With greenbacks under attack, critics search for a currency that really makes change
Imagine, if you will, seated at a table an earnest community activist, a Big Brother technocrat, and a conspiracy-mad libertarian. They are all nodding their heads in agreement. Now imagine that one of them strikes a match. The others nod approvingly, and a pile of paper in the middle of the table bursts into flame.
Except for the vivid bonfire, this is a tough image to conjure. In reality, these three probably wouldn't sit at the same table, much less find common ground. But in their different ways, and for their different reasons, they would all happily torch that pile of paper, and watch with satisfaction as a symbolic stack of Federal Reserve Notes disappeared in a cloud of green smoke.
The mighty greenback, it seems, has come under attack. The vagaries of global capitalism have left the local activist's neighbors behind, undervaluing their skills and expertise, and siphoning wealth from their communities. For the technocrat, the electronic economy has rendered paper bills obsolete; they invite theft, for one thing, and they make it easy for criminals (and the rest of us) to cheat the tax collector. The libertarian sees the Federal Reserve System as an enormous conspiracy between government and private interests promoting a currency backed by nothing, that changes its value on a whim. Three disparate concerns are united by sheer frustration with the almighty dollar.
The frustration stems from both the clumsiness and the freedom of cash, says David Warrick, a California-based investment writer. In his new book, Ending Cash: The Public Benefits of Federal Electronic Currency (Quorum Books), Warrick argues that coins and paper bills not only are cumbersome to carry but also allow criminals to conduct business and hide their profits from the law. Even honest citizens might be tempted to conceal cash income from the IRS. In place of it, Warrick proposes what he calls FEDEC, "federal electronic currency," which would take debit and checking cards one giant leap further by making all transactions electronic, and thus traceable.
Nothing could be more distasteful to the folks at NORFED, the Indiana-based National Organization for the Repeal of the Federal Reserve Act and the Internal Revenue Code. As a NORFED press release puts it, "A government that does not control the money is a government that is much easier to control."
Writer Cletus Nelson explains in EYE (April/May 1999) that "in a biblical crusade to eject the money-changing Feds from the temple of American commerce," NORFED has begun to issue Liberty Bucks, silver-backed bills in $1, $5, and $10 denominations. Each buck is a warehouse receipt equivalent to approximately one ounce of silver. "Unlike our cash supply, whose value as a commodity is constantly being manipulated by Washington bureaucrats and well-heeled banking interests," writes Nelson, "American Liberty Currency (ALC) constitutes a daring attempt to eliminate the government from monetary transactions and let an unbridled economy run its course."
Of course, we've had unbridled economies before, and unregulated banks, and it wasn't always a bowl of cherries. For all its faults, the Federal Reserve was created to keep banks and the economy in check—and a new monetary system presumably would require similar fine-tuning down the line. But supporters of this new currency, convinced that the Fed not only is wielding too much (or the wrong kind of) control, but actually is a vast conspiracy (one that even may have been involved in President Kennedy's assassination), argue that the devil we don't know will be better than the devil we do. Their main selling point: a certificate backed by silver rather than by statistics and whim. But as one Fed apologist points out, "What makes silver worth something? Simply the fact that people believe it has value. Same with paper."
In a growing number of communities, the preferred currency is backed not by silver, gold, or the dictates of the Fed, but by human labor. During the Great Depression, writes Barbara Brandt in Dollars and Sense (May/June 1999), "hundreds of communities in the United States issued their own money." Banks had failed, savings had disappeared, but "farmers in these communities were still producing food, plenty of people without jobs still had skills and were willing to work, and municipalities and individuals still had needs. What was lacking was the financial 'connective tissue' that could allow local labor and resources to keep producing and recirculating. Local money systems provided that missing link." Today, such systems are reappearing in efforts to strengthen community ties, increase individuals' buying power, and build more vibrant local economies.
There may be as many as 3,000 community currency systems operating today around the world, Brandt notes. And last year, San Francisco hosted the first national conference for community money advocates. In the eight years since Ithaca, New York, launched its much-publicized Ithaca Dollars, communities across the country have created local currencies based on hours of labor—either valuing all labor at the same rate, as Ithaca does, or ascribing market value to different services, and using either coupons or centralized tallies of credits and debits. In each case, the local dollars amount to something like a barter system—the oldest form of "currency"—except that it's not a direct quid pro quo. You can cut Steve's hair, Steve can baby-sit Jan's kids, Jan can do your taxes for you. (Though—speaking of taxes—if the service is for commercial purposes, and the estimated value is at market rate, you must report to the IRS as income the value of the local dollars you receive.)
Whether these projects will ever create a significant alternative to the almighty dollar, though, remains to be seen. "None of the systems is large enough to demonstrate whether they can prevent the drain of wealth out of a community—a frequently mentioned goal," Brandt writes. "Yet they give ordinary people the power to decide what is of value to them, and to make that value real through an economic mechanism circulating the goods, services, and social support they care about."
And that's a concept almost anyone can get behind.