Wednesday, April 17, 2013

Complementary Currency

Published on Aug 3, 2012
\opening statement for Rob Gray of testifying at Congressman Paul's subcommittee met on August 2nd, 2012 to examine sound money and parallel currencies.

I am fascinated by the concept of the widespread use of alternative currency. It is more theoretical than useful in my life right this very instant, but I am drawn to its possibilities. What is complementary currency? Here is a snippet from

An Introduction To Complementary Currencies

November 22 2011| Filed Under » 
In communities around the world, people have come up with alternatives to the usual way of paying for goods and services. Instead of yen, pounds or dollars, they are using privately developed substitutes called complementary currencies.  Tutorial: Introduction To The Federal Reserve

What Are Complementary Currencies?A complementary currency is a medium of exchange that functions alongside a national currency, to fulfill a need that the national currency seemingly does not. According to the "International Journal of Community Currency Research," community and complementary currency systems have four main purposes:

  • To promote local economic development
  • To build social capital
  • To nurture more sustainable lifestyles
  • To meet needs that mainstream money does not
Complementary currencies are not legal tender, only government-issued money has this status in many countries, including the United States, England and the eurozone countries. Legal tender is the only currency that must be accepted to satisfy a debt, in countries with legal tender laws. However, the parties to a transaction can mutually agree to do business with another payment form. 

Complementary currencies are thus legal, as long as they meet certain requirements. Businesses that earn them are generally required to count them as income for tax purposes. Also, complementary currencies are not allowed to look like the national currency. Bernard von NotHaus was convicted of counterfeiting in 2011, for his liberty dollars, which the U.S. government said looked too similar to government-issued money.


Overview of Widely Used Complementary CurrenciesThere are dozens, if not hundreds, of complementary currencies in use around the world. The United States, Germany and Australia appear to have the greatest number of complementary currencies. Here is an overview of a few of these systems and how they work. 
BerkSharesBerkShares are a local currency used in the Berkshire region of Massachusetts, backed by U.S. dollars. Consumers only need to exchange 95 cents of national currency to receive one BerkShare, therefore consumers effectively receive a 5% discount on local purchases made in BerkShares. 

Lewes PoundThe Lewes Pound is local currency used in Lewes, East Sussex, United Kingdom, backed by the pound sterling. Individuals receive 95% of the value of the British pounds they exchange for Lewes pounds; the other 5% goes to community grants.

Toronto DollarsToronto dollars are a local currency used in TorontoCanada, primarily in the St. Lawrence Market and Gerard Square areas; they are backed by the Canadian dollar. Individuals receive one Toronto dollar for every Canadian dollar they exchange, but businesses only receive 90 cents for every Toronto dollar they redeem. The other 10% goes to community grants. 

Salt Spring DollarsSalt Spring dollars are used on Salt Spring IslandBritish Columbia, and are backed by the Canadian dollar. They are a rare example of a local currency with near universal acceptance, meaning that most businesses on the island accept it. These include hotels and inns, art galleries, grocery stores, restaurants, bakeries, retail stores and service businesses.

Ithaca HOURSUsed in Ithaca, N.Y., and founded in 1991, Ithaca HOURS are the "oldest and largest local currency system in the U.S.," according to the organization that runs the system. This complementary currency system is not as straightforward as many others, in that one Ithaca HOUR equals one hour of basic labor or $10.00. Hours are issued as paper currency. Individuals and businesses have to join the Ithaca HOURS system, to be able to use the currency. Members can receive zero-interest business loans on a one-year repayment schedule. (For more on time and money, read Understanding The Time Value Of Money.)

Dane County Time BankThe Dane County Time Bank operates a currency represented by TimeBank Hours, but it's a different type of hour than the Ithaca Hour. TimeBank hours represent hours of service and they are not taxable because they have no monetary equivalent.

When I think of complementary currency, I think of either a barter system or, as in the video above, the use of actual metal instead of the Federal Reserve notes which are now the standard for cash transactions of any significant amount. I think that the widespread use of actual coinage or metal-by-the-ounce has the theoretical potential to free us from the Fed as an economic system without having to rely on step-by-step legislation. I think it also has the potential to change the way we shop and where we shop. Hypothetically, introducing currency options as another variable besides value/quality/longevity/ethical production, etc when we are evaluating a potential purchase might significantly change the equations that make large chains the current kings of efficacious shopping. Discounts if you pay in silver, anyone? :)

However.... while the theoretical possibility is fascinating, the pragmatic reality seems improbable. First of all, there are a great deal of logistical concerns to consider. Coinage of larger denominations would need to be more readily available, and the transportation, storage, and security of silver, for example, would need to be addressed. Then, of course, as Mr. Gray said: "Merchants accept complementary currencies on the assumption that someone else will be willing to do the same thing, later." Therein lies the rub. That's quite an assumption. In a way it's like voting 3rd Party- if enough people did it, it would be a boon to society, but if very few people do it it's a waste, except as a means of social protest.
Next, we'd have to assume that most people procure goods and services with money they actually have, as opposed to credit, aid programs, et c. In fact, while I don't know the exact statistics, I'd guess that there is a very significant number who would be left out of such a system by virtue of dependence on credit, assistance programs, or (assuming the alternative currency wasn't universal) simply the economic pressure to find the best possible value and the impetus to make that their primary, if not sole, consideration. Until we reform our beloved welfare state, implement more free-market economic strategies, and encourage and implement a civil and private ethic of financial responsibility, I don't really see alternate currency as a universal practicality at this time. It certainly bears watching, though....

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