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Friday, September 28, 2012

No money? Then make your own

By Marie Jackson 
BBC News

NOTE: This article was originally published on September 17, 2009

Can printing your own cash actually help revive a struggling economy? That's just what traders in one London shopping district are hoping for, as they begin accepting a new local currency.
Short on cash? Then why not make your own. There's no law against it, so long as you don't try to pass it off as sterling.
And you can use whatever you please to make your money, whether cigarettes, rabbit skins or paper notes.
That's what's happening in Brixton, a south London neighbourhood where shoppers, from Thursday, will be able to hand over 10 Brixton Pounds (B£s) in return for their groceries.
Proponents of local currencies say they boost the community's economy by keeping money in the area, but critics dismiss them as fashionable gimmicks, tantamount to protectionism.
They may sound experimental but have in fact been used since the Middle Ages when local currencies were all there was - it was not until the 1700s that every European country had its own currency, says Tim Leunig, an economist at the LSE.
Research suggests that when the wider economy slumps, communities turn to barter systems. In other words, when there's little money around, people think about making their own.
The Great Depression of the 1930s saw a wide take-up in the US and much later, the Global Barter Club was born after the Argentine economy hit rock-bottom in 2001. At its height, the system was supporting three million people.
And today's straitened times may well renew interest in complementary currencies but, as one unconvinced Brixton shopper, asks: "What's the point?"
"A local economy is like a leaky bucket. Wealth is generated then spent in chain stores and businesses. It disappears leaving an impoverished local economy," explains Ben Brangwyn, part of the team behind the Totnes Pound, launched in south Devon in 2007.
"Local money prevents that from happening and keeps the money bouncing around the bucket, building wealth and prosperity."
Currently, 6,000 Totnes pounds are in circulation from an estimated local economy of £60m.
It is, stresses Mr Brangwyn, a radical experiment, still in its very early stages, but he can see a day when England has 2,000 local currencies.
Other towns joining the experiment, started by environmental group Transition Network, are Lewes in East Sussex and Stroud in Gloucestershire which introduced the Stroud Pound this week.
Fake notes
Brixton, with its reputation for bustling streets, a lively nightlife and a notoriety for street crime, is the first urban area to have its own currency.
Volunteers behind the project say it has not been an easy sell.
Some shopkeepers are concerned about counterfeiting and the build-up of Brixton pounds in their till. Others see it as a novel advertising tool that could become gift vouchers, or even a collector's item.
So far, £10,000 has been pledged by businesses and local people to be converted into B£s, but on the streets there is still some convincing to be done.
Project manager Tim Nichols hopes people will be drawn by the notion of a kind of "secret club" for holders of the special notes and expects Brixton's antiestablishment spirit to work to its advantage.
"We are in London, the financial hub of the world, and are trying to do something that goes against the grain of the big banking system that we are living on the edge of."
He is also optimistic the recession can work in its favour.
That's the view of Susan Witts who co-founded the BerkShare, a local currency launched in 2006 in Berkshire, Massachusetts.
She puts the growth of BerkShares (from 1 million to 2.5 million in three years) down, in part, to the recession and a lot of hard work.
"Introducing a new currency means more work. You have to train staff to use it, adapt accounting processes. When things are going well, it seems an unnecessary extra step.
"But in difficult times, businesses are looking at ways to make their business work. It relies on people's sense of wanting to shape their own economic future."
But David Boyle, of the New Economics Foundation think-tank and a supporter of alternative currencies, believes efforts in Britain are hampered by its banking system.
Whereas the US has a major network of local banks willing to handle other kinds of money, banks in the UK are less willing to do that. He suggests the answer could lie with local authorities playing a more controlling role.
The vital factor though, says Mr Boyle, is belief.
"If you can maintain that belief in the community, it can work," he says.
Tax dodge
Other economists dismiss the whole concept as a gimmick.
"It might make people feel good, but it's not achieving anything meaningful," says Tim Leunig, of LSE.
"You're saying you can't buy goods from Hackney, Southwark or China, even if they are cheaper. It's giving Brixton shops monopoly power and in the long-run destroys incentives. Almost all collapse because they don't achieve anything."
The only use he can see for it is as a tax dodge, but the taxman says this is a red herring.
All businesses have to report all turnover and as every local currency is tacked to sterling, every sale, whether paid for in cream cakes, polar bears or carrots must be reported to its sterling value, the HM Revenue and Customs says.
And if you are not running a business, the HMRC has no interest because where there's no profit motive, there's no taxation consequence. The Treasury, meanwhile, views them as little more than gift vouchers.
So, with the government unperturbed, perhaps we could yet see Mr Brangwyn's vision of 2,000 separate local currencies realised. But would that be a brave leap into the future or a return to the Middle Ages?
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