Microcurrencies

When thinking about zones and economic, there is usually a big hurdle.  Our currency is national.  Several groups have tried to create a local currency and associated business loan programs.  This is a tough sell for me.  I’ve read of local currencies, or microcurrencies, but feel that they are mostly feel good efforts, rather than meaningful projects.

 This is is a concept of issuing a local microcurrency to be used in place of the almighty dollar for local business transactions.  The problem that I have with the concept is that they seem tied to the dollar as valuation.  The only useful aspect that I’ve seen is that the issuing agency can make microloans to environmentally sensitive entrepreneurs.  

 

The most nle example that I have found is Berkshares, Inc., a Massachusetts based microcurrency.  www.berkshares.org.  Once again, this operation is not pure, as it relies on local banks to handle the money for them. 

 

Here is how it operates, as I understand it.  An individual can exchange US dollars for Berkshares at the rate of $9.50 US for $10.00 BS.  If they cash out, they get the reciprocal rate.  Merchants who sign on, will take the Berkshare dollars as US dollars.  There is no coinage, so fractions of a dollar are paid is US coinage.

I see this as a 5% loyalty discount being offered by the merchants.  In my area several non-profit organization have arranged for 10% discounts for their members at selected retailers, whenever they show their membership cards.  These include art associations and sewing guilds.  How are Berkshares different?

A proposal has been made that Berkshares be pegged to a basket of local goods in order to insulate the local economy against volatility in the US dollar. This might make Berkshares a truly independent currency, otherwise I don’t get the point. Still, how is the basket of goods valued?  If it is in US dollars, we are back to square one.

I’ve read of barter societies, groups of people that exchange goods and services through an electronic credit system.  Perhaps a microcurrency could be used as a medium of exchange in this type of barter system.  The system would have to be closed and operate in parallel to the US dollar system. 

An advantage to this type of system is that it discourages growth for the sake of growth.  It makes no sense to produce more that your market can consume.  It would also encourage product differentiation, thus reducing direct competition for market share.

In researching this topic I found Creating Sustainable Societies, by John Boik.  This book is available in print from Barnes and Nobel or Amazon $16 or in Kindle format for $7.  You can also download a free PDF version (donation requested) from www.principledsocietiesproject.org.   When I work my way through this book, I will have more to say about this topic.  Expect this several months from now.

I’m asking all readers for input on this or any aspect of economics that follows the permaculture model.