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equivalent value in goods or services in the local market.
Chapter 36 - The Community Currency Movement

Community currencies now operate legally in more than 35
countries, and there are over 4,000 local exchange programs
worldwide. Local or private exchange systems come in a variety of
forms. Besides private gold and silver exchanges, they include local
paper money, computerized systems of credits and debits, systems for
bartering labor, and systems for trading local agricultural products.
What distinguishes them from most national currencies is that they are
not created as a debt to private banks, and they don™t get siphoned off
from the community to distant banks in the form of interest. They stay
in town, stimulating local productivity. Local currencies can “prime
the pump” with new money, funding local projects without adding to
the community debt. Many governments actively support them, and
others give unofficial support. Experience shows that these additions
to the money supply strengthen rather than threaten national financial
stability. Besides their monetary functions, local exchange systems
have served to bring communities together, funding cooperative
businesses where members can sell goods, new skills can be learned,
and public markets can be held.

Creative Responses to Disaster:
The Example of Argentina

In 1995, Argentina went bankrupt. The government had adopted
all the policies mandated by the International Monetary Fund, includ-
ing “privatization” (the sale of public assets to private corporations)
and pegging the Argentine peso to the U.S. dollar. The result was an
overvalued peso, massive economic contraction, and collapse of the
financial system. People rushed to their banks to withdraw their life
savings, only to be told that their banks had permanently closed. Lawns
soon turned into vegetable gardens, and local systems sprang up for
bartering goods. One environmental group held a massive yard sale,
where people brought what they had to sell and received tickets rep-
resenting money in exchange. The tickets were then used to barter
the purchase of other goods. This system of paper receipts for goods
and services developed into the Global Exchange Network (Red Global
de Trueque or RGT), which went on to become the largest national
community currency network in the world. The model spread through-
out Central and South America, growing to 7 million members and a
circulation valued at millions of U.S. dollars per year.

Web of Debt

Other financial innovations were devised in Argentina at the local
provincial government level. Provinces short of the national currency
resorted to issuing their own. They paid their employees with paper
receipts called “Debt-Cancelling Bonds” that were in currency units
equivalent to the Argentine Peso. These could be called “negotiable
bonds” (bonds that are legally transferable and negotiable as currency),
except that they did not pay interest. They were closer to the “non-
interest-bearing bonds” proposed by Jacob Coxey in the 1890s for fund-
ing state and local projects. The bonds canceled the provinces™ debts
to their employees and could be spent in the community. The Argen-
tine provinces had actually “monetized” their debts, turning their
bonds or I.O.U.s into legal tender.1
Studies showed that in provinces in which the national money
supply was supplemented with local currencies, prices not only did
not rise but actually declined compared to other Argentine provinces.
Local exchange systems allowed goods and services to be traded that
would not otherwise have been on the market, causing supply and
demand to increase together. The system had some flaws, including
the lack of adequate controls against counterfeiting, which allowed
large amounts of inventory to be stolen with counterfeit scrip. By the
summer of 2002, the RGT had shrunk to 70,000 members; but it still
remains a remarkable testament to what can be done at a grassroots
level, when neighbors get together to trade with their own locally-
grown currency.

Alternative Paper Currencies in the United States

More than 30 local paper currencies are now available in North
America. One that has been particularly successful is the Ithaca HOUR,
originated by Paul Glover in Ithaca, New York. The HOUR is paper
scrip that reads on the back:
This is money. This note entitles the bearer to receive one hour
of labor or its negotiated value in goods and services. Please
accept it, then spend it. Ithaca HOURS stimulate local business
by recycling our wealth locally, and they help fund new job
creation. Ithaca HOURS are backed by real capital: our skills,
our muscles, our tools, forests, fields and rivers.
One Ithaca HOUR is considered to be the equivalent of ten dollars,
the average hourly wage in the area. More highly skilled services are

Chapter 36 - The Community Currency Movement

negotiated in multiples of HOURS. A directory is published every
couple of months that lists the goods and services people in the com-
munity are willing to trade for HOURS, and there is an HOUR bank.
People can use HOURS to pay rent, shop at the farmers™ market, or
buy furniture. The local hospital accepts them for medical care. Sev-
eral million Ithaca HOURS™ worth of transactions have occurred since
1991. A Home Town Money Starter Kit is available for $25 or 2-1/2
HOURS from Ithaca MONEY, Box 6578, Ithaca, New York 14851.
Another successful credit program was originated by Edgar Cahn,
a professor of law at the University of the District of Columbia, to help
deal with inadequate government social programs. Like Glover, Cahn
set out to create a new kind of money that was independent of both
government and banks, one that could be created by people them-
selves. The unit of exchange in his system, called a “Time Dollar,”
parallels the Ithaca HOUR in being valued in man/hours. In a land-
mark ruling, the Internal Revenue Service held that Cahn™s service
plan was not “barter” in the commercial sense and was therefore tax-
exempt. The ruling helped the program to spread quickly around the
country. Cahn notes that social as well as economic benefits have
resulted from this sort of program:
[T]he very process of earning credits knits groups together . . . .
They begin having pot-luck lunches; and they begin forming
neighborhood crime watch things, and they begin looking after
each other and checking in; and they begin to set up food bank
coops. [The process] seems to act as a catalyst for the creation of
group cohesion in a society where that kind of catalyst is difficult
to find.2
Local scrip has also been used to tide farmers over until harvest.
“Berkshire Farm Preserve Notes” were printed by a farmer when a
bank in rural Massachusetts refused to lend him the money he needed
to make it through the winter. Customers would buy the Notes for $9
in the winter and could redeem them for $10 worth of vegetables in
the summer. With small family farms rapidly disappearing, local cur-
rencies of this type are a way for the community to help farm families
that have been abandoned by the centralized monetary system. Pri-
vate currencies provide the tools to bind communities together, sup-
port local food growers and maintain food supplies.3
Bernard Lietaer, author of The Future of Money, describes other
private currency innovations, including a system devised in Japan for
providing for elderly care that isn™t covered by national health

Web of Debt

insurance. People help out the elderly in return for “caring relationship
tickets” that are put into a savings account. They can then be used
when the account holder becomes disabled, or can be sent electronically
to elderly relatives living far away, where someone else will administer
care in return for credits. Another interesting model is found in Bali,
where communities have a dual money system. Besides the national
currency, the Balinese use a local currency in which the unit of account
is a block of time of about three hours. The local currency is used
when the community launches a local project, such as putting on a
festival or building a school. The villagers don™t have to compete with
the outside world to generate this currency, which can be used to
accomplish things for which they would not otherwise have had the

The Frequent Flyer Model:
Supplemental Credit Systems

Another innovation that has served to expand the medium of
exchange is the development of corporate credits such as airline
frequent flyer miles, which can now be “earned” and “spent” in a
variety of ways besides simply flying on the issuing airline. In some
places, frequent flyer miles can be spent for groceries, telephone calls,
taxis, restaurants and hotels. Lietaer proposes extending this model
to local governments, to achieve community ends without the need to
tax or vote special appropriations. For example, a system of “carbon
credits” could reward consumers for taking measures that reduce
carbon emissions. The credits would be accepted as partial payment
for other purchases that serve to reduce carbon emissions, producing
a snowball effect; and businesses accepting the credits could use them
to pay local taxes.5

Parallel Electronic Currencies:
The LETS System

Alternative currency systems got a major boost with the advent of
computers. No longer must private coins be minted or private bills be
printed. Trades can now be done electronically. The first electronic
currency system was devised after IBM released its XT computer to
the public in 1981. Canadian computer expert Michael Linton built
an accounting database, and in 1982 he introduced the Local Exchange
Chapter 36 - The Community Currency Movement

Trading System (LETS), a computerized system for recording
transactions and keeping accounts.
Like Cotton Mather more than two centuries earlier, Linton had
redefined money. In his scheme, it was merely “an information system
for recording human effort.” A LETS credit comes into existence when
a member borrows the community™s credit to purchase goods or
services. The credit is extinguished when the member gives goods or
services back to the community in satisfaction of his obligation to repay
the credits. The exchange operates without any form of “backing” or
“reserves.” Like the tally system of medieval England, it is just an
accounting scheme tallying credits in and debits out. LETS credits
cannot become scarce any more than inches can become scarce. They
are tax-free and interest-free. They can be stored on a computer
without even printing a paper copy. They are simply information.
There are now at least 800 Local Exchange Trading Systems (LETS) in
Europe, New Zealand, and Australia. They are less popular in the
United States, but community currency advocate Tom Greco feels they
will become more popular as conventional economies continue to
decline and more people become “marginalized.”
In a website called “Travelling the World Without Money,” Aus-
tralian enthusiast James Taris tells of his personal experiences with
the LETS system. At a time when he had quit his job and was watch-
ing his money carefully, he attended a LETS group meeting in his
local community, where he learned that he could obtain a variety of
services just for contributing an equivalent amount of his time. The
result was the first and best professional massage he had ever had, a
luxury for which he could not justify paying $60 cash when he was
gainfully employed. He “paid” for this and other services by learning
various Internet and desktop publishing skills and contributing those
skills to the group, something he quite enjoyed. He has been demon-
strating the potential of the system by traveling around the world with
very little conventional money.6
“Friendly Favors” is a LETS-type computerized exchange system
that has grown beyond the local community into a worldwide database
of over 12,000 members. The system tracks the exchange of
“Thankyou™s,” a unit of measure considered to be the equivalent of
one dollar saved due to a friendly discount or favor received. The
database also stores the photos, resumes, talents, interests and
community-building skills of participants. Developed by Sergio Lub
and Victor Grey of Walnut Creek, California, www.favors.org is a non-
commercial service “to interconnect those envisioning a world that
Web of Debt

works for all.” Unlike most LETS systems, which have evolved among
people short of money looking for alternative ways to trade, the Friendly
Favors membership includes people who are financially well off and
highly credentialed, who are particularly interested in the human
resources potential of the system. As of May 2004, the Friendly Favors
membership was spread over more than 100 countries and its database
was shared by over 200 groups with a collective membership of over
42,000, making it potentially the largest source of human resources
available on the Internet.
A number of good Internet sites are devoted to the community
currency concept, including ithacahours.com; madisonhours.org; Carol
Brouillet™s site at communitycurrency.org; and The International Journal
of Community Currency Research at geog.le.ac.uk/ijccr. For a good
general discussion of alternative money proposals, see Tom Greco™s
Monetary Education Project at reinventingmoney.com. The definitive
source for LETS information is Landsman Community Services, Ltd.,
1600 Embleton Crescent, Courtenay, British Columbia V9n 6N8,
Canada; telephone (604) 338-0213.

Limitations of Local Currency Systems

Local exchange systems demonstrate that “money” need not be
something that is scarce, or for which people have to compete. Money
is simply credit. As Benjamin Franklin observed, credit turns prosperity
tomorrow into ready money today. Credit can be had without gold,
banks, governments or even printing presses. It can all be done on a
The concept is good, but there are some practical limitations to
the LETS model and other community currency systems as currently
practiced. One is that the usual incentives for repayment are lacking.
Interest is not charged, and there may be no time limit for repayment.
If you have ever lent money to a relative, you know the problem. Debts
can go unpaid indefinitely. You can lean on your relatives because
you know where to find them; but in the anonymity of a city or a
nation, borrowers on the honor system can just disappear into the
night. Some alternatives for keeping community members honest have
been suggested by Tom Greco, who writes:
[T]here is always the possibility that a participant may choose
to not honor his/her commitment, opting out of the system and
refusing to deliver value equivalent to that received. There are

Chapter 36 - The Community Currency Movement

three possible ways, which occur to me, of handling that risk.
The first possibility is to use a “funded” exchange in which each
participant surrenders or pledges particular assets as security


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