From The London Times
June 23, 2007
How small-town banknotes keep the global dollar at bay

James Bone in Great Barrington, Massachusetts
You can buy a slice of hazelnut ricotta torta and a caffe latte at Rubi’s
cafe in this trendy Massachusetts town for $5 (£2.50).

The crisp local banknotes look like politically correct Monopoly money, with
portraits of social activists and local figures such as Herman Melville, the
novelist, and Norman Rockwell, the painter, on one side and pictures by
living local artists on the other.

But Matt Rubiner, the cafe owner, will happily accept them. “The percentage
of our customers who use them is somewhere above or below 20 per cent,” he
says.

Great Barrington, in the Berkshire hills, a favourite summer getaway for New
Yorkers, has started a monetary experiment by launching its own hyper-local
currency, called Berkshares. It intends to cultivate the local economy by
encouraging people to use a currency that can only be spent in the immediate
area, so that the benefit goes to local workers and suppliers. You can get
your car repaired, your bicycle fixed, your eyes checked and your cavities
filled using Berkshares.

Already, the Devon town of Totnes has taken the similar step of issuing the
Totnes Pound.

The concept is being promoted by the E. F. Schumacher Society, a nonprofit
organisation named after the late British economist who served for two
decades as an adviser to the National Coal Board and became famous for Small
is Beautiful, his 1973 book .

“We have respectable participation from Main Street business. We have
enthusiastic participation from the banks,” said Susan Witt, the director of
the society. “I actually left my dentist because he said I needed $6,000 in
dental work and he did not take Berkshares.”

Lewis Solomon, a law professor at George Washington University who wrote
Rethinking Our Centralised Monetary System: The Case for a System of Local
Currencies, argues that such currencies are one of the few options that
localities have to combat the negative effects of globalisation. “There is
now so much globalisation that this is a way that enables you to build a
local economy,” he says.

But Joel Naroff, of Naroff Economic Advisers, calls it “currency
protectionism”. “In small cases and for short periods, it can work. But it
cannot work in large cases and for long periods of time,” he said.

Berkshares are pegged one-to-one to the dollar, so that the hazelnut ricotta
torta and caffe latte that costs $5 also costs five Berkshares. But there is
a built-in incentive. Locals buy Berkshares at the bank for 90 cents each,
so that 10 Berkshares cost just nine dollars.

“I bought a pair of shoes that I wear constantly,” Sara Katzoff, artistic
director of a local theatre festival, said. “That is my biggest purchase
with them – about 100 Berkshares. So I got 10 per cent off. I took that 10
dollars and went to the movies that night.”

The problem comes, however, when someone wants to redeem Berkshares for
dollars. The banks pay back only the original 90 cents on the dollars, which
means local businessmen who get stuck with them have to take a 10 per cent
loss.

Petrol stations refuse to take Berkshares, as do utility companies,
insurance firms and mortgage lenders. About 900,000 Berkshares have gone
into circulation in this town of 7,400, and about 750,000 have been redeemed
for dollars. “To be an effective programme this really needs to be a
completed circle. There are not enough vendors that use it,” Mr Rubiner
said.

Making a mint

— In 1970 Leonard George Casley, an Australian, declared his land an
independent state. He produced a bill of rights and the Royal Mint of Hutt produced its own currency

— The UK Local Exchange Trading Scheme provides a marketplace for people to
exchange goods and services without having to resort to currency

— For more than a thousand years, salt served as the principal item of
exchange in Ethiopia

Source: Hutt River Principality, Totnes Council, letslinkuk.org