Funny Money

| July / August 2003

You need a new pair of shoes. Does it really matter whether you buy them from the local merchant or a national chain? It does, for your community. Buying local helps keep your money circulating through your hometown: paying your neighbors? salaries, boosting local government revenues, and so on. But when you fork over your cash to a national chain, your money gets whisked away in that night?s deposit.

To keep money flowing around town longer, communities across North America have created special local currencies to encourage local spending. Towns from Ithaca to Gainesville to Tucson have introduced new currencies, often adorned with pictures of local art or historical figures. And some have had great success convincing small businesses to accept them.

This idea is not new (many places did it during the the Depression), nor are the problems associated with it. Lawrence, Kansas, found out the hard way that for local currencies to succeed, they need to be fully integrated into the larger economy. People in Lawrence happily spent the local REAL dollars (which featured local resident and novelist William Burroughs on the three-dollar bill) at small businesses across town. But merchants eventually ended up with stacks of local currency and nowhere to cash in the bills. ?Businesses need to be able to make deposits and withdrawals,? says Denis Highberger, organizer of the REAL dollars program, which was put on hold in late 2002 until organizers develop a banking and debit card system. ?This is essential for keeping a local currency going.?

British Columbia?s Salt Spring Island Monetary Fund (SSIMF) addressed these issues while developing its Salt Spring Island dollars in 2001. The program is now the very first alternative, local currency in the world to be completely backed by a national currency. ?The main benefit we are seeing is by the tourist community buying the money and then taking it off the island,? says Don Monteith, SSIMF director. ?That?s cash in the bank for us.? Three banks on the island accept Salt Spring dollars on par with the Canadian dollar. Since March 2002, the currency has even been available through ATM machines. The result? Great success. With 95 percent of all small businesses on the island now accepting the local bills, some are offering an incentive for using them: $1.10 worth of goods for each Salt Spring dollar spent. And that keeps the cash flowing?all around the community.

Nick Garafola is Utne?s editorial assistant.

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