(Click here for a transcript of the discussion)
Today we begin our explorations into new visions for how to exchange value with people in our communities and across the globe, in a way that benefits everyone. Some people are calling this "The New Economy".
These are quotes from two different articles, click the title of the quote to reach the article. The articles themselves are not long, I highly recommend reading them through.
What does currency measure?
At the most basic level, currency functions as a means of exchange (I give you a dollar and you give me an ice cream cone), a unit of value (a dollar, pound, etc.) and a store of value (you can hold onto a dollar as it maintains its worth). It’s also a source of information about relative value, and about what is needed to keep trade flowing, for instance, by adjusting the supply of money or the exchange rate so that those in other markets can afford your goods.
The Different Applications of currency
If money is for trading, you want to use it; if money is to store value, you want to save it. Greco and others such as David Boyle say that people could be better served by separating out the functions of money—and using different currencies, depending on whether you are, say, meeting friends at a local café or saving for college.
Conventional currency excels at serving as a store of value—so much so that use of money for actual trade slows down, leaving some local economies stuck. Coin and paper currencies do not lose value like the products one buys with them can, which makes hoarding and speculation attractive, particularly with the enticement of interest. Argentine economist Silvio Gesell described this phenomenon in 1913 and said that money also should lose value: that it should “rust” or go moldy like other commodities, and suggested a penalty, or demurrage fee, for holding onto it.
This is how it works: Each quarter, every Chiemgauer bill loses 2 percent of its value. In order to spend the money later, the consumer needs to put a special sticker on the paper currency.
In the beginning, Gelleri got complaints. Then people figured out how to make the model work for them. For instance, one cinema owner said that business went way up at the end of the quarter when people wanted to shed their currency. Increased cash flow at quarter’s end was helpful for accounting, he said. The 2 percent loss, he added, was insignificant compared to the advertising he’d have to buy to secure the same level of customer loyalty he has from accepting the Chiemgauer.
Promoting local economies
“From the beginning we had two objectives—to promote the region and promote local charities,” says Christian Gelleri. In 2003, Gelleri and a group of his students at a Waldorf School developed the Chiemgauer currency in the Lake Chiemsee region of Bavaria, Germany. Since then, some 3 million Chiemgauer notes (equivalent in value to the euro) have been placed in circulation. The currency, accepted by 600 businesses in the region, typically is spent and spent again 18 times a year—three times more than the Euro. This means that the currency is encouraging trade and cooperation in the region, which keeps the shops and restaurants and artisans active. Think of this faster rate of use (what economists term “velocity”) as a kind of reinvestment in the community."
Independence from national credit problems
"Reliance on national currency means being at the mercy of the national credit situation. As we’ve recently seen, credit constriction can paralyze local economies. Despite the availability of goods and the need for business, when there’s no money, consumers don’t buy. Stores don’t sell. Start-ups can’t get a toe-hold. An alternative currency gives people another way to buy, sell, lend, and borrow. If the community creates its own currency, local business can go on even if the supply of national currency dries up."
Feedback system to stuckness in the economy
Jacobs pointed out that national currencies cover such broad geographical areas that they provide no local feedback. The way our system is now, regions subsidize each other, and weaknesses are not corrected. Local currencies, however, have clear feedback loops so that trade and production imbalances can be addressed more quickly.
As Susan Witt, executive director of the E.F. Schumacher Society, explains, “Whenever a BerkShare must be returned to the bank [instead of recirculated], that means there is not a source or product available locally to fill that business’s needs.” For example, say a toy store finds itself stuck with the currency. This presents an opportunity for a local craftsperson to provide the store with wooden figures, games, or puzzles to be purchased with BerkShares.
Emotional Investment
Witt wrote recently about another local woman, someone who had called her office to ask how to make a donation to a local nonprofit in BerkShares. She couldn't just write a check, Witt explained to her. She'd need to "walk or drive to the project's office, call the staff together, look them directly in the eye, tell them how important their work is to the community, and hand them an envelope with a big stack of BerkShares."
Those bank notes would be nice, but so would the sentiment; in the end, it's entirely about building community, and so the connection counts as much as the money.
Here's Jasmine Stine, an intern at the Schumacher Society: "My housemate was in line at Guido's [an upscale produce market in Great Barrington], right in between two other people who were paying in BerkShares. It turns out that one guy was making biodiesel, and the other guy needed some. That's the kind of conversation we've got to start having."
Creating Trust
The currency is literally teaching people to think more carefully about how their habits build or erode community. It's about creating trust in a world where economists have taught us that we're self-interested individuals and nothing more.
What you're trading is spare capacity.
"We finally nailed the economic argument—it's spare capacity," she adds. "Would you rather pay a bill with a gift certificate to your business or with cash? There's already trust within our network of businesses; these are the kinds of people who want to work with one another."
