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UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of ten of America's presidencies and who has edited alternative journals since 1964. The Review, which has been on the web since 1995, is now published from Freeport, Maine. We get over 5 million article visits a year. See prorev.com for full contents of our site

February 21, 2010

INTEREST IN LOCAL CURRENCIES GROWS AS ECONOMY FALTERS

Fox Business News - Today, there are close to 100 types of local currencies operating in the United States.

While some currencies are true to their name and are backed by federal dollars, others are simply a record of hours worked by contributing "time bank" members. "Whenever you have a shortage of money, people look to invent their own medium of exchange," said David Boyle, fellow of the New Economics Foundation and Author of "Money Matters.". . .

Because there is no set standard for what a local currency should be, many times the grassroots effort to start a program doesn't gain the momentum it needs. The average success rate for local currency is around 20%, according to a study done by Professor Ed Collom at the University of Southern Maine, which looked at 82 such currencies.

"It's difficult to keep going, because of the scale on which they are organized," said Boyle. "You've got local people organizing it, and inevitably the workload gets out of hand." Boyle said that in order for a local currency to thrive it must be imbedded with another type of endeavor, like a local business or the local government.

Of course, even local currencies with tangible bills aren't foolproof.

"Counterfeiting is always a possibility," said Susan Witt, executive director of the E.F. Schumacher Foundation and co-founder of BerkShares, the local currency in the Berkshire region of Massachusetts.

Counterfeiting has never happened before, thanks to security features on the bills, and the relatively small size of the circulation area, Witt said.

"If someone showed up with several fake 50s, it wouldn't take long to figure out who they were," Witt said.

Since 2006, BerkShares have been traded through 13 branches of 5 local banks. The exchange rate is 95 cents to every dollar. Accepted at just under 1,000 retailers in the region, $2.5 million of BerkShares have been issued from the bank, and $140,000 are currently in circulation.

Convincing local retailers to use the BerkShare hasn't been tough, Witt said. Although there is a 5% discount to customers, it's seen as a way to encourage citizens to shop locally. It also means merchants aren't paying for processing of credit card fees, bounced checks, or waiting to collect on bills.

For merchants that accept BerkShares, there's the possibility of having too great of a ratio of Berkshares to dollars. Should a merchant find they have too many to do business properly, they can go to a local bank and trade in their BerkShares for federal dollars.


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