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In economics, a local currency, in its common usage, is a currency not backed by a national government (and not necessarily legal tender), and intended to trade only in a small area. Numismatics (numisma nomisma "coin" from the νομίζειν nomízein, "to use according to law" is the study or collection of Currency This article is a collection of concise Numismatic and Coin collecting terms for the beginner or professional A currency is a unit of exchange, facilitating the transfer of Goods and/or services It is one form of Money, where money is main - title Coin keywords numismatics coin review A banknote (often known as a bill, paper money or simply a note) is a kind of Negotiable instrument, a Promissory note made by a Wikipedia talkFeatured lists for an explanation of this and other inclusion tags below -->This list of circulating currencies contains the 182 current Company scrip is Currency issued in certain industries to pay Workers Such Scrip can only be exchanged by Wage -earners in company stores Local Exchange Trading Systems (LETS also known as LETSystems are local non-profit exchange networks in which goods and services can be traded without the need for printed In Economics, a time-based currency is an Alternative currency where the unit of exchange is the Person-hour. Fictional currency is Currency in works of Fiction. It is often invented bearing little or no resemblance to any modern or historic currency A mint is an industrial facility which manufactures Coins for Currency. Coining is a form of precision stamping in which a workpiece is subjected to a sufficiently high stress to induce plastic flow on the surface of the material In Numismatics, the term milled coinage (also known as machine-struck coinage) is used to describe coins which are produced by some form of machine rather than by Hammered coinage describes the most common form of coins produced since the invention of Coins in the first millennium BC until the early modern period of ca Cast coinage refers to Coins made by pouring melted metal into a mold i Exonumia is the study of Coin -like objects such as Token coins and Medals and other items used in place of legal currency or for commemoration A credit card is part of a system of Payments named after the small Plastic card issued to users of the system A medal is usually a Coin -like sculpted object of metal or other material that has been engraved with an Insignia, Portrait or other artistic rendering In the study of Numismatics, token coins or tokens are coin-like objects used instead of Coins The field of tokens is part of Exonumia. Notaphily is the study of paper Money or Banknotes A notaphilist is a collector of banknotes paper money paper currency or plastic notes A banknote (often known as a bill, paper money or simply a note) is a kind of Negotiable instrument, a Promissory note made by a Scripophily is the study and collection of Stocks and bonds A specialized field of Numismatics, scripophily is an interesting area of collecting due to both Software for Fixed assets management and Stock control developed in 2004. In Finance, a bond is a Debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and Interest Economics is the social science that studies the production distribution, and consumption of goods and services. A currency is a unit of exchange, facilitating the transfer of Goods and/or services It is one form of Money, where money is Legal tender or forced tender is Payment that by Law, cannot be refused in settlement of a Debt ( Debtor cannot successfully be sued These currencies are also referred to as community currency. They encompass a wide range of forms, both physically and financially, and often are associated with a particular economic discourse.

Contents

History

Free banking provides the economic prototype of local currencies. Free banking is a theory of Banking in which commercial banks and market forces control the provision of banking services In the modern era, the most recognizable local currencies were company scrip issued in certain industries to pay workers, and token coins issued by some businesses to encourage consumer loyalty. Company scrip is Currency issued in certain industries to pay Workers Such Scrip can only be exchanged by Wage -earners in company stores In the study of Numismatics, token coins or tokens are coin-like objects used instead of Coins The field of tokens is part of Exonumia. In the nineteenth and early twentieth century, the failures of national banks during crises often created acute demands for cash, which were met by businesses creating emergency currencies. These scrips were usually issued with the intention of redemption in national currency at some later date.

A few such currencies, however, developed into monetary systems in their own right. The idea of using free banking to produce an alternative, community-level currency dates back at least as far as the German Credit Unions in the 1800s. The oldest local currencies known to be in continuous use are the WIR in Switzerland, and the Labor Banks in Japan. "Wir" redirects here For the British punk band that dropped the last letter from its name for one album, see Wire (band.

Complementary currency is a hypernym to local currency, but the terms are often used as synonyms. Complementary community currency (CCC is a Hypernym (superordinate of Local currency (also referred to as community currency and Sectoral currency. In Linguistics, a hyponym is a Word or Phrase whose semantic range is included within that of another word As the term is now widely used, it does not refer to currency which is nationally-backed but happens to only be used in a local area.

Advocates, such as Jane Jacobs, argue that this enables an economically cool, yet depressed region to pull itself up, by giving the people living there a medium of exchange that they can use to exchange services and locally-produced goods. Jane Jacobs, OC, OOnt ( May 4, 1916 – April 25, 2006) was an In a broader sense, this is the original purpose of all money. Money is anything that is generally accepted as Payment for Goods and services and repayment of Debts. Local currencies also tend to operate in relatively small geographic regions and encourage recycling, reducing the amount of carbon emissions from the transportation and manufacture of goods. As a result, they are part of the economic strategy of many green and sustainable living groups such as the Green Party of England and Wales. The Green Party of England and Wales (GPEW (Plaid Werdd Cymru a Lloegr is the principal Green political party in England and Wales.

Local currencies can also come into being when there is economic turmoil involving the national currency. An example of this is the Argentine economic crisis of 2002 in which small denomination, interest free provincial bond IOUs issued by local governments quickly took on some of the characteristics of local currencies successfully.

Opponents of this concept argue that local currency creates a barrier which can interfere with economies of scale and comparative advantage, and that in some cases they can serve, like traditional national currencies, as a means of tax evasion. In international trade the principle of comparative advantage refers to the fact that although one country may have an absolute disadvantage with another value can be created for both Tax avoidance is the legal utilization of the Tax regime to one's own advantage in order to reduce the amount of tax that is payable by means that are within the law

Use of local currencies to boost local economies is strongly advocated by the Netherlands-based Instrodi Institute. The Netherlands ( Dutch:, ˈnedərlɑnt is the European part of the Kingdom of the Netherlands, which consists of the Netherlands the Netherlands Social TRade Organization STRO is an NGO from the Netherlands.

Historical local currencies

The Wörgl experiment that was conducted from July 1932 to November 1933 is a classic example of the potential efficacy of local currencies. Wörgl is a town in Tyrol, Austria, in the Kufstein district It is 20 km from the state border with Bavaria. Wörgl is a small town in Austria with 4000 inhabitants that introduced a local scrip during the Great Depression. By 1932 unemployment in Wörgl had risen to 30%. The local government had amassed debts of 1. 3 million Austrian schillings (AS) against cash reserves of 40,000 AS. Local construction and civic maintenance had come to a standstill. On the initiative of the town's mayor, Michael Unterguggenberger, the local government printed 32,000 in labor certificates which carried a negative 1% monthly interest rate and could be converted into schillings at 98% of face value. An equivalent amount in schillings was deposited in the local bank as cover for the certificates in case of mass redemption and earned interest for the government. The certificates circulated so rapidly, that only 12,000 were ever actually put into circulation. According to reports by the mayor and economists of the day who studied the experiment, the scrip was readily accepted by local merchants and the local population. It utilized the scrip to carry out 100,000 AS in public works projects involving construction and repair of roads, bridges, tanks, drainage systems, factories and buildings. The scrip was also accepted as legal tender for payment of local taxes. In the one year that the currency was in circulation, it circulated 13 times faster than the official shilling and served as a catalyst to the local economy. The heavy arrears in local tax collection declined dramatically. Local government revenue rose from 2,400 AS in 1931 to 20,400 in 1932. Unemployment was eliminated, while it remained very high throughout the rest of the country. No increase in prices was observed. Based on the dramatic success of the Wörgl experiment, several other communities introduced similar scrips.

In spite of the tangible benefits of the program, it met with stiff opposition from the regional socialist party and from the Austrian central bank, which opposed the local currency as an infringement on its powers over the currency. As a result the program was suspended, unemployment rose and the local economy soon degenerated to the level of other communities in the country. [1] [2]

Other well-documented historical examples include:

Characteristics

Theory

Local currency is based on a local form of monetarism and mercantilism: it establishes an internal trade barrier, as the local currency cannot be used externally, and allows the area to have a different (presumably lower) interest rate than the national currency's — in the Wörgl experiment, a negative interest rate, known as demurrage. Joshua Abraham Norton ( c 1819 &ndash January 8 1880 the self-proclaimed His Imperial Majesty Emperor Norton I, was a celebrated citizen of San In 1936, the Alberta Social Credit Party -led government of the Province of Alberta, Canada, introduced prosperity certificates in an attempt Air 1 is a Christian music Radio network in the United States, operated by the Non-profit organization EMF Broadcasting. Monetarism is a school of economic thought concerning the determination of national income and monetary Economics. Mercantilism is the idea that a colony should export more goods than it imports and that a colony should sell at higher prices and buy at lower prices A trade barrier is a general term that describes any government policy or regulation that restricts International trade. Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets Demurrage is a cost associated with owning or holding currency over a given period of time Advocacy and criticism of local currencies is a based partly on general attitudes towards monetarism and mercantilism, and partly on opinions of the desirability of having internal variations in currency and trade.

Advocate of local currency in effect argue that, in certain circumstances, an entire country is not an optimum currency area, and that various regions should have different currencies. In Economics, an optimum currency area ( OCA) also known as an optimal currency region ( OCR) is a geographical region in which it would maximize Compare with the Eurozone in Europe. Euro Enlargement of the

Benefits

The Wörgl experiment dramatically illustrates some of the common characteristics and major benefits of local currencies. [3]

  1. Local currencies tend to circulate much more rapidly than national currencies. The same amount of currency in circulation is employed more times and results in far greater overall economic activity. It produces greater benefit per unit. The higher velocity of money is a result of the negative interest rate which encourages people to spend the money more quickly.
  2. Local currencies enable the community to more fully utilize its existing productive resources, especially unemployed labor, which has a catalytic effect on the rest of the local economy. They are based on the premise that the community is not fully utilizing its productive capacities, because of a lack of local purchasing power. The alternative currency is utilized to increase demand, resulting in a greater exploitation of productive resources. So long as the local economy is functioning at less than full capacity, the introduction of local currency need not be inflationary, even when it results in a significant increase in total money supply and total economic activity.
  3. Since local currencies are only accepted within the community, their usage encourages the purchase of locally-produced and locally-available goods and services. Thus, for any given level of economic activity, more of the benefit accrues to the local community and less drains out to other parts of the country or the world. For instance, construction work undertaken with local currencies employs local labor and utilizes as far as possible local materials. The enhanced local effect becomes an incentive for the local population to accept and utilize the scrips.
  4. Some forms of complementary currency can promote fuller utilization of resources over a much wider geographic area and help bridge the barriers imposed by distance. The Fureai kippu system in Japan issues credits in exchange for assistance to senior citizens. Fureai kippu (in Japanese characters ふれあい切符 or in a rough English translation Caring Relationship Tickets is a Japanese Community currency created in 1995 by the Family members living far from their parents can earn credits by offering assistance to the elderly in their local community. The credits can then be transferred to their parents and redeemed by them for local assistance. Airline frequent flyer miles are a form of complementary currency that promotes customer-loyalty in exchange for free travel. The airlines offer most of the coupons for seats on less heavily sold flights where some seats normally go empty, thus providing a benefit to customers at relatively low cost to the airline.
  5. While most of these currencies are restricted to a small geographic area or a country, through the Internet electronic forms of complementary currency can be used to stimulate transactions on a global basis. In China, Tencent's QQ coins are a virtual form of currency that has gained wide circulation. QQ coins can be purchased for Renimbi and used to purchase virtual products and services such as ringtones and on-line video game time. They are also obtainable through on-line exchange for goods and services at about twice the Renimbi price, by which additional 'money' is being directly created. Though virtual currencies are not 'local' in the tradition sense, they do cater to the specific needs of a particular community, a virtual community. Once in circulation, they add to the total effective purchasing power of the on-line population as in the case of local currencies.

Society utilizes only a small portion of its resources and opportunities. Almost everyone has underutilized knowledge, skills and time that can be engaged productively. Most manufacturers and services have underutilized machinery or capacity. Complementary currencies are a creative means to enhance this untapped social potential.

Difficulties

A common difficulty arising with many local currencies is pooling, with sudden release of the pool, creating hyperinflation. This is particularly likely when the local currency is not exchangeable for the coin of the realm and there are only a few vendors of basic necessities (such as food or housing) accepting the local currency for full, or nearly full, payment.  

Modern local currencies

There has been a tremendous surge in the use of local currencies over the past two decades. Today there are over 2500 different local currency systems operating in countries throughout the world. One of the most prominent is LETS, Local Exchange Trading System, a trading network supported by its own internal currency. Originally started in Vancouver, Canada, there are presently more than 30 LETS systems operating in Canada and over 400 in the United Kingdom. Australia, France, New Zealand and Switzerland have similar systems. Time dollars, Ithaca Hours and PEN exchange are among the most successful systems in the USA. Ithaca Hours is a Local currency in Ithaca New York. It is credited as the first modern Local currency and has inspired similar systems throughout the

References

  1. ^ [1] Wörgl Experiment with Depreciating Money
  2. ^ [2] Mckeever Institute of Economic policy Analysis
  3. ^ Lietaer, Bernard, The Future of Money, Century, 2002. The ora is the currency of Orania. It was first issued in 2004, to provide an internal currency for Orania as part of their quest for self-determination The Crédito was a Local currency started on 1 May 1995 in Bernal, province of Buenos Aires, Argentina The LECOP was a bond issued by Argentine national government to replace the Patacón, which was issued by provincial governments The Patacón (officially called Letra de Tesorería para Cancelación de Obligaciones de la Provincia de Buenos Aires) was a bond issued by the government of the The Saber ( Spanish / Portuguese: knowledge currency is a proposal of an educational Sectoral currency initially presented in Brazil. These are community currencies (also known as "local currencies" in Canada Community currencies that have been used in the United States: Models Time Dollar Currencies Fureai kippu (in Japanese characters ふれあい切符 or in a rough English translation Caring Relationship Tickets is a Japanese Community currency created in 1995 by the Eco-Money is the name of many Japanese community currencies, used to connect neighbours in obtaining the goods and services they need Community Oriented Mutual Economy ( COME) is a Local currency project started in Hong Kong by the Saint James Settlement[http //www Sel is a municipality in the county of Oppland Norway. Sel was separated from Vågå as a municipality of its own January 1 1908 Chiemgauer is the name of a REGIO community currency started on 2003 in Prien am Chiemsee, Bavaria, Germany. Axarquia is a region of Andalucía. It is the wedge-shaped area east of Málaga. "Wir" redirects here For the British punk band that dropped the last letter from its name for one album, see Wire (band. Local Exchange Trading Systems (LETS also known as LETSystems are local non-profit exchange networks in which goods and services can be traded without the need for printed In Economics, a time-based currency is an Alternative currency where the unit of exchange is the Person-hour. The Totnes pound is an alternative Local currency, intended to support the local economy of Totnes, a town in Devon, UK. In Economics, a time-based currency is an Alternative currency where the unit of exchange is the Person-hour. The Ruf RGT is a sports car made by Ruf Automobile of Germany Environmental economics is a subfield of Economics concerned with environmental issues

See also

External links

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