How to Enhance Local Economies with Local Currencies

Local economies are plagued by a continual drain of internal capital that is used to purchase goods and services produced outside the region. The situation is very much akin to a country that must import all its vital necessities, such as food, energy resources, and other raw materials as well as finished goods, machinigery, low, medium or high technology, medicines, medical treatment, medical treatment facilities. Almost any necessity we may think of could be produced locally or imported from outside the region. The difference is both crucial and instructive. The list does not matter but the principle does: a food gown locally, a good manufactured locally, a service provided locally do more than keep the existing wealth base. It expands it by creating and driving internal demand which will in turn generate internal investment and production. There is a multiplier effect to capital that is reinvested. One approach certain communities have adopted is to create a local currency that is sponsored by local business that in turn pledge to accept this locally branded currency as fair exchange for any goods, services provided. This currency has an actual exchange value to the sovereign currency, which local businesses and participating banks all honor.

Difficulty: Challenging

Instructions

1. Enlist local banks and businesses to accept a locally circulated note.
   Spearhead drive through a sponsoring organization, in tandem with local chamber of commerce.

2. Create a central issuing facility for the local currency. Declare the mission and charter purpose for the currency. Refer to precedents, influences and goals for the issuance of he note.

3. Peg the note to a ratioed number of U.S. dollars, which will remain fixed at a premium level.

4. Denominate local good, services and wages in the local currency price, to the greatest extent possible. Offer parallel wage and price exchangeability to facilitate transactions and liquidity.

Tips & Warnings

• One example: Berkshares, a currency circulating in central and western Massachusetts, named for the Berkshire mountains that grace the region, branded with the same name. Berkshares are pegged to 90 cents on the dollar. Because they are discounted the dollar (by 10 percent) it takes B1.1 to exchange for $1, the dollar is always worth 10 percent more, which means there is always that incentive for local banks and businesses to circulate and accept Berkshares, because at any time they may redeem there for an equivalent 10 percent in US currency.
• Serious caution should be taken in establishing a debt market in the new currency. The strict exchange rate may be challenged by fluctuations in interest rates of the primary national currency.

Resources

• Local currency mission
• Berkshares Inc