The currency is issued by an organisation, who keep an equivalent amount of the national currency, so it can always be converted back to the national currency. People exchange sterling for the local currency equivalent at a number of points in the town (usually shops). Some schemes offer discounts or put expiry dates on the notes to encourage use.
Local businesses are recruited who will accept it. The point of a local currency is to promote the local economy as it can only be spent with participating businesses, and also to give people a sense of ownership of their money. However, it does not create new money and can only work where people have sterling in the first place.
Here’s a handy guide that explains how to set up a local currency, based on the Lewes Pound.
Local Electronic Currencies
Some of the newer currencies of this sort also allow transactions to be made by text message or online, which greatly increases their flexibility.
In Brixton, they have partnered with the local council, so that council employees can choose to receive some of their salary in Brixton pounds. Here’s a short video showing how the system works:
In Bristol, they have partnered with the Bristol Credit Union as well as the council. Some local taxes can be paid using them, for example business rates, which adds to their credibility and acceptability. The first Mayor of Bristol is even being paid in Bristol Pounds
Mutual credit systems
While the local currencies with printed notes don’t actually create new money because they are backed by the national currency, there are other kinds that do. For example, you may have heard of LETS (local exchange trading systems) and Time Banks which are examples of mutual credit systems…
Local Exchange Trading Systems
If Amanda does something for Bruce for 10 LETS, her account is credited with 10 LETS and Bruce’s is debited with 10 LETS. That is the moment at which the money is created. Amanda can then use her credits with someone else in the system. There is no central money-issuing authority, so it is a ‘mutual credit’ system.
In a mutual credit system, the amount of money in circulation expands and contracts as it is needed, so it is never in short supply. There is generally no interest charged in a mutual credit system, but there may be fees to keep the system going. There is generally a directory that lists what people are offering and want, issued frequently in print and/or available online.
LETS are a popular form of local currency that has been around since the 1980s. It has no printed notes or coins, but gives its currency unit a distinctive local name (Beams, TEM, bobbins, …) and keeps a record of all transactions. The value of a currency unit is often, but not necessarily, notionally the same as the national currency. A LETS is a community enterprise, like any other, and needs active volunteers to run it.
To see if you have a local LETS scheme check at LETS-linkup.
If you want to set up a LETS there is a lot of support available. You can use online software to keep your records from several organisations including:
Community Forge is a non-profit association that designs, develops and distributes free, open- source software for building communities with currencies. Free hosting is also offered. It’s currently used by about 40 communities.
The Community Exchange System (CES) is a community-based exchange system that provides the means for its users to exchange their goods and services, both locally and remotely. This is well established with several hundred communities using it, for a LETS or Time Bank style currency.
Because it creates new money, a mutual credit system can be a lifeline in places where conventional money is very scarce. Many are springing up in places hit by the financial crisis, for example, in a village in Greece as shown in this video:
Time Banks are a form of mutual credit where the currency used is hours. For every hour participants deposit in a time bank, perhaps by giving practical help and support to others, they are able to withdraw equivalent support in time when they themselves are in need.
It is mostly commonly used for social services, particularly to people in need. In the UK, Time Banking UK is government supported and provides training for people wanting to start a time bank as well as a directory and a step-by-step guide.
Time banks, like LETS, strengthen communities by helping people find means to do things for each other. It is like an organised exchange of favours, so is helping enable a gift economy.
Further reading and links
The International Journal of Community Currency Research – an online journal that provides a forum for the dissemination of knowledge and understanding about the emerging array of community currencies being used throughout the world, both at present and in the past.
Credits: main image Bristol Pound and many thanks to Gary Alexander for creating this content.
NOTE: This article is originally published at this website: