Central America/Sout/east/west Asia/ Northern Africa), Gizmo geek, Clubbing... What do I like in a good movie?: Women, Music, Auters, Special effects, Style. What do I like in a bad movie?: Women, Music, Auters, Special effects, Style. Favorite Critic: International: Bazin Domestic: J Hobermann Indian : me. (noone else comes close ...India or here..) Best quality: Humility. Outspokenness. Warmth Worst quality: Intolerence Favorite color : Yellow Black Blue Favorite Perfume : men: Grey Flannel(Geoffery Beene) Women: Celine dion: Obsession Boxers / briefs : Boxers Did I inhale: And how! Author: Marquiz, Rushdie, Murakami, Jong Last Book: The Ethical Slut by Dossie Easton, Catherine A. Liszt Music : Patricia Kass, Alejandro Sanz,Nina Simone, Amir Diab Sports person: uh..me? What am I usually in : White briefs and tees. Chianti or Burgandy: Chianti Food: French Japanese(street/fast food). Saw and liked: No Country for old men, Lust Caution Saw and disliked: Nishabd Didnt see: Aaja Nach le. Call me: Write me first.
This entry was posted in Uncategorized. Bookmark the permalink.

7 Responses to Local Currency

  1. I think local currency sounds good. I’m not an expert on economics and I don’t understand how the economy works, but shit, this sounds good.

  2. Mark Herpel says:

    I enjoyed reading your post and you have some good information and questions. However, you have quite a bit of wrong information and conclusions. Paul Glover (http://www.paulglover.org/) invented the Ithaca Hours, not Steve. The Federal Debt has already pasted 12.8 Trillion:-) [we are screwed]

    “It is a way to price a local economy of goods and services independantly of the national economy for them.”

    This is not really true at all, there are many types of local currencies, some like Ithaca that are based on hours (labor) and some that are backed on USD on deposit in the local bank like Berkshares.org Still others require an tax stamp to stay current, but in all cases the price of local goods does not change. Local merchants will accept USD fiat currency or local currency for goods and the price is the same. Using a local currency does not isolate the merchant or the goods from the greater world of trade nationally or globally.

    If you can think if a local currency as a coupon or gift certificate. You buy your goods and the clerk may say “do you have any coupons to use” and you might then use local currency instead of or alongside national currency. Some communities will only accept local currency for a part of the total price, like up to 50% of the checkout, in that case the local currency note is truly just like a coupon.

    Walmart could never issue a local currency. The concept of keeping it local is to use local shops who will in turn, respend the money at other local shops, the revenue stream stays local because the money is literally no good beyond the community. You can’t take it to another state or country, it’s no good. Spend $1 of local currency at a shop and that money re-circulates in that community. Spend $1 at Walmart and $.90 cents immediately leaves the area for Walmart headquarters, bank accounts in other states and ultimately China. They don’t respend that $1 with another local store. If Walmart had “Walcurrency” for their shoppers as you propose, it might be considered a local community currency for China because 90% of it gets respent in China not locally.

    Community currency is an excellent idea and we publish a monthly magazine for it online, Community Currency Magazine. 🙂

    Mark Herpel
    editor@ccmag.net

  3. rameshram says:

    Mark,

    Thank you for your wonderful comments here. I stand corrected that steve burke invented Ithaca Hours.

    The discussion about how local currency works in ithaca is , also as you say like a clipout coupon. however, this is not the way it works in all areas it is tried. for instance, we had a german academic who brought out his experience of working with a coop structure in germany where, in a few local towns the local currency was used as the medium of exchange and the national one as a medium of storage and he said that the coop grew to be quite a poerful central bank in these places.

    I had also never implied that the price of local goods changes solely on the basis of issuance of the local currencny, although it can be one effect of doing a parelell trade in local currencies denomenated on local hours.

    As regards walmart, If you read my piece carefully, the definition of “community” has changed after the internet , in a way that it is possible that a person that works at walmart can also be a walmart shopper/supplier and can
    thus be(whether in china or in the US) part of walmart’s community. his purchases in a putative walmart issued currency can be paid for by the goods /services he sells to walmart ,with a pricing dynamic all its own. So do you see that the concept of itaca currency can be taken and applied to any self sustaining economic universe, given that the world is now so interconnected?

    I do understand that the local currency initiatives, currently in the US are predominantly geographically local, but this does not prevent them from being “local ” in more global ways, and to me this is the challenge and opportunity in local currency.

  4. Jct: Best of all, when local currencies are pegged to the Time Standard of Money (how many dollars/hour child labor) Hours earned locally can be intertraded with other timebanks globally!
    In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
    U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
    See my kingofthepaupers youtube channel

  5. rameshram says:

    and my point being , of course , that this iss one way of addressing those iniquities-make your sweatshop a community paid in hours of ‘local currency” with which to buy a sustinance lifestyle for your “community’.

  6. arevamirpal says:

    You can also take a look at the prison economy, where “fiat” money has no value and not used. Inmates use honest money like a can of mackerel, pack of cigarettes as medium of exchange.

  7. wemitchell says:

    Weimar hyperinflation was in the early 1920s, not the mid-1930s.

    You’re right that local currencies are — like gated communities — a move toward medievalism. They signal the erosion of central government.

    Local currencies enable tax fraud by making it impossible to track cash flows. Contrary to popular belief among the guns-and-ammo subculture, you do owe tax on earnings, regardless of the medium of exchange. Even barter.

    So alternate currencies are basically parasitical on the US — they permit people to enjoy the benefits of the legitimate tax base, while not paying any of the obligations.

    I agree most tax money is wasted, but fraud is not the way to fix it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s