Community Currencies

“Complementary” or secondary community currencies are often re-invented whenever there is a period of acute monetary shortages, as during the US Great Depression, or the post-2001 crash in Argentina. The idea is that individuals and business are short on cash, but long on unsold inventories and useful things they can do. Since no one has money to buy, with an alternative means of exchange they can benefit themselves.

“Complementary currency” is the most common term, but such an exchange system need not have a physical token — many barter clubs merely keep a central listing of credits and debits. The oldest and largest such barter club is the WIR ("We") Bank of Switzerland, founded in the 1930s, with some 60 thousand participants in 2004. A good intro the the WIR is the wikipedia entry, http://en.wikipedia.org/wiki/WIR_Bank. (My work has been mentioned on the site — but I didn't post that link!)

Another name for this phenomenon is 'LETS' or 'Local Exchange and Trading Systems'. Some other examples, these two with their own paper currencies, are the Ithaca Dollars and the 'BerkShares' movements, centered in Ithaca, New York and Great Barrington, Massachusetts, respectively.

I have been motivated in this research by:
(1) theoretical interest, since in a truly well-functioning monetary system such complementary currencies wouldn't have any reason to exist, and
(2) a belief that they can greatly improve people's lives and build community.

On (1), an article in the WIR magazine discussed an earlier stage of my work: http://www.ewp.rpi.edu/hartford/~stoddj/BE/LeSystemeWIR.htm. My research is in the 2009 volume of Journal of Economic Behavior and Organization. The published version of that paper is available here: http://www.ewp.rpi.edu/hartford/~stodder/MacroPrinc/Stodder_WIR.pdf.

On (2) I have presented my work at a conference of the Banco Central do Brasil, which is considering sponsoring such currencies in poorer rural areas. There is some overlap between these projects and the much better-known movement for micro-finance, as in the Grameen Bank of Nobelist Muhammad Yunus; http://en.wikipedia.org/wiki/Muhammad_Yunus. The current economic downturn is making this stuff much more of interest. Historically, these things tend to grow in recessions, especially ones that show a pattern of deflation, or generally falling prices. My contacts at the Swiss WIR-Bank tell me that they've never experienced so much interest from media as they have in early 2009.

Jim Stodder, http://www.ewp.rpi.edu/hartford/~stodder, ude.ipr|jddots#ude.ipr|jddots

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