HashOut: 2007/04/28
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Local money, a step backwards in global economics?

Despite being part of the US, the souther Berkshire region of Massachusetts has launched a local currency. Termed BerkShares, the exchange rate is set at 90 cents. That is, $90 will yield 100 BerkShares. BerkShares are printed in several denominations. Local businessmen accept these shares at full dollar value (i.e. 0 BerkShares=$10), thereby giving the consumer a 10 percent incentive for trading locally and strengthening the regional economy.

Berkshire region is not the first to get a local currency of its own. Local currencies are an old idea. Thousands of them were used during the Great Depression, according to Bernard Lietaer, author of The Future of Money and a former currency trader who helped implement the euro. They're a subset of a grouping called complementary currencies, which also includes airline frequent-flier programs.

BerkShares Accepted Here Sign at a Cafe

The motive behind such local money, also termed as social money, is to promote local businesses that accept the currency, thereby building stronger relationships and a greater affinity between the traders and the public.

Local currency first resurfaced in the U.S. in 1991 in Ithaca, New York. Then-resident Paul Glover, now living in Philadelphia, says many of his neighbors were unemployed or underpaid, and he was looking for a way to fatten their wallets. He and a group of supporters created the Ithaca Hour, each one equal to either $10 or one hour of work.

Today there are over 2500 different local currency systems operating in countries throughout the world. LETS, Local Exchange Trading System, being one of the most prominent trading network supporting its own internal currency. LETS originated in Vancouver, Canada and as on the date of this writing there are 30 LETS systems operating in Canada and over 400 in the United Kingdom. Australia, France, New Zealand and Switzerland have similar systems. Time dollars, Burlington Bread and PEN exchange are among the most successful systems in the USA. In Germany, there are at least 16 regional currencies.

Even though these local currencies are treated as illegal in most countries and are under the watchful eyes of their country's controlling banks, do these numbers mean that we are moving back from globalization of economies to localization?

Sources: The Week, Forbes.com, BBC News, Wikipedia.
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