November 24, 2017

Local currencies: Finding value beyond the dollar

“People will try (local currencies) but really, they never have the same value as the national currency. These things come and go in many places.”

Ken Jones, chief economic analyst for the Vermont Agency of Commerce and Community Development

Like worthless old Confederate dollars or colonial scrip, Green Mountain Hours started out as a promising idea on paper in Montpelier.

As a new local currency, businesses bought and spent their Hours locally. Since the “money” was home-grown, and stayed within the community, it helped to stimulate the retail economy and encouraged buying locally.

At least, that was how Hours were intended to function in the early 2000s. In the end, the paper notes never really caught on, said Elysha Welters, owner of Rhapsody Natural Foods in Cabot, which produces organic food products including tempeh, miso, rice milk and vegan egg rolls. They eventually stopped using Hours as an alternative local currency.

“Everybody needed to accept them, especially the food co-ops. The co-ops didn’t go for them. That was the problem,” Welters said. “I still have a whole pack of them in front of one of my filing cabinets.”

One popular time bank in central Vermont is the Onion River Exchange, which began in April 2008 as an outgrowth of Envision Montpelier. The group’s mission is to ensure community sustainability and increase “community connectedness.”

ORE uses time — not dollars — as a measure of value to exchange a variety of services with members. In October 2012, Reach Service Exchange Network merged with ORE into a single timebank. In 2015, ORE launched a tool library for all timebank members, which currently number 430 from more than 45 towns in central Vermont.

“Our mission is to promote the exchange of skills and talents, using time instead of money, to increase the sustainability and well-being of communities,” according to ORE’s website. “ORE’s vision is a world of empowered, interdependent and resilient communities where everyone is valued equally, and has access to the services they need to enhance their well-being.”

Through ORE, members post offers and requests, and log time earned or spent exchanging services with each other on our online timebanking system. The time “banked” can be used for future exchanges with any member.

ORE members have exchanged over 45,000 hours in more than 15,000 exchanges since 2008, with nearly 300 services offered.

Over the past two decades, other local currencies have come and gone in the Vermont communities that tried them.

Buffalo Mountain Hours, created in Hardwick, was one such local currency that fell out of favor. The Burlington Currency Project enjoyed a 10-year run, until that project ended in 2007.

“There were many distinct phases during the life of BCP,” according to the International Journal of Community Research. “It started out as an ad hoc group of volunteers, and eventually found a level of institutional and city support before closing due to a number of factors.”

Local currencies, like their U.S. dollar counterparts, are “fiat” currencies — money created “out of thin air,” said Gwen Hallsmith, of Vermonters for a New Economy, a private organization that advocates for a public banking system in Vermont.

As fiat currency, a local currency functions both as a store of value and a medium of exchange, she said.

The Ithaca HOUR, for example, is a local currency that has been in use in Ithaca, New York since it was first issued in 1991.

The main difference with a local currency, however, is that you can’t spend it just anywhere in the U.S., said Hallsmith, author of “Creating Wealth: Growing Local Economies with Local Currencies.”

“As a currency, it needs to flow in order to be successful,” she said. “The level of success depends a lot on the type it is, the need it fills, and how it is managed. The problem is they take an enormous amount of effort (to manage). They tend to fail more easily.”

Local currencies come in many forms, such as the “time bank” — a repository for units of time that are transacted just like money. Frequent Flyer miles also can function as currency, said Hallsmith, the former director of the Montpelier Department of Planning and Community Development.

In 2010, Montpelier considered piloting a “food currency” program to help local farmers cope with low prices and rising costs.

While the “hybrid” system envisioned using real dollars, food storage units and food credits to buy and sell goods and services, the program never launched, Hallsmith said.

Hallsmith, who lives in Cabot, said she hasn’t given up on the idea of a local food currency. She said one local store owner — with her encouragement — started a “pay-it-forward” program that allows residents to pre-purchase food, gas and hardware.

“This supports the local businesses and builds the kind of habits needed for a currency based on food storage,” Hallsmith said.

Ken Jones, chief economic analyst for the Vermont Agency of Commerce and Community Development, noted that local currencies tend to follow a “consistent trajectory” based on currency supply, demand, and comparative dollar value.

“People will try (local currencies) but really, they never have the same value as the national currency,” Jones said. “These things come and go in many places.”

In order for a local currency to work, he said, it needs a “mature infrastructure” to maintain it along with proven “liquidity” — the ease with which local currency is converted into cash.

“People really do want to buy local. (Local currencies) translate buying local into something concrete,” Jones said.

Jones said Bristol Bucks and other customer-loyalty “scrip” programs can also function as local money.

Bristol Bucks, a project of Bristol CORE, was founded 11 years ago to promote the local economy. The system works similarly to a checking account, said project spokeswoman Carol Wells.

Wells said Bristol Bucks can be purchased in denominations of $5 and $20, but only at the National Bank of Middlebury in Bristol. There is no transaction fee, she said.

Bristol Bucks were first issued in 2006, and in 2016, the bank sold a total of $2,675 in currency, mainly during the holidays. So far in 2017, the bank has sold $975 in Bucks, said Heather Jerome, community office manager for the National Bank of Middlebury.

Since there is no expiration date, “sometimes people forget about them and use them years later when they come across them in a drawer or something,” Jerome said.

Wells said Bristol Bucks also works like a gift certificate program, “although the town does accept them.”

“You can pay your water bill with Bristol Bucks. We feel good about the program, but we promoted it. I think it’s giving people an alternative to buying national gift cards,” Wells said.

 

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