February 15, 2010

Dear Friends,

This past week, the Fox News Business website featured a story on local
currencies. The article quoted both Susan Witt, co-founder of BerkShares,
and David Boyle, a scholar exploring alternative economic systems who is
currently in residence at the E. F. Schumacher Society. Below please find
the full text of the Fox News article, "As Economy Stumbles, Local
Currencies Gain Traction."

We thank you for your engagement with BerkShares. It is encouraging that
our local currency continues to attract national media coverage that
transcends politics.

Warm Greetings,

The BerkShares Team
P. O. Box 125
Great Barrington, MA 01230
413 528-1737
info@berkshares.org

* * * *

As Economy Stumbles, Local Currencies Gain Traction
By Kathryn Elizabeth Tuggle
FOXBusiness

When Judith Lasker joined the Community Exchange program, a local currency
organization in Lehigh Valley, Pa., she knew she was helping fellow members
of her community. She just didn't realize how much.

Driving an older member of the Community Exchange to a physical therapy
appointment one morning, Lasker was touched by her passenger's story of how
the exchange had changed her life.

"She said simply that she would have been forced to give up her home if not
for the program," Lasker said.

Community Exchange is just one example of local, hours-based "currencies"
that are growing in popularity nationwide. Today, there are close to 100
types of local currencies operating in the United States.

While some currencies are true to their name and are backed by federal
dollars, others are simply a record of hours worked by contributing “time
bank” members. “Whenever you have a shortage of money, people look to invent
their own medium of exchange,” said David Boyle, fellow of the New Economics
Foundation and Author of "Money Matters."

The earliest local payment system on record began in the 1930’s, which isn't
surprising; historically, local currencies have been most popular during
times of economic crisis, and the U.S. then was in the midst of the Great
Depression.

Today, the Community Exchange hours system has 450 members, though similar
systems work with just 50 or more members. When one member does something
for another, they get credit for the amount of time spent helping. Each
member’s time is worth the same, whether they’re giving tax advice or
cooking dinner.

Because there is no set standard for what a local currency should be, many
times the grassroots effort to start a program doesn’t gain the momentum it
needs. The average success rate for local currency is around 20%, according
to a study done by Professor Ed Collom at the University of Southern Maine,
which looked at 82 such currencies.

“It’s difficult to keep going, because of the scale on which they are
organized,” said Boyle. “You’ve got local people organizing it, and
inevitably the workload gets out of hand.” Boyle said that in order for a
local currency to thrive it must be imbedded with another type of endeavor,
like a local business or the local government.

The Community Exchange is joined with the Lehigh Valley Hospital, which
offers the organization a headquarters for its members database and a place
to work, free of charge. Although this offers stability for the Exchange,
there is still a danger of members not treating it as a formal system,
Collom said. There's always the risk of it turning into a network of
"friendly favors."

"Once you make friends, it’s like, 'Oh, don’t worry, I don’t need that hour
and a half,' he said. "It’s sort of a catch-22, because once the program is
successful, the relationships are formed and the program doesn’t need to
exist anymore. But until the program gets off the ground, those connections
can’t be made."

Of course, even local currencies with tangible bills aren’t foolproof.

"Counterfeiting is always a possibility," said Susan Witt, executive
director of the E.F. Schumacher Foundation and co-founder of BerkShares, the
local currency in the Berkshire region of Massachusetts.

Counterfeiting has never happened before, thanks to security features on the
bills, and the relatively small size of the circulation area, Witt said.

"If someone showed up with several fake 50s, it wouldn’t take long to figure
out who they were," Witt said.

Since 2006, BerkShares have been traded through 13 branches of 5 local
banks. The exchange rate is 95 cents to every dollar. Accepted at just under
1,000 retailers in the region, $2.5 million of BerkShares have been issued
from the bank, and $140,000 are currently in circulation.

Convincing local retailers to use the BerkShares hasn’t been tough, Witt
said. Although there is a 5% discount to customers, it’s seen as a way to
encourage citizens to shop locally. It also means merchants aren't paying
for processing of credit card fees, bounced checks, or waiting to collect on
bills.

For merchants that accept BerkShares, there's the possibility of having too
great of a ratio of BerkShares to dollars. Should a merchant find they have
too many to do business properly, they can go to a local bank and trade in
their BerkShares for federal dollars.

With BerkShares, as with all local currencies, there are no coins allowed.
Although local currencies are legal as long as there is an exchange rate
with federal dollars so transactions can be recorded for tax purposes, coins
are not allowed because they involve processing precious metals.

The main stumbling blocks for local currencies are maintenance and staff,
Collom said. For BerkShares, grants to pay for printing of the currency and
bank account setup was provided by a donor-directed fund at the Rudolph
Steiner foundation in California.

The interest in local currencies will persist, even as the economy improves,
Collom said, because local forms of payment tie into the "buy local"
movement that has gained so much traction in recent years. "It all goes back
to the idea of neighbors helping neighbors," Collum said. "Whether they’re
changing a light bulb or helping their local florist stay in business, it's
currency that can work."

With the broader economy still trying to find its feet, local currencies
will continue to grow and flourish, according to Boyle.

"Typically, these things tend to happen in births of innovation and then its
quiet again, and I think we are at the beginning of a birth at the moment,"
he said.