Saturday, February 20, 2010

STRUGGLING TOWNS BEGIN PRINTING THEIR OWN CASH

STRUGGLING TOWNS BEGIN PRINTING THEIR OWN CASH

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In an echo of the Great Depression, local currencies with their own special flavors are popping up all over in attempts to give commerce and communities a lift.

Last year, two Detroit businessmen were bemoaning the local economy—no one in the city had cash, and when they did, they spent it in the suburbs. Then the pair hit on a solution: Print their own money. Thus was born the “Detroit Cheer,” a local scrip accepted by a handful of city businesses, including a pizzeria, an electrician, a few local pubs and a doggy day care center.

Residents can also exchange it at a few area bars for greenbacks, but the cheer is vastly more colorful. It features a chiseled Greco-Roman superhero (the Spirit of Detroit) towering Godzilla-like over the city skyline, cupping a tiny family in one hand and a sunburst representing God in the other.

Detroit isn’t the only city sporting its own currency. Since the market bottomed nearly 18 months ago, there’s been an interest in local scrips not seen since the 1930s Great Depression. Law professor Lewis Solomon states in his book, Rethinking Our Centralized Monetary System, that there is no legal prohibition to creating a local currency system in the United States.

The IRS, FBI, Secret Service, Federal Reserve and Treasury Department have all declared the printing and use of local currencies to be legal.

Residents in tiny North Fork, Calif., just launched the North Fork Share and folks in Piedmont, N.C., spend the newly issued the “plenty,” a currency depicting colorful local flora and fauna. Brooklyn, N.Y., is preparing to launch the “torch,” while South Bend, Ind., is set to print Michiana Community Currency that will be commonly known as “MACs.”

Susan Witt, the executive director of the E.F. Schumacher Society, a Massachusetts think tank devoted to decentralized economies, says she gets calls daily from towns across the nation looking to join the movement.

In most cases, these communities are simply looking to boost local commerce. The currency has to be spent in town, obviously, because it’s worthless anywhere else. But a growing distrust of the U.S. dollar is also at work.

When the Treasury floats billions of bonds to get money to bail out banks and automakers, people look for alternatives. “These folks may look nutty now,” says one advocate of the alternative systems, “but wait until the dollar goes the way of the Argentine peso. Then you’ll gladly exchange your wheelbarrow of cash for a handful of our local currency.”

Towns often find the scrip flowing to the local food co-op, which soon complains that suppliers won’t take it. Until Piedmont’s “Plenty” was reissued with the backing of U.S. dollars, it was kept alive mainly by the local biodiesel seller, who used it to pay his interns.

There have been a few successes, though. The western Massachusetts “Berkshare” is accepted by an estimated 400 businesses and has circulated to the tune of $2.5 million—not bad for a region with 20,000 residents. The “Hours” currency, issued in Ithaca, N.Y., has been so entrenched for years that the local transit system is planning to accept it.

Still, University of Southern Maine sociologist Ed Collum says his study of 82 local currencies revealed a disheartening 20 percent survival rate.

Another system that has been around for decades is the barter organizations that use “trade dollars” to balance an uneven trade of goods and services. For example should Joe trade his motorcycle for Sam’s car worth $1,000 more, a deposit of 1,000 barter (or trade) dollars would have to transfer from Joe’s barter account to Sam’s, in order to balance the deal.

The bottom line is that people see the inevitable happening and are looking for their own solutions rather than depending on government.

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