The Next Money: As the Big Economies Falter, Micro-Currencies Rise

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More consumers are walking away from fiat currencies to drive commerce -- and society -- with new ways of buying.

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German merchant Joseph Stoeckl shows off the Bavarian "Chiemgauer" micro-currency at his store in Chiemsee. (AP)

People everywhere are fed up with the status quo of the economy. With the passion our official institutions show for this tepid "recovery," many are concluding that progress will come not from the current system, which is after all what got us here in the first place, but from their own ingenuity and inventiveness. In pockets around the world, folks are declaring economic independence by starting small, local, but potentially revolutionary alternative currencies that could change not only how we buy goods and services -- but how we relate to one other in society. If these micro-currencies catch on, we could be witnessing the replacement of our monocultural monetary system, which emphasizes a certain sort of free market capitalism above all else, with a variety of currencies that will represent more diverse sets of values belonging to the groups that hold them.

Local Currencies, Local Economies

The next time you're in the southside of London, you might find yourself standing next to a man purchasing his chicken tikka with pounds sterling that feature, rather than the Queen of England, David Bowie in his Ziggy Stardust era. The man isn't a counterfeiter with a love of 70s glam rock, but a resident of Brixton proudly using the Brixton Pound, a "complementary currency" meant to revitalize the famously tough London borough by encouraging people to spend their money as close to home as possible. Started in September 2009, the Brixton pound can now be used at 200 local businesses, some of which offer special deals to those who use the currency instead of plain-old pounds sterling. Not that normal British currency is useless: the Brixton pound is pegged directly to its national cousin, and all the notes in circulation are backed by sterling located at a local bank. The scheme is small in scope and totally transparent. And while the paper money is gorgeous and meaningful, it will soon be expanded to allow people to spend their Brixton pounds by text message.

Brixton is one of four "Transition Towns" in the United Kingdom -- the others are Totnes, Lewes, and Stroud -- currently using local currencies. The effort to energize local merchants and inspire local consumers to incorporate their values into their commerce may also be inspiring others.

The Germans are also hip to the local currency concept. Sure, in Frankfurt, where the European Central Bank is headquartered, the elites of the European economic system are furiously trying to stitch together Paris, Athens, Rome, and Madrid in some kind of fiscal Frankenstein. But not every German is keen on the euro. Sometimes to register their protest of this larger system, sometimes to put their economic energy into the prosperity of their lands close to home, and sometimes to express the kind of localized identity that Brixtoners are celebrating with Bowie-emblazed notes, several regional currency schemes are popping up around the country. One, the Chiemgauer, serves the region Prien am Chiemsee, where it was started by high school teacher Christian Gelleri. The currency is tied to the value of the euro with some interesting exceptional policies, all aimed at increasing employment in the area, supporting local culture, and making the local food supply more resilient.

In Bavaria, the heart of Germany, many people who once embraced the solidarity of the European system are now turning inward, enthusiastically using the local currency as a protest. The locals are buying a refreshing stein of Hefeweizen, paying in Chiemgauer, complaining about the profligacy of the Greeks, and feeling a profound sense of local pride. Area residents can purchase Chiemgauer notes with their euros, but there are rules for how much it costs and what you can do with it. To maintain an individual bill's validity, the local banks that run the Chiemgauer charge a 2% fee every three months, a way to encourage spending and discourage hoarding or speculation, also known as "demurrage". Non-profits can purchase 100 Chiemgauer at 97€, allowing them to spend 3% of their purchases on their core activities. Businesses that accept Chiemgauer are subject to 5% commission fee should they want to change the local currency back into euros, encouraging them to work within and thus grow the Chiemgauer micro-economy by, for example, getting local suppliers into the system.

Similar currencies have popped up around the world, such as Berkshares in Western Massachusetts, Butte Bucks in Montana, or Calgary Dollars in Alberta, Canada. Like Brixton Pounds, these regional, complementary currencies are tied directly to the national tender, and thus to the health of the overall economy. But this growing trend is also a way for people to buttress local resiliency against the volatility of the global system.

The Ancient Ways Make a Comeback

The good old barter system is another hyperlocal medium of exchange to regain ground. While bankers and finance ministers fret about the tangled, abstract mess of the fiscal situation in Athens, the Greek people are living real lives of greater hardship. Unemployment is up, lines of credit are strangled, invoices go unpaid, and retirements are at risk. Yet, the Greek people themselves are still ready to exploit their creativity and hard work for the common good. In the months since the real difficulty set in, some Greeks have begun to meet in the local agora to exchange goods and services directly, an echo of the culture that flourished millennia ago in the very same cities and towns. Since the currency they use is dominated by dysfunction at the highest levels, people are buying and selling through barter. They're trading carpentry for tango lessons, home cooked meals for baby-sitting. The barter network in the city of Volos is one of many that allow local Greeks to achieve a measure of prosperity using their ingenuity and hard work, side-stepping the currency system that is so tied up in unbearable complexities and unsolvable problems at the international level.  

The time bank, a slightly more sophisticated version of barter, is appearing in spots around the globe. A central repository keeps track of who offers what services, of how many hours they've contributed to the time bank, and how many hours they're owed. The "hours" accumulate at different rates depending on the skill level required to provide the service. For example, fine carpentry earns more hours than yard work, hours spent doing accounting accumulate at a higher rate than babysitting, etc. Once an individual has earned the hours by working for someone within the network, they can then spend them on the services they choose, with the number of hours remaining being coordinated by a central "time" bank. These systems are in use all over the world, from Chicago to Paris to Moscow, though the organizers are careful to make sure that the time is never given a specific value in a hard currency, which would open the door to taxation from governments.

A group in Northern New England has developed a specialized time bank system that helps people pay for healthcare through their earned hours. TrueNorth, a non-profit health clinic in coastal Maine, has a deal with Hour Exchange Portland by which physicians accept as payment "time dollars" that their patients accrue through service to their neighbors. The system works well at increasing community engagement and improving doctor-patient relationships, though organizers admit that younger doctors, who often bear hundreds of thousands of U.S. dollars in medical school debt, are less likely to participate.

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Eric Garland, a futurist and strategic analyst, is the author of Future Inc: How Businesses Anticipate and Profit from What's Next and How to Predict the Future...and WIN!

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