The rise of local currencies and their potential as a macro/micro economic tool

1. • Home
Edition: International |
◦ about nsnbc ìnternational
◾ Contributors and associate media
◾ Contributing to nsnbc international
◾ Comment Policy on nsnbc international
◾ nsnbc media activist – volunteer
◾ nsnbc privacy policy
◦ nsnbc international book store
◾ Globalization
◾ Geopolitics
◾ USA
◾ Novels – Political Novels
◾ nsnbc contributors
◾ Agha Humayun Amin
◾ Cynthia McKinney
◾ Dr. Carolyn LaDelle Bennett
◾ Ellen H Brown
◾ Lars Schall
◾ Michel Chossudovsky
◦ Advertise in nsnbc international
Saturday 09 May, 2015
Latest News >
News
40,691 Egyptians fled Libya since ISIS beheading ...
Search News - Type Keyword & Hit Enter
• Trending Topics:
• ISIS
• - Egypt
• - Palestine
• - Media Ethics
• - Ukraine
• - Russia
• - Yemen
• 40,691 Egyptians fled Libya since ISIS beheading video
•
•
•
•
◦ News
◦ Politics
◦ Africa
◦ Asia & Oceania
◦ Europe
◦ Middle East
◦ Latin America & Caribbic
◦ Northern America
◦ Analysis
◦ Geo-Politics
◦ Opinion
เทรดแบบไรค่า Spread
เลเวอเรจ 1:2000, ไม่มีการ Requote เครืองมือและ CFD มากกว่า 30 ชนิด
Page 1 of 7Is it time for the rise of local currencies? | nsnbc international
9/5/2015http://nsnbc.me/2015/04/14/is-it-time-for-the-rise-of-local-currencies/

2. ◦ Economy
◦ Interviews
◦ Editorial
◦ Health and Lifestyle
◦ Science & Technology
◦ SPORT
Navigate... 
Published On: Tue, Apr 14th, 2015
Analysis / Culture / Economy / Editorial / Politics / Politics | By Murray Hunter
Is it time for the rise of local currencies?
Share This
•
•
•
•
•
•
•
•
•
•
•
Tags
AustraliaBrazilEUFEDJapanMalaysiaTaiwanThailandUSA
Murray Hunter (nsnbc) : It’s an almost long forgotten historical fact that most trade was undertaken by local based currencies right
into the 20th Century. Australia had a number of colonial currencies before federation in 1901. The United States of America had a
number of currencies issued by private banks before the Federal Reserve Bank was formed in 1913, and individual states of the
European Union had their own national currencies before the mega-currency, the Euro was launched in 1999.
However given the trend to larger and “stronger” currencies, the hype of the Euro, the protection of the
US Dollar as the major trading currency, a very quiet trend has been going the other way. In contrast, more than 2,000 local currencies in
some form or the other have been launched in communities around the world.
The phenomenon of the local currency almost doesn’t exist in contemporary economic literature. Therefore the purpose of this article is to
have a look at local currencies, and try and answer the questions; Why do communities launch them? Do local currencies have any benefit to
these communities?, and What is the real potential of these currencies?
A local currency, sometimes referred to as a community currency, is a means of exchange used by members of a community that have some
common bonds. Any local currency is usually not backed by a national government, nor is officially a legal tender within the region it is
circulated. A local currency is usually intended for trade within a limited geographical area.
Money is essentially an agreement to use something as a means of exchange. Any local currency can be denominated by the prevailing
national currency, or measured in any commodity, or even labor units to provide create unit value, so people know how to use it as a medium
of exchange. This redemption measure is usually a major factor giving users confidence in its present and future value.
A local currency is a potential tool of monetarism, where it helps to define an economic boundary which accepts it as a medium of exchange
by certain groups within that location.
Local currencies are usually created on the value judgment, supported by E.F. Schumacher’s ideas that there should be a focus on the
development of local economy. The proponents of local currencies would usually aspire towards developing a diverse local economy full of
diverse micro-activities which would promote local production, local self sufficiency, and the maintenance of profits within the local area by
local businesses. They would hope that the local currency and the corresponding changing spending habits (use of a local rather than national
currency) would promote a preference and loyalty to local products and businesses, rather than goods and businesses from outside.
Page 2 of 7Is it time for the rise of local currencies? | nsnbc international
9/5/2015http://nsnbc.me/2015/04/14/is-it-time-for-the-rise-of-local-currencies/

3. The proponents of local currencies would also probably aspire towards developing personal relationships in trade and desire to get away from
the “McDonalds landscape” where the same restaurants, stores, and service businesses exist in everyplace with an emerging mono-culture.
Thus the introduction of a local currency would be seen as a method of encouraging the de-standardization of their local community through
developing a vibrant diverse community.
The success of any local currency depends upon the assumption that a single country may not be an optimum currency area, where different
regions within a country may be better off with different currencies. This would allow the development of local comparative advantage rather
than national comparative advantage. This is very much against the spirit and purpose of macro-economic policy during the development
phase of most economies, which has generally promoted centralization, the growth of SMEs into larger corporations so that economies of
scale are developed to the point where firms can exercise competitive advantage in the international market.
Even though local currencies worked extremely well in the 19th Century, remember they were most often redeemable in gold then, the track
record of the contemporary local currencies hasn’t been good. The successful ones like the Berkshare have been proxy currencies with an a
generally agreed par value with the national currency. In fact, it is only the Berkshare used in the Berkshire region of Massachusetts, that has
been touted as the success story of local currencies. The Berkshire has a large number of users managed to keep circulating within the local
community where the community importantly, was already pre-disposed to producing local products for the local community. Many others
have failed or ceased to exist through low levels of support within communities. While others like the Kelantan Dinar launched in 2006 was
effectively sabotaged by the Malaysian Federal Government through repeated statements that the Dinar was not legal tender.
One of the impediments of any successful local currency is developing a critical mass of community support that would keep the circulation
velocity high enough to maintain its perceived value.
More notoriously, the Malay workers on the Cocoas Islands once ruled by the Clunies-Ross family were paid in Cocos Rupees, a currency
John Clunies-Ross created and which could only be redeemed at the Clunies-Ross owned company store. Large retail corporations have
successfully used forms of complementary local currencies as coupons, gift certificates, and point systems, to enlist customer loyalty.
Although there is scant evidence that any local currency to date has actually promoted local economic wealth, the mediocre track record of
local currencies does not mean they have great potential in the future for achieving specific objectives. From a macro-economic point of view,
a local currency is a perfect tool for local micro-economic management, where the objective is to develop micro and SME industry to serve
the immediate community. This will more and more become an important objective both in developing and developed economies around the
world due to poor local enterprise diversity in many places.
A local currency, coupled together with a hybrid of crowd funding organized by local cooperative banks, would be a powerful alternative for
providing credit to local enterprises that the conventional ‘big’ banks have been hesitant to service.
There may be another philosophical reason for adopting this approach as well. The banking sector has become so centralized, that most
governments across the world have deemed their local banks ‘too big to fail”, where these privately owned institutions are almost above the
law, or worse still, become a law unto themselves. All lending, trade, interest rates, and other credit facilities are controlled by these banks.
No government took any great effort to regulate these institutions post 2008, because the job was too difficult and very few had the political
will to do it.
The nature of a national currency has given banks great power to create money through debt creation. Most money that makes up the currency
system is actually electronic. There are no notes or coins or supporting wealth to back up this money. It’s just a figure on a computerized
ledger system where, if any bank was asked to produce the physical currency, it would be impossible. Technology has allowed this system to
evolve, which arguably has been one of the underlying causes of financial crises i.e., electronic selling mortgages and derivatives etc. This is
upsetting the balance of wealth in every country, where GINI indexes are actually widening.
Centralization has generally meant higher interest rates over time since single currencies and centralised banking came into existence. This
suited government which found it easier to deal with a more centralised banking industry and fund economic activity. This also caused a rural
crisis which was partly solved through the formation of specialized and subsidized rural banks in some cases.
One could also argue that the housing crisis was also caused by central currencies where investments made in land as a ledge against inflation
of a national currency was encouraged and promoted.
However a local currency may be able to challenge the dominance of these banks, which impose their credit policies upon communities from
outside. The local currency may help to provide some economic freedom from the interest rates banks apply to communities, and the
prevailing inflation rates on the national scene.
This can be done by using local currencies to provide new means of obtaining credit and capital fund, for businesses that banks won’t fund. It
is here local currencies can help most, where governments all over the world have failed to influence the banking sector to step into the area
of micro-finance. In this period of nearing on deflation, i.e., real wages are relatively decreasing, a local currency may enable local trades
people to exchange labor for local goods much more effectively.
The means of trade is typically changing today where the traditional means of exchange with state currencies are being discarded for
electronic and cyber alternatives. One thing is for certain is that national currencies will be weakened by the number of alternatives to
currencies and banking that are springing up on the internet and social media today.
The potential of local currencies has become a forgotten tool of development. New employment in the future is likely to be created through
small business with limited capital. Very few large corporations will dramatically increase employment as they are looking for ways to reduce
employment.
Many multinationals open and shut in the developing world, to places where they can make larger profits, leaving vacuums in employment.
Therefore micro enterprise and SME development and diversifying local economies should be a major economic objective.
A local currency should go hand in hand with a local banking system. Any local banking system should have a simple system that is easily
understood, be consistent with existing system, be redeemers of currency (i.e., current currencies are not redeemable in anything, if a local
currency is redeemable against a national currency gives it intrinsic value), provide a universal measurement of value to provide a sense of
security, eliminate interest and install discount rates on loan repayments – i.e., voucher, and be organized at a local and community level.
Page 3 of 7Is it time for the rise of local currencies? | nsnbc international
9/5/2015http://nsnbc.me/2015/04/14/is-it-time-for-the-rise-of-local-currencies/

4. 2 3
Credit unions have existed for a long time and this is not far away from the concept espoused here. However governments through their
support for ‘big’ banks, and banks through acquisitions and aggressive commercial practices have done their best to destroy this type of
institution, which has stood in the way of banks taking over control of the economic through central lending.
One must not forget that money is a social instrument. Local currencies are a ‘bottom-up’ approach to development rather than usual policy
initiatives which come from a central government. Local currencies seem to have one thing in common, which may be the primary reason that
promoters create them in the first place. That is the enhancement of local identity and sense of community within a region. Advocates of local
currencies would argue that a local currency helps to form a sense of community which may lead to localized entrepreneurial start-ups in
ventures that serve these communities. This would primarily be in specialized food businesses, etc. Thus local currencies could be seen as a
source of local justice in helping to promote local entrepreneurial activities. Opportunity is also a human right.
A local currency, imaginably used, may be able to promote a micro-business sector to cover the local economic void that now exists in many
communities. Local businesses can be nurtured through using hybrids of local currencies for alternative financing linking into variations of
local crowd funding, and thus reflect local economic value better.
Local currencies may be more protective of international exchange rate fluctuation, thus protecting local economic buoyancy, which appears
to be on the rise of late. A local currency may even be able to assist in lowering the high cost levels many developed economies, which has
destroyed the simple economic model of local production to serve local communities. It is all about going back to the future in macro-
economic policy and recreate local comparative advantage once again.
As pointed out by the author of Sacred Economies Charles Eisenstein, it was Taiwan, Japan, and South Korea, which fostered local
production through import replacement protectionist policies in the 1980s that have prospering middle classes today. Compare this with
Mexico which opened up free trade and openly allowing in foreign investors, gained very little in knowhow, technology, and permanent
capital. Further, countries like Brazil and Thailand are taking measures to protect their economies from the flood of cheap US dollars buying
up domestic assets. In both these cases the currency acted as protection from the outside world in a form of economic sovereignty. Compare
this to the situation in Greece which does not have its own currency.
Perhaps the real reasons why local currencies are introduced are non-economic. Local currencies are more about building community pride
and developing ‘cultural capital’ against national and international trends.
The objective of a local currency and the attached value system to it, is to create or recreate a local community, product and service economy
that meets the needs of local society from the local society itself. It aspires to develop a self financing community.
This is a very powerful tool for community development, to create micro-economic activity back in the communities that have become
economically barren, and then to capture the value of local trade and hold it within the community.
As Bernard Lietaer said, ‘civilization needs a new operating system and fast‘. This is indeed very relevant for many parts of the world today.
Share:
About the Author
Murray Hunter - Murray Hunter is an academic at University Malaysia Perlis and
sometimes consults to government on development and entrepreneurship within the
ASEAN region. Murrey Hunter contributes to several international media, including our
partner media, The 4th Media in Beijing, Asian Sentinel and others. Murray Hunter became a
regular contributor to nsnbc international in May 2013.
Related News
Abu Laila: “Israel Using Absentee Property Law As A Pretext For Ethnic Cleansing”
Trade Deals and Immigration Are Not the Only Threat to Employment
Share
We Give You $100 to Trade
Open Account Now and Get $100. No Deposit. Limited Time
Offer!
32
Page 4 of 7Is it time for the rise of local currencies? | nsnbc international
9/5/2015http://nsnbc.me/2015/04/14/is-it-time-for-the-rise-of-local-currencies/

5. Alexandria Lighthouse to be reassembled in original location
EU vs. Google: When Two Goliaths Meet
Leave a comment
Your Name... (Required)
Your Email... (Will not be published) (Required)
Your Website... (Optional)


XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite>
<code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
Submit Comment
Notify me of follow-up comments by email.
Notify me of new posts by email.
Latest articles
40,691 Egyptians fled Libya since ISIS beheading video
May 8, 2015, No Comments
New Israeli Government To Legalize Random Outposts
May 8, 2015, No Comments
Page 5 of 7Is it time for the rise of local currencies? | nsnbc international
9/5/2015http://nsnbc.me/2015/04/14/is-it-time-for-the-rise-of-local-currencies/

6. Egypt’s military participated in release of Ethiopians abducted in Libya: Sisi
May 8, 2015, No Comments
Brits call for immediate protests if Tories remain in office
May 8, 2015, No Comments
Court Rules NSA ‘Bulk Collection’ is Illegal & Must Be Stopped
May 8, 2015, No Comments
Saudi King pardons 76 Prisoners: Forced Mercenary Service of Hundreds remains
uninvestigated
May 8, 2015, No Comments
Colombia to extradite alleged Assassin of Venezuelan Lawmaker
May 8, 2015, No Comments
The dreams deferred by Baltimore’s mortgage crises set the stage for unrest
May 7, 2015, No Comments
Abu Laila: “Israel Using Absentee Property Law As A Pretext For Ethnic Cleansing”
May 7, 2015, No Comments
May 9th: Russian Victory, NATO Defeat
May 7, 2015, No Comments
Support nsnbc
Have Your Say
• The half-baked Farce of International Law
5 comments
• US plays “Chicken” with Russian Air Force while Nukes are on Hair-Trigger Alert
4 comments
• GSK Vaccine Recall: Flulaval “Might Cause More Harm Than Good”
3 comments
Page 6 of 7Is it time for the rise of local currencies? | nsnbc international
9/5/2015http://nsnbc.me/2015/04/14/is-it-time-for-the-rise-of-local-currencies/

7. Search News - Type Keyword & Hit Enter
• UK carried away by newborn royal “useless eater”
2 comments
• Buckingham Palace Stormed: The Peasants are Revolting
2 comments
• Western Nonsense and the Rise of China
2 comments
• Swedish Troops to join faux anti ISIS Alliance in Iraq
2 comments
Get a free subscription / please donate.
Subscriptions are free of charge so all, even the most impoverished can have access to our newspaper. We count on that you donate a modest
monthly amount when you subscribe. No more than you would pay for one print newspaper per month. Good, independent journalism is not
inexpensive and journalists have to survive economically too and we have bills to cover. If you appreciate independent journalism, you find
the donate button in the right column of our website. Thank you.
Subscribe
Meta
• Register
• Log in
• Entries RSS
• Comments RSS
• WordPress.org
RSS Feed
• New Israeli Government To Legalize Random Outposts
• Egypt’s military participated in release of Ethiopians abducted in Libya: Sisi
• Brits call for immediate protests if Tories remain in office
• Court Rules NSA ‘Bulk Collection’ is Illegal & Must Be Stopped
• Saudi King pardons 76 Prisoners: Forced Mercenary Service of Hundreds remains uninvestigated
◦ Analysis
◦ Geo-Politics
◦ Opinion
◦ Economy
◦ Interviews
◦ Editorial
◦ Health and Lifestyle
◦ Science & Technology
◦ SPORT
© 2011 - 2075 All Rights Reserved nsnbc ® & contributors.
Page 7 of 7Is it time for the rise of local currencies? | nsnbc international
9/5/2015http://nsnbc.me/2015/04/14/is-it-time-for-the-rise-of-local-currencies/