"FUNNY MONEY"

February 14th, 2006

By Emily Lambert

Published by Forbes Magazine, www.forbes.com, at:

http://www.forbes.com/2006/02/11/local-currencies-ithaca_cz_el_money06_0214local.html  

NEW YORK - The dollar has some competition in Traverse City, Mich. The contender is the Bay Buck, a colorful currency launched last fall. To be sure, it isn't about to replace the dollar anytime soon. And at Wal-Mart Stores and Starbucks, it's as useful as Monopoly money.

But Bay Bucks can be used to pay for real goods and services, just like dollars can. And supporters say that using Bay Bucks promotes the local economy.

Bay Bucks are a local currency--one of a handful circulating in the U.S., including Burlington Bread, Ithaca Hours and, soon, BerkShares in Massachusetts. Besides being fun to trade and talk about, these currencies are meant to circulate near their home base, not to be ferried off to corporate headquarters in Arkansas or Seattle.

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.

At present, local currencies don't affect the conventional economy—our dollar economy—much, because they have such limited circulation. Only $12,000 worth of Bay Bucks have been issued, for example, compared with some $700 billion worth of dollars. But the point of local currencies is also to boost the value of resources, such as local labor, that are undervalued in the dollar economy.

So are these things legal? Lewis Solomon, a law professor at George Washington University and author of a book about local currencies, says local currencies are legal with some stipulations, including that they have to be printed (not coined) and that local money cannot resemble dollars.

By most accounts, local currencies resurfaced in the U.S. in 1991 in Ithaca, N.Y. 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.

Glover hoped Hours would encourage local spending, thus stimulating the local economy. Say you purchased something from a local store using an Hour. In turn, the store would have to pay that Hour to a local supplier or an employee. A professional charging $60 per hour for his or her services could choose to charge six Ithaca Hours, or, if he needed some greenbacks, $30 plus three Ithaca Hours.

The first printing was 2,250 Hours, or the equivalent of $22,500. In the beginning, a few dozen neighbors signed on. Glover systematically gave out Hours to people who agreed to accept Hours in return as payment for goods or services. They printed the names of businesses accepting Hours in a newsletter, so residents would know where to spend their new money.

"A lot of my work in the first few years was facilitating connections for the spending of Hours," says Glover. In other words, if a business received an Hour, there had to be somewhere to spend it.

Now Ithaca has six denominations. There is the Hour, the two Hour, the half Hour, the quarter Hour, the eighth Hour and the tenth Hour. More than $100,000 worth of Hours have been issued.

The cash itself features pictures of a local waterfall, a steamboat, children and animals. "Money is a powerful cultural tool," says Glover. "Therefore, rather than dead presidents, our money has images of local monuments of nature."

To discourage counterfeiters, Hours are printed on good-quality paper and have faint graphic elements that are hard to reproduce. Every Hour is stamped with a serial number. Being accepted only locally is itself a deterrent. In Ithaca, it wouldn't be too hard to trace a faked Hour to its source. "You wouldn't get very far before somebody would figure it out," says Stephen Burke, president of the Ithaca Hours board. He says forging an Hour is considered a felony. And by the way, an Hour is taxable.

Residents and curious tourists can exchange dollars for Hours at a used bookstore in town. Alternatives Federal Credit Union keeps Hours in its teller drawers and lets customers use them to pay fees. Several hundred businesses accept Hours, though they may set limits. Ithaca's cooperative food market accepts only $5 worth of Hours per transaction—that way, it doesn't take in more Hours than it can spend.

Following Ithaca's lead, Madison, Wis., launched an Hours program. So did Corvallis, Ore. The Burlington Currency Project in Burlington, Vt., is issuing Burlington Bread, a similar currency. Although Bread is not yet as widely accepted in Burlington as Hours are in Ithaca, a major hurdle was cleared in 2003, when Gardeners Supply Co., a local outfit that generates $60 million in annual sales, agreed to accept Burlington Bread for up to half the sticker price of every purchase. The next step is getting the city to accept Bread for taxes and other city services and to use Bread to partially fund development projects, like a local bike path.

Not everyone sees the point of made-up money in the modern world. Local currencies have closed or gone dormant in California, Florida and Kansas in recent years. Forty miles away from Burlington, in Montpelier, Vt., supporters of Green Mountain Hours couldn't sign on enough businesses to make the program work. "The problem is, it intersects the mainstream economy in so many places, there are a lot of hurdles to overcome," said Steven Gorelick, program director for a nearby nonprofit. Even the town's new-age gift store, he found, had suppliers mainly from outside the region.

In progressive but cynical Brooklyn, N.Y., Brooklyn Greenbacks circulated for five years before petering out in 2001. "The demand really is there," says Craig Seeman, a Brooklyn producer and editor, who supervised the project and had hundreds of people using Greenbacks. But organizing everything was a full-time job, and the organizers needed to pay their rent in plain old dollars.

But hopes for community cash run deep. "I'd just love it if there were a New Orleans currency," says Susan Witt, executive director of the E.F. Schumacher Society, a Massachusetts nonprofit that promotes local currencies. If a local currency were used to pay for rebuilding, the money would go to people who would spend it elsewhere in the community. "It would keep the redevelopment of that important city with the residents of that city."

New Orleans Notes, anyone?