by Rob Higgin Two questions about local currency: First, what backs a local currency? And second, how does it fit in?
Before answering the first, we need to be very clear about what backs conventional money, and that boils down to, what are people willing to do to get it? Certainly land, timber and mineral resources are the substance but even gold is worthless unless someone is willing to work, lie, die or kill for it. In short, you and I give money its value and only our need for shelter and bread drives us to it.
How does it fit in? Local currency just adds some to the money we already have.
Initially, for a storefront business, local currency can only be accepted as part of the small amount of final profit that exists only after all other costs have been met with cash. Ten to 15 per cent is usually enough to draw attention.
Though small, it can make an enormous difference in the community, expanding circles of trusted acquaintance and mobilizing local talent. If the local currency is readily accepted then it is money in all the essential ways for which we use cash locally already.
In time, if a large number of people want to use local currency and work for it, then more of a storeowner’s own needs, and those of his or her employees, could also be met with local dollars, i.e. staff bonuses, farm produce, trades labour, local goods and charitable donations.
Ideally, the time would come when a portion of city salaries and contracts would also be payable in local currency, enabling municipal governments to accept local currency as part of tax revenues.
Individuals, including building contractors, lawyers, dentists and artisans can often use a higher percentage of local dollars. An example of this is my concrete retaining wall arc-sections. The material cost is quite small; the value is in the shape, efficiency and artistry. I can accept up to 50 per cent of the total price in local dollars. This makes my product even more attractive.
The math is simple. If we have only cash, we can be sure it’s on a fast track out of town, leaving the community in a state of hypovolemic shock. On the other hand, if we have two currencies, one of which is only valued in the local economy, then we’ll find ourselves acting more like a society (from the Latin socius meaning friend), just because there’s an adequate money supply backed by the energy, skills and goodwill of the participants.
Global events will continue to rattle personal fortunes and local economies, if we choose to do nothing exceptional. Local currencies and the Powell River Mutual Fund have the potential to act as a breakwater and reservoir against financial storms.
Rob Higgin lives south of town and can be contacted at 604.487.1119 or through email [email protected].
