The Ultimate Futility of Economic Education


Communities print their own currency to keep cash flowing

By Marisol Bello, USA TODAY
A small but growing number of cash-strapped communities are printing their own money.
Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.

The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.

Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.

Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.

"We wanted to make new options available," says Jackie Smith of South Bend, Ind., who is working to launch a local currency. "It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace."

About a dozen communities have local currencies, says Susan Witt, founder of BerkShares in the Berkshires region of western Massachusetts. She expects more to do it.

Under the BerkShares system, a buyer goes to one of 12 banks and pays $95 for $100 worth of BerkShares, which can be spent in 370 local businesses. Since its start in 2006, the system, the largest of its kind in the country, has circulated $2.3 million worth of BerkShares. In Detroit, three business owners are printing $4,500 worth of Detroit Cheers, which they are handing out to customers to spend in one of 12 shops.

During the Depression, local governments, businesses and individuals issued currency, known as scrip, to keep commerce flowing when bank closings led to a cash shortage.

By law, local money may not resemble federal bills or be promoted as legal tender of the United States, says Claudia Dickens of the Bureau of Engraving and Printing.

"We print the real thing," she says.

The IRS gets its share. When someone pays for goods or services with local money, the income to the business is taxable, says Tom Ochsenschlager of the American Institute of Certified Public Accountants. "It's not a way to avoid income taxes, or we'd all be paying in Detroit dollars," he says.

Pittsboro, N.C., is reviving the Plenty, a defunct local currency created in 2002. It is being printed in denominations of $1, $5, $20 and $50. A local bank will exchange $9 for $10 worth of Plenty.

"We're a wiped-out small town in America," says Lyle Estill, president of Piedmont Biofuels, which accepts the Plenty. "This will strengthen the local economy. ... The nice thing about the Plenty is that it can't leave here."

Finally, an economic logic that even Obama can understand!

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What is "real" money?

"'We print the real thing,' she says."

What is real money? How is what the Federal government prints any different from these local currencies? If I can take this scrip into the grocery store and feed my family, then it is real money.


Is this similar to what you're using in Floyd County? What is the Floyd scrip backed by, if anything?

Labor hours

I believe the Floydian scrip was exchangeable for one hour of labor (whether you were a dentist, artist, or digger). They exchanged at a constant rate of one hour equals ten US dollars.

I forwarded my last post about Floydian Scrip to one of the originators of the currency for her comments, which she sent me by email. She said the USAToday article had "[l]ots of facts wrong, but [was] good storytelling." She also directed me to some Georgist literature, which I'm still trying to grok so I can speak fairly about her project. For example, I'm reading Rothbard's Reply to Georgist Criticisms.

My initial reaction to the currency is that it has a lot of technical problems. But since it is being used by a small community, no one is willing to exploit these flaws and ruin their reputation with their neighbors. Further, people are free to opt in or out of the currency as they wish, so if they worry the flaws will expose them to risk, they simply don't use it.

I believe that one of the main motivations for the currency was to increase the sense of community in Floyd County. From this point of view, it was successful, as were hundreds of other projects and organizations over the years. This is a place where residents drive to the one stoplight at the center of the County on a Friday night to play music in the streets together.