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Source link: http://archive.mises.org/11675/local-businesses-creating-local-currencies/

Local businesses creating local currencies

February 15, 2010 by

The USA Today reports that a “small but growing number of cash-strapped communities are printing their own money.”

The oracle for the nation’s news insists that the printing up of local currencies “help consumers make ends meet and support struggling local businesses.”

But, one of the people commenting on the article makes the point: “But the long and short of it is that it doesn’t cost the business or the customer anything more – likewise it doesn’t save them anything if they use the Chamber Bucks.”


Eric M. Staib February 15, 2010 at 3:54 pm

Sounds great, and I support any choice in currency, but it’s lamentable that people using them believe in the destruction of the division of labor:

“This will strengthen the local economy. … The nice thing about the Plenty is that it can’t leave here.”

This old mercantalist proposal has been disproven over and over yet keeps being resuscitated by people who don’t understand the market but who feel empowered to exercise authority over it. Damned democracy!

Bogart February 15, 2010 at 3:59 pm

You missed the best statement in the article. One for the ages. The spokes person for the Bureau of Engraving and Printing says “We print the real thing.”(meaning Federal Reserve Notes)

How fake can you possible get: Argentine Pesos, Russian Rubles, Weimar Marks, Zimbabwae Dollars, etc.

Mitchell Powell February 15, 2010 at 4:38 pm

The mercantilist position is a sad misunderstanding. Putting up a fence around one’s community would also keep money in, but it would be just the same sort of bad idea, because in the end people don’t need money for itself, but rather for its ability to help people get their hands on goods.

But the fact that the Chamber bucks are being offered as a free alternative choice only for those who choose to use them, and they are not being imposed by force, makes me inclined to smile at the whole endeavor as at worst benignly misdirectly and at best the beginning of helping some people to rethink the meaning of fiat currency.

skeptical citizen February 15, 2010 at 4:53 pm

Why let consumers buy a newfangled currency at a 5% discount, instead of simply giving them a 5% discount on merchandise?

What a waste of time.

Eric M. Staib February 15, 2010 at 6:48 pm

I’m looking forward to the follow-up story about cities changing their currencies rates of exchangeability with dollars.

How long until the Plenty sells at $1.50!? :-)

Thinker February 15, 2010 at 7:07 pm

If I recall my history right, something very similar to this happened during the Great Depression. Maybe the current situation isn’t quite as rosy as all the marvelous statistics and brilliant economists are telling us…?

Ridiculous, I know.

Bob February 15, 2010 at 7:29 pm

The USA article is dated. I’d like to see an update of the progress (or not) of local currencies.

These local programs are not new to small towns. Often run by the local CoC, they generally run at key times like Christmas and fair time. Paying with local bucks is someting you want to be seen doing to support your town so there are lots of overtones to the programs.

Bob February 15, 2010 at 7:38 pm

Didn’t the mint do this recently? – They offerred free shipping of their new dollar coins and allowed credit card payment. The cc points effectively discounted the USD and there was quite the chatter of those scamming the program. Though the intent was to get coins in circulation, one could argue coins are a “local” (in the US) issue and intended or not it was a program that encouraged US shopping.

Bruce Koerber February 15, 2010 at 9:18 pm

Someone tell these communities to initiate free banking in their communities. Free banking would be the most efficient means to attain the same ends.

Eric M. Staib February 15, 2010 at 9:42 pm

“Someone tell these communities to initiate free banking in their communities. Free banking would be the most efficient means to attain the same ends.”

The problem with that is money would start to flow in from all over the country and los federales would intervene and kick the city around.

TokyoTom February 15, 2010 at 10:50 pm

While local currencies may have mercantilist overtones, such tones are a manifestation of the simple fact that the currency represents nothing more that the good faith of people in a particular community, which would break down at large scales.

Eric M. Staib February 16, 2010 at 1:06 am

“the good faith of people in a particular community, which would break down at large scales.”

Which is why gold and silver should be allowed to triumph.

[Which is also why communism, when attempted beyond the scope tiny villages and groups, is always enforced with weapons and threats.]

Jim Chappelow February 16, 2010 at 7:34 am

Fox has a more recent story on this. It says accounting records still have to be kept in dollar terms for tax purposes and coins are not allowed. Legal tender laws ensure that no private currency will ever be able to compete with federal reserve notes beyond this kind of small-fry, local basis (at least as long as the law is enforced).

Bruce Koerber February 16, 2010 at 8:40 am

Now Is The Time For Communities To Intiate Free Banking!

“Someone tell these communities to initiate free banking in their communities. Free banking would be the most efficient means to attain the same ends.” This is part of the economic solution – trying to discover the best means.

Since economics and ethics are inseparable the communities also need to take some ethical steps. The principal ethical step would be clearly defining and refining property rights. There is no ethical reason that the property rights associated with free banking cannot be clearly defined. These property rights can continually be refined over time.

Once this happens – the property rights associated with free banking are clearly defined in the community – the prospect of success at keeping the monetary monopolist away depends on the public resentment towards the violation of human rights. Property rights are human rights.

The mood of the people in the U.S. is increasingly intolerant of the violation of human rights by the unConstitutional coup. In other words, now is the time to initiate free banking in communities.

Curious February 16, 2010 at 12:00 pm

sceptical citizen said:

“Why let consumers buy a newfangled currency at a 5% discount, instead of simply giving them a 5% discount on merchandise?

What a waste of time.”

I agree. This is not free banking. This doesn’t make any sense.

augusto January 31, 2011 at 8:31 pm

No, it is advertisement.

Get all members of the local Chamber of Commerce to agree on a 5% discount campaign for a month. A week after it’s over, it’s past, it’s history.

Print some funny money that guarantees a 5% discount on local stores, and 50 years from now there will be collectors from all corners of the country talking about.

Gene Berman February 16, 2010 at 7:22 pm

One of the vulnerabilities of the described system is that, to the extent that the communities involved are in states that have sales taxes, the state will insist that these be paid to the full extent of the ordinary $ price of the goods or services involved–and that the sums due be paid in the lawful currency. The whole system will end up causing its users far more in such headaches than might now be imagined. I wouldn’t put it past some states to even consider the transaction which puts
the private currency into circulation a “sale” on which sales tax falls due.

If I walk into a store, hand over a dollar, asking for change in quarters, there are probably states that would like to tax that “sale” to the 7-8% extent that they’ve got; they can’t–simply because lawful money doesn’t get “sold”–it gets “changed” for its equivalent in other pieces of the currency. That very well might not be the case with these private currencies. The proponents might be able to get their stuff exempted from tax but they’d have to get the legislature to mandate that treatment.

By and large, it seems like an entirely puerile exercise.

Dick Fox February 17, 2010 at 9:04 am

This is silly. I can buy “currency” like this from the Boy Scouts when they raise funds by selling coupon books. I can buy gift certificates for a store, a group of stores, or any purchase I want.

This whole thread reveals how poor monetary education really is. The reporter with USA Today is extremely confused.

If you were sucked in you need to develop more skepticism. I am even surprised it is posted here.

KingofthePaupers March 7, 2010 at 6:04 pm

Jct: Why represent our collateral with their chips for a fee? (interest)
When we can represent our collateral with our chips for free?

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