Today most money around the world takes the form of fiat currency: Currency that has no intrinsic value. Fiat money is only valuable because people believe it has value. This raises a question: Couldn’t a group of people get together and agree to accept some differently-decorated pieces of paper as money? Yes, actually, they could, and communities around the US have created their own local, taxable, legally valid currencies, especially in the last few years.
Local currencies are created to encourage people to buy locally produced goods from brick and mortar stores and foster a sense of community. In principle, a widely adopted local currency could lead to a self-sufficient regional economy, where dollars are phased out because no one is buying goods and services from outside the community. That’s never happened, of course, but here are some notable efforts to create local economies.
The second-oldest valid currency in the US (after the dollar, of course), is the Ithaca HOUR. The currency was established in 1991 by community activist Paul Glover and is modeled after the value of an hour of work—one HOUR is worth $10, which is what Glover reckons is a fair hourly rate for unskilled labor. What sounded like a whimsical experiment turned out to be surprisingly sustainable. There are about $110,000 worth of HOURS in circulation today, according to an [essay by Glover](The second-oldest valid currency in the US (after the dollar, of course), is the Ithaca HOUR. The currency was established in 1991 by community activist Paul Glover and is modeled after the value of an hour of work—one HOUR is worth $10, which is what Glover reckons is a fair hourly rate for unskilled labor. What sounded like a whimsical experiment turned out to be surprisingly sustainable. There are about $110,000 worth of HOURS in circulation today, according to an essay by Glover. That’s a pretty modest monetary supply for a 20-year-old currency, but the idea has spread to other communities, including Madison, Wisconsin. That’s a pretty modest monetary supply for a 20-year-old currency, but the idea has spread to other communities, including Madison, WI.
One of the most successful—and cleverly-named—local currencies, BerkShares are accepted as payment by hundreds of businesses in the Berkshire region of western Massachusetts. According to the official website, over 2.7 million BerkShares (which are roughly equivalent to dollars in value) are in circulation, and are accepted as currency by regional banks. The bills feature Norman Rockwell and Herman Melville on them and—it must be said—look more like official currency than Ithaca HOURS, which can unfortunately resemble board game money.
Washington DC Potomacs
Whatever the reason, HOURS, BerkShares, northern Michigan’s Bay Bucks, and others have flourished in rural areas while cities haven’t quite caught up. One attempt at a local currency in the nation’s capital, Potomacs, have been in circulation for two years. According to a recent article, only about $1,400 Potomacs are in circulation and only about ten businesses accept them. There are no security features on the bills, meaning they could be counterfeited relatively easily, but the currency has thus far avoided such trouble.
The example of the Potomac illustrates an important drawback to local currencies: Convincing people that they should believe that colored bits of paper are inherently valuable is tough. Wikipedia’s List of Community Currencies in the US is littered with broken links to no-longer-existing websites of well-meaning currency projects. If too few businesses, banks, and individuals adopt a currency, it is effectively worthless. Like a new social network, the easiest way to get people to adopt an alternative currency is to have a lot of people already using it. The other issue is that creating and publicizing an alternative currency is a time-consuming affair that is virtually guaranteed to not make money. BerkShares’ success is the exception that proves the rule. This notice on the website for the Ukiah, California HOURS could serve as a epitaph to alternative currency: “Ukiah HOURS never got started, not because it wasn’t a great idea, but only because the people energy ran out at the time.”
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