As the economy of Cyprus implodes, UK austerity measures begin to bite and the banking industry retreats further into itself, the need for new and ‘bottom up’ community-based economic tools has never been greater.
One such tool is the Credit Unions, where people make deposits which fund loans within a community with a ‘common bond’, which may be geographic, functional (eg the Metropolitan Police) or possibly both.
Another emerging tool is the complementary currency, of which the best known is probably the emerging range of Transition currencies such as: the Totnes Pound; Lewes Pound; Bristol Pound; Brixton Pound and so on.
While both of these tend to keep economic value local, which is unequivocally a good thing, what they essentially do is move existing economic value around; they don’t actually do a great deal to stimulate new economic activity, the need for which is growing daily more urgent.
Maybe there’s another way of doing it?the3rdimagazine
The Community is the currency
Chris Cook
Why the claim that local currency does not stimulate the local economy? I thought that that was the point.
ReplyDeleteI think he's just saying that growth isnt robust with local currencies but activity can be stimulated.
ReplyDeleteMaybe you dont appreciate the distinction Im getting at.
What Im saying is that there is a difference between the creation of lots of new things to buy and simply high levels of exchange of exisiting things and local currencies are good at stimulating the latter and less so the former.
Bill,
ReplyDeleteThe reason local currencies don’t stimulate local economies is that, as Chris Cook said, “all they essentially do is move existing economic value around”. I.e. if I have some local currency I’ll tend to use it get buy stuff produced locally rather than buy stuff produced elsewhere.
On the other hand, if every locality just prints local currency and distributes it for free to local residents, that increases the net financial assets of everyone in the country, which WOULD INCREASE aggregate demand.
What Greg said.
ReplyDeleteSmall alternative currencies usually work well when it comes to injecting liquidity into the local economy when there is a scarcity of it, which can help against deflationary issues and even depressions.
But due to their limitations (only acceptable in limited locations and business), the effect on increasing aggregate demand is limited. But this is not by design, is a function of the acceptance and demographic impact of such currency, see for example the Swiss WIR, which has a bigged national scope and has worked well in the past as counter-cyclical currency.
While both of these tend to keep economic value local, which is unequivocally a good thing ...
ReplyDeleteWhile supporting one's local community is a good thing, I can't agree that keeping economic value local is "unequivocally" a good thing. The logical end result of that kind of thinking is a regression to small and relatively impoverished village communities.
If you want things from the outside world you have to be willing to send things to the outside world. And that means you need to be able to acquire currencies that the outside world will accept. Frankly, accepting a restricted local currency - which is by definition less liquid and less accepted - for one's goods and services, is an economically irrational strategy ... unless one is some kind of survivalist nutter who thinks the end of the world is nigh, the major currencies are all going pffft, and one must stock up on ammunition, canned food and local chits.
I think that a lot of the criticism of local currencies, "scrips," really, ignores that the purpose of these scrips is not to replace the currency, as Bitcoin is, for instanc, as an alternative to state currency. Local currency are adjunct currencies whose purpose is to increase velocity of transaction, and they do this.
ReplyDeleteFor example, local businesses have inventories, tradespeople have down time, and so forth, which are dead weight. Adjunct currencies can decrease this inefficiency in the system by moving inventory faster and filling in down time.
Seems to me that obsessive technocrat control freaks would ascribe the term "survivalist nutter" to the tenor of this article. This article simply didn't imply a totalist remedy; but nice try at invective dirty pool, Dan.
ReplyDeleteMalmo's Ghost, would you say that keeping economic value local is unequivocally a good thing?
ReplyDeleteDan,
ReplyDeleteI don't think the idea here was to keep ALL economic value local, at least in the sense you inferred ( and then extrapolated to survivalist nutters) from this article.
As one "tool" among other more conventional means to stimulate growth, I think for the Cypriots, Greeks and others this is a reasonable venture. If it morphed into even greater and sustaining economic value from this local form of catalyst then more power to them.
Coupled with barter, especially of the service variety, more local economic value could be attained. At some point I suspect these methods would push up against local resistance. So what? Nothing inherently wrong with that. Still, if the global rentier hegemon takes an ass whuppin, and subsequently contracts in its reach at the hands of these locals, more power to em.
Malmo's Ghost, would you say that keeping economic value local is unequivocally a good thing?
ReplyDeletePretty much. Now a whole lot of the profit in the local economy is bled off to corporate offices and stored by rentiers in the Caymans. Used to be the same tens and twenties circulated from local banks to local firms to local incomes back to local firms and banks. That used to be small town rural America. Now local incomes go to Walmart and the local income that Walmart replaces into the local economy is minuscule in comparison. This has changed the entire complexion of much of small town America.
"On the other hand, if every locality just prints local currency and distributes it for free to local residents, that increases the net financial assets of everyone in the country, which WOULD INCREASE aggregate demand."
ReplyDeleteRalph - Wouldn't that also tend to increase prices? You know, as in too many currency units chasing too few goods?
I remember as a boy going to downtown Clinton, Iowa, Mt Carroll, Il, etc, and experiencing the vibrant and largely local economies there. There was less stuff yet far more cultural richness. Heck even larger cities felt more alive and dynamic. Rarely did I feels the sense of being alone together, as is common now days. Less was more, and what was produced was much more evenly distributed.
ReplyDeleteSo called "economic value" is entirely incomplete as a benchmark to the good life, and has never captured the fuller essence of meaningful community life. Too bad Freud isn't around to pen a tome titled Technocracy And Its Discontents.
OK, Tom, so you're saying that if I have produced a lot of valuable maple syrup here in New Hampshire, I should avoid selling it to people in Florida, for example, in exchange for dollars that I can use to buy dried chilies raised in New Mexico?
ReplyDeleteNew Hampshire should hoard the economic value that exists in its syrup and New Mexico should keep its chilies, because this is unequivocally a good thing?
Let's be reminded by Warren this AM:
ReplyDelete"Yet more proposals that won’t work.
The problem remains:
Deficits are too small while they all think they are too large."
This is the core problem... these local things may be better than nothing but I have to agree with Dan here they are far from optimum for an entire nation...
Tom, the problem with the locals is that the transactions still have to be "netted" and then any profit taxed in USDs anyway which sucks...
If we could get the tax authorities to understand that they can lower overall taxes to J6P perhaps then they could give up on this portion of "revenues" and let folks do some local things ... taxes are too high right now and those in authority think they need these revenues to be able to spend...
rsp,
Tom,
ReplyDeleteI forget if you saw this latest from Bentonville:
http://venturebeat.com/2013/03/28/wal-mart-dabbles-with-sharing-economy-to-implement-same-day-delivery/
WalMart is looking to have customers perform services for them in exchange for store credit... this is in effect one of these "local scrips" but only issued by WalMart and redeemable at WalMart...
They will probably get their lobbyists to get rid of the tax issues for them!
rsp,
"Wouldn't that also tend to increase prices? You know, as in too many currency units chasing too few goods?"
ReplyDeleteNot very noticeable as long as the economy is operating below capacity and there is unemployment.
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Matt, if local governments issue and accept such currencies to settle tax payments (albeit temporarily) it can help. Where I live there has been one local government which has started doing something like this, and it has been helping.
While is a form of leveraging local taxes to increase local aggregate demand and increase liquidity, and in the end it will have to be 'netted' in euros, it helps a bit.
Also please keep some perspective, the state of the US economy, as bad as it may be, is in pretty good shape to a lot other places (and I'm talking in Europe), so these little things can help a lot as some sort of counter-cyclical tool when there are real liquidity problems (which probably isn't the problem in the US right now, but for example it is a big problem in Spain).
Malmo's Ghost: "Rarely did I feels the sense of being alone together, as is common now days."
ReplyDeleteShades of "The Lonely Crowd"!
http://chronicle.com/article/The-Lonely-Crowd-at-60-Is/124334/
OK, Tom, so you're saying that if I have produced a lot of valuable maple syrup here in New Hampshire, I should avoid selling it to people in Florida, for example, in exchange for dollars that I can use to buy dried chilies raised in New Mexico?
ReplyDeleteMuch more efficient to use local products locally than to transport them. Of course, this doesn't exclude using the benefits of "external trade" as well, to gain access to what is not available locally.
And a lot of what is exchanged locally is local labor, instead of local labor working for the non-local ROW.
Ignacio,
ReplyDeleteYes agree....
A while back I mentioned that same type of thing to the Ranking Minority (ie "Republican") Member on the Budget Committee in the Maryland House of Delegates whom I know and his eyes literally glazed over when I tried to explain how it would work here... they went on to pass an expanded permitting of state sponsored gambling casinos instead to try to capture more USD balances... go figure...
I think Roger, JD Alt, and myself are the only 3 people in my whole state (Maryland) who know how these systems are supposed to work....
Hang in there friend!
rsp,
A big reason for going to alternative solutions is based on the calculation that the likelihood of TPTB addressing the issues is low. This is the calculation that a lot of us made in the 60's and 70's when we decided that waiting for change was a dead-end and the result has been an expansion of alternative lifestyles supported by an alternative-underground economy. Occupy is already figuring that out. Bitcoin is another example of an endrun around the system of another sort.
ReplyDeleteActually, the community interaction content, patterns and tempo are the currency, but let's not quibble.
ReplyDeleteMost of the discussion here focuses on static infrastructure & static assets.
In a social species, and every organized system, the most valuable infrastructure is the organizational infrastructure, i.e., the degree of teamwork achievable.
Everyone agrees that organized teams can do amazing things, with enough practice.
What we call a "currency" system is just a way to denominate SOME of our static and dynamic infrastructure. There are lots of things we use completely different and more implicit "currency" systems for, usually lumped under affinity bonds.
How much $ to sell your spouse, kids or other family membes for? How much would you take to sell your citizenship? etc, etc
In any complex system, the highest value - by far - is the return on coordination. There are many "shadow-banking" ways to organize and manage coordination. Loyalty to a given fiat currency is only as strong as the community's shared affinity to those managing the currency.
Family ties? Mafia ties? Community ties? Ties of friendship, neighbors, faction, club, political party, patriotism, religion, language, ethnicity, etc, etc, etc. Those can outweigh & cut across static monetary values at any instant.
Methinks the calculating economists are grossly overvaluing the relevance of their calculations to their situation.
What if electorates unpredictably add additional variables to the economic polynomial? And can do so at will? What then? That's why I'm not Keen on mathematical models for economics. The predictable math can only chase, not lead, the unpredictable addition of more degrees of freedom.
Meanwhile, we all could and should be putting down our calculators more often, and be surfing.
I'm thinking of virtually moving to the virtually Virgin Islands. In fact, the CotU has established a virtual colony, wherever I go. :)