LETS

August 27, 2012 1:23 AM

Start Your Own Currency - "In the Catalonia region of Spain, a restaurant and a community garden are part of an experiment in alternative cash--they are accepting a home-grown currency called the Eco as well as the Euro." [viz. gated article (Google link), cf. The Wörgl Experiment]
posted by kliuless (29 comments total)

Seignorage to Catalonia?
posted by chavenet at 2:27 AM on August 27, 2012 [3 favorites]

Community Currencies in the USA

Community Currencies in Canada

Community Currency Guide
posted by Winnemac at 2:57 AM on August 27, 2012 [2 favorites]

I've been trading the Eco on the arbitrage market for a while and I've made a killing.

The market for Ecos is going to collapse pretty soon, but it did fund my second yacht.
posted by twoleftfeet at 3:01 AM on August 27, 2012

"We are going to launch our own currency."
"How do you go about that? Don't you have to be a government?"
"No. You have to be a bank. Why do you think they're called bank notes?"

posted by ceribus peribus at 3:26 AM on August 27, 2012 [2 favorites]

The Wörgl Experiment

Wow, I played three gigs in the obscure little town of Wörgl, in the mid/late 80s, but had never heard about any of this! They paid me in Austrian schillings back then, not town currency!
posted by flapjax at midnite at 3:50 AM on August 27, 2012

How does currency-based arbitrage differ from the kind done with commodities?
posted by LogicalDash at 4:04 AM on August 27, 2012

I'd like to reference the Ithaca Hour which identifies it as a currency representing one hour's worth of work.

Just imagine if your currency was bound to the least a person could make for an hour's worth of work. Sounds kinda nice doesn't it?
posted by Bathtub Bobsled at 4:07 AM on August 27, 2012 [2 favorites]

This has being going on for a long time, but it never really catches on with the hoi polloi. Alt currencies are still very much the playground for econ wonks and local heads.
posted by clvrmnky at 5:55 AM on August 27, 2012

Just imagine if your currency was bound to the least a person could make for an hour's worth of work. Sounds kinda nice doesn't it?

The more you bind a currency to some external value, the more volatile the currency is going to be.

For an extreme example, imagine the chaos that would happen if the dollar was pegged to the price of gasoline.

As with Bitcoin, this currency will just end up being a way for traders to extract value from the true believers.
posted by gjc at 6:11 AM on August 27, 2012 [3 favorites]

Does a duck's Eco quack?
posted by tilde at 6:33 AM on August 27, 2012

I'd like to reference the Ithaca Hour which identifies it as a currency representing one hour's worth of work.

I live in Ithaca, and I've never seen an Ithaca Hour or heard anyone reference them outside of discussion threads like this one.

I have a few questions about local currencies, maybe someone here knows the answers:

1) Why would anyone want to create a local currency?
2) I suppose one goal is to isolate the local economy from the national economy. But if all goods that can be traded with the local currency can also be traded with the national, but not the reverse, doesn't that effectively peg the local to the national?
posted by qxntpqbbbqxl at 7:29 AM on August 27, 2012

1) Why would anyone want to create a local currency?


Two possibilities:

One: (the absolutely wrong reason) you have a pet theory about a better way to manage a currency from what your nation has. Case in point, these "Hour" currencies which are clearly based on the Labor Theory of Value.

Two: desperation: there is not enough of the national currency circulating in your community.

The latter's a far better reason, and plenty of American towns and regions did it in the Depression.
posted by ocschwar at 8:05 AM on August 27, 2012

gjc: "As with Bitcoin, this currency will just end up being a way for traders to extract value from the true believers."

As long as

1) Drugs are illegal
2) Tor remains secure

bitcoin will have a real world use. It's actual value might be inflated due to speculation but it has already survived several crashes because of it's utility.
posted by Bonzai at 8:26 AM on August 27, 2012

Isn't there a third reason? The local currency is only good within your community, so even though you can exchange it for the national currency, that can be a bother, so the currency stays within the community.
posted by kenko at 8:26 AM on August 27, 2012 [1 favorite]

What's the exchange rate with Beenz? I think I still have some of those.
posted by Halloween Jack at 8:53 AM on August 27, 2012 [1 favorite]

Woman: Would you like to buy some Itchy and Scratchy Money?
Homer: What's that?
Woman: Well it's money that's made just for the park. It works just like regular money, but it's, er..."fun".
Bart: Do it, Dad.
Homer: Well, OK, if it's fun...let's see, uh...I'll take $1100 worth! [he walks in, sees all the signs: "No I&S Money", "We Don't Take tchy and Scratchy Money", etc.] Aw!

Okay, there's nothing fun about 50% youth unemployment. (But I have amused myself looking at the private dollars and community currencies pages.)
posted by MCMikeNamara at 8:54 AM on August 27, 2012

Just imagine if your currency was bound to the least a person could make for an hour's worth of work. Sounds kinda nice doesn't it?

Well, there's a Federal minimum wage, so over the short term the dollar is effectively pegged to the labor-hour that way. It's not a (1hr / $1) relationship, but it's a (1 hr / $7.25) one. Over the longer term they can decouple as inflation reduces the value of the dollar, depressing real wages, until the difference becomes big enough for Congress to raise the minimum wage. So the real wages of someone working at the Federal minimum is a sort of sawtooth.

At times, I've found that converting historic prices to modern ones -- in other words doing inflation adjustments -- using minimum-wage (or some other wage) labor-hours is more illustrative of the actual cost of goods to an average worker than using the CPI.
posted by Kadin2048 at 8:58 AM on August 27, 2012 [1 favorite]

I prefer the Schrute Buck.
posted by blaneyphoto at 9:01 AM on August 27, 2012 [1 favorite]

One: (the absolutely wrong reason) you have a pet theory about a better way to manage a currency from what your nation has.

Yeah, 'cause, y'know, nations can always be trusted to be responsible and prudent in managing currency.
posted by ZenMasterThis at 9:07 AM on August 27, 2012 [1 favorite]

I live in Ithaca, and I've never seen an Ithaca Hour

I live in Ithaca and have $10,000 of the local currency in my desk drawer. I work in the finance department of the local food cooperative. We're currently a "sink" for the currency - we accept about 6 times as much as we spend. There is one other business in town that accepts as much or more as we do, a local bakery chain. There is no commodity standard we can necessarily trade it in for - with the commodity of human labor being the big question mark. Is anyone willing to work for it?

desperation: there is not enough of the national currency circulating in your community.

Agreed, the literature I've read suggests that they can be most successful where there is an absence of cash. It is anecdotally said that when credit cards became easier to get here, the local currency decreased in use. People had cash available. it also decreased in use when the economy improved, and when the the founder/champion moved away.

Today the participant list has shortened, leaving currency holders with fewer options for spending it, and a general crisis of confidence. I do not want to be the last business holding it. It makes me care about the health of the whole currency system, which sounds positive but can also be seen as a hidden expense for using the currency.

The practice of the currency use tends to be to scan the directory, searching for something you need from someone who accepts them. Since the directory is full of body workers and architectural salvage we cannot necessarily find anything we need. So our plan is to try to expand the list by creating creating contract jobs. The jobs will pay in Ithaca Hours to do good works, we'll advertise them to the whole region (not just self-identified participants), we'll cap the pay under the reportable 1099 threshold to let contractors decide for themselves about reporting, and see if anyone is interested in doing the work.

I think one of the quiet complexities of local currencies is that they are not creating a new economy, they are creating a secondary economy. Depending on the historical moment, it may or may not compete well with the primary economy.
posted by ioesf at 10:53 AM on August 27, 2012 [3 favorites]

(the absolutely wrong reason) you have a pet theory about a better way to manage a currency from what your nation has

Because the pet theory about how to manage a currency espoused by the people in your central bank is necessarily always absolutely correct?

Although personally I don't think that creating an alternate currency is the way to go about things in that case -- it's fairly straightforward to keep your savings in some other asset and only convert it to currency when you need transactional liquidity* -- but the underlying concern is certainly valid.

* This is also why I think both the gold bugs who want a return to a commodity-backed currency are wrong, and why people who think that Bitcoin is totally useless are wrong. Bitcoin is the logical extreme of modern fiat currencies, with nothing (not even the full faith and credit of a government, however dubious) backing it. I wouldn't want to keep my savings in it due to the volatility, but there's no problem using it as a low-friction funds transfer method, with a conversion to some more stable currency on either end. Similarly, on a longer timescale, a non-commodity-backed currency might be a bad place to park your savings due to inflation, but modern investment vehicles like ETFs or money market accounts let you keep most of your savings diversified however you want (i.e. according to your personal risk/reward tolerance) but are liquid enough that you can convert them to your desired currency for making purchases whenever you want. Given this, I don't see any real value in tying the national currency to a commodity; anyone who wants their savings in gold (say) can just go ahead and do it already.
posted by Kadin2048 at 11:18 AM on August 27, 2012

Case in point, these "Hour" currencies which are clearly based on the Labor Theory of Value.

It's my understanding that it isn't a wonkish thing, but a tax code thing. That is, you can barter an hour of X for an hour of Y, but you can't sell an hour of X for currency value of Y unless you provide all sorts of IRS-friendly documentation.
posted by dhartung at 11:33 AM on August 27, 2012

1) Why would anyone want to create a local currency?

Immortality. St. Peter won't call you, because you can't go, if you owe your soul to the company store.

More seriously, my grandfather had some company scrip he was paid in as a teenager in the 30s. I was always amazed that they could and would do that.
posted by Pogo_Fuzzybutt at 11:33 AM on August 27, 2012

It's my understanding that it isn't a wonkish thing, but a tax code thing. That is, you can barter an hour of X for an hour of Y, but you can't sell an hour of X for currency value of Y unless you provide all sorts of IRS-friendly documentation.


Ah, okay, that sounds a lot better.

And for Ithaca, it might make sense to just use them for public works, then. Just like in Worgl.
Cleaning up litter in the Gorges, improving the parks, that kind of stuff.
posted by ocschwar at 12:35 PM on August 27, 2012

you can barter an hour of X for an hour of Y,

I'd be surprised if this was correct. My employer, for example, can't pay for my cleaner in return for some of my time being unpaid (and therefore escape the higher taxes on the time spent on me.) Or a more extreme example: company trips to the local brothel would be regarded as a taxable employee benefit taxed at my rate of pay, not the sex worker's. (Unless I'm a sex worker, in which case I would be inclined to try and get it under the R&D tax relief provisions...)

we'll cap the pay under the reportable 1099 threshold to let contractors decide for themselves about reporting

I'm not American, so I don't quite follow this, but don't you mean "so the contractor can handle the paperwork if they go over the 1099 threshold"? Otherwise I think you're suggesting tax evasion.

And tax evasion is the key problem. You can earn and pay in non-state currency as much as you like. But (1) you have to pay your taxes in state currency, so you have to have a state-currency income (2) if you have a non-state-currency income then the state will insist on converting it into a state-currency income and taxing you on it. If you don't believe me, check the attempts of cunning and unscrupulous London bankers to avoid Income Tax by (for example) being paid in gold bullion, wine...
posted by alasdair at 2:46 PM on August 27, 2012

Otherwise I think you're suggesting tax evasion.

The IRS does not require reporting income under $600, though technically the contractors could report it if they choose. Is it evasion if the government offers the loophole?

Gold bullion aside, the reason this is part if the idea at all is that the costs of being paid in local currency are high - limited places to spend it, uncertain value, etc - that to require a worker to go out an find state currency elsewhere just to pay tax on the money they are accepting from us seems particularly burdensome.
posted by ioesf at 3:07 PM on August 27, 2012

It's my understanding that it isn't a wonkish thing, but a tax code thing. That is, you can barter an hour of X for an hour of Y, but you can't sell an hour of X for currency value of Y unless you provide all sorts of IRS-friendly documentation.

This is incorrect. Everything must be denominated in dollars, even if the transaction didn't occur in dollars.

The IRS does not require reporting income under $600, though technically the contractors could report it if they choose. Is it evasion if the government offers the loophole?

It's not a loophole. The IRS doesn't require businesses to fill out a 1099 for payees who get less that $600 (per year!), but, the payee is required to report it as income, unless their income for the year is so low for the year that they do not have to file a tax return.
posted by gjc at 5:19 PM on August 27, 2012

Oh I see. Evidently a common misconception. Thanks.
posted by ioesf at 5:29 PM on August 27, 2012

One: (the absolutely wrong reason) you have a pet theory about a better way to manage a currency from what your nation has. Case in point, these "Hour" currencies which are clearly based on the Labor Theory of Value.

Incidentally, I don't think that's clear at all. Nothing's stopping you from pricing the thing it took you one hour of work to create at ten Hour-Bucks.
posted by kenko at 7:00 PM on August 27, 2012