
Short on Money, Cities Around the World Try Making Their Own - walterbell
https://www.bloomberg.com/news/articles/2020-08-07/a-depression-era-idea-gets-a-new-look-local-money
======
ksdale
I remember reading an economic history book and they mentioned that the
Spanish bringing gold to Europe from the Americas stimulated the European
economy, and it struck me all at once that basically none of the economic
activity in Europe _required_ gold (they weren't making intricate electronics,
after all). Growing food, making clothes, tools, shelter, it all could have
been done without the gold. What they needed was "money" that everyone
believed was valuable in order to convince people to do work. It's the work
that causes prosperity, not the gold.

I think local currency can function similarly. A lot of people in small towns
struggle to turn their skills into dollars, partly because the modern economy
values a lot of stuff rather weirdly. Just because their skills aren't easily
translatable into dollars globally doesn't mean that they can't still make
their local community a much better place, provided there's a way for someone
in the local community to communicate that they value the service (which they
can't do using dollars, because they also don't have any).

~~~
hammock
>the Spanish bringing gold to Europe from the Americas stimulated the European
economy

"Stimulated the economy" is a choice way of looking at it. What it did was
create a period of inflation on a scale of size and duration never before
seen. It basically led to the decline of Spain as a major world power.

[https://en.m.wikipedia.org/wiki/Price_revolution](https://en.m.wikipedia.org/wiki/Price_revolution)

~~~
ksdale
Interesting! Thank you for the link.

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Wildgoose
The modern rebirth of local currencies was probably the Austrian town of Wörgl
which having been hit badly by the Great Depression recovered magnificently
after creating its own local currency in 1932. The currency was so successful
it was later forcibly shut down by Austria's Central Bank.

[https://en.wikipedia.org/wiki/W%C3%B6rgl](https://en.wikipedia.org/wiki/W%C3%B6rgl)

~~~
m12k
It's amazing how well a society can function, if you ensure that the money
that circulates in it doesn't leak out of it, fueling further investment and
purchases. I think it's worth actually re-examining our view of globalization
and global trade with this in mind.

~~~
dkarp
I'm no economist, but wouldn't this lead to greater wealth disparity?

When money leaks out, it leaks in to somewhere else. Sort of like connecting
bodies of water will lower the water level of one body and raise it in
another. One place will lose out and another will gain.

Unless differences in local taxation/laws/amenities/other lead to
wealth/poverty hotspots. With some areas vacuuming up wealth and others
repelling it. Is that what this is really solving? Unable to compete on local
taxation/laws/amenities/other, cities have to find another way to prevent
their wealth being repelled.

Sounds like just another wall though. Which can surely never last

~~~
raxxorrax
With the experience of the Euro and the vastly different countries under
different legislation, I think this is far too naive.

The common currency was a bad decision in my opinion. Sure, now legislation is
getting "normalized" (I love the jargon), so that nobody is happy with it
anymore. I don't think I would want that for anybody. It is like a marriage
that doesn't really work.

Complete detachment of capital that was created in one place is not a great
idea. That doesn't mean other places cannot grow and it doesn't mean there is
no exchange.

~~~
mschuster91
The Euro was and is not as bad IMO as many people make it to be. I'm half
Croat, half German and I remember when visiting Croatia pre-Euro rollout that
you had to do three currency exchanges along the trip - from Deutsche Mark to
Austrian Schilling to Slovenian Tolar to Croatian Kuna. Today? It's only the
Croatian Kuna which is probably going away in 2023-2025. Everywhere else I can
pay with a credit card without paying any "currency conversion" fees or
exchange rates far away from actual market rates. And especially you don't
lose hours upon hours on useless border control any more (with the exception
of the SL-HR border and the idiocy at the German border).

And it's not just tourism. Euro + SEPA + free movement between countries are
what fueled the growth of the European economy pre-rona. That all of this got
attacked in the recent years (no matter if Italy/Greece threatening/being
threatened with Euro removal or Germany's Seehofer introducing border controls
again to "combat immigration" aka get rid of refugees) is saddening.

The people who want to dial back European unification are going to cost Europe
a lot, especially the ability to compete with the US on the global stage.

Do note that this does _not_ mean there are no problems relating to the Euro -
especially the economic disparity between the powerhouses Germany/France and
the (South) Eastern European countries - but these should be solved by wealth
transfers and nation building, not by risking all progress of the last
decades!

~~~
PaulRobinson
Remain-voting Briton here.

The Euro has nothing to do with border control or free movement, free trade,
standardisation or fishing quotas. It has nothing to do with immigration
policy, the Dublin treaty, or even the Maastricht treaty.

There is no doubt that central European monetary policy has harmed Italy and
Greece. It likely contributed to the Catalonian vote for independence, too and
is also squeezing Portugal in ways that are making the citizenship sit up and
take notice.

Britain was successfully showing it was possible to have free movement & trade
and significant collaboration inside the EU's organisations and projects
without a single currency or monetary policy.

Sadly, the Dublin treaty was not being enforced that led - and still leads to
this very day - to hysterical media coverage that turned public opinion
against the whole project. The EU's inability to flex on that was one of many
contributory factors to the Brexit vote, but so was the drive for tighter
political and economic unification.

That is now causing other countries to have their own exit movements gain
attention. If the EU does not pull back there is a real risk those movements
will gain more momentum and the project will end.

People aren't interested in competing with the US on the global stage. They
want a home, a family and fulfilling work and social lives. The technocrats
trying to wave their genitals don't care about the damage they do, as long as
the EU rises in league tables with ever bigger numbers.

I believe a reformed EU is the only future where we get any of the benefits of
the original ideals. It's not clear to me you need to have a common currency
to do that. It's not even clear to me you need a Parliament to do that, never
mind one that moves between two cities regularly.

------
hyko
These schemes always remind of Paddy’s Bucks from Its Always Sunny in
Philadelphia.

They are a monetary solution sent in to fight financial problems. The solution
to those problems usually lies outside issuing your own money; it instead
compounds your problems. There’s probably a case to be made for them if you
could find and administer an optimal currency area, which is a monumental
challenge.

~~~
wpasc
Thus creating the self sustaining economy

~~~
jonny_wonny
“I don’t understand how _finance_ works.” - Dennis Reynolds

------
beefield
It is a bit weird that cryptocurrency folks talk about "disrupting" financial
system when they actually talk about rolling monetary policy back to about
middle ages. Come up with a currency _anyone_ can create and there you have a
real disruption.

~~~
gwbas1c
[https://www.amazon.com/dp/B01M22NTCT/ref=cm_sw_r_cp_apa_9eOm...](https://www.amazon.com/dp/B01M22NTCT/ref=cm_sw_r_cp_apa_9eOmFbJKDZM99)

It's a bit of a hard read, but the author proves that Bitcoin is pushed by far
right activists who have extreme views of how money should work.

~~~
atom-morgan
I, and many others I know, aren't far right and support it. We just don't want
the government to print money at will.

~~~
gwbas1c
That is a far right viewpoint. Modern economics requires a government to
actively maintain a steady value in its currency. Removing this control is, by
definition, far right.

------
pinkfoot
My guess is they are going to owe the IRS a lot of money.

In real USD.

[https://www.irs.gov/newsroom/four-things-you-should-know-
if-...](https://www.irs.gov/newsroom/four-things-you-should-know-if-you-
barter)

~~~
magicsmoke
This right here shows how much the value of USD depends on the power of
taxation. Even if you barter goods with no USD used, the IRS will still force
you to find a way to obtain USD to pay taxes on that barter.

------
misja111
I wonder what is wrong with the USA's economy, because the FED is printing
dollars like never before to provide liquidity to the economy and still cities
have to fall back to initiatives like this one to keep their local economies
going.

Where did all the dollar liquidity of those cities run away to?

~~~
wallflower
In the US, almost every of the 50 states must balance their budgets. They
can't spend what they don't have without selling debt (municipal bonds that
pay interest). They can't manufacture money as that is handled at the Federal
level.

[https://www.ncsl.org/research/fiscal-policy/state-
balanced-b...](https://www.ncsl.org/research/fiscal-policy/state-balanced-
budget-requirements-provisions-and.aspx)

~~~
misja111
Sure, but the FED money is going somewhere in the USA. Either to banks or
other companies. Those companies are located in states. So eventually the FED
money flows to those 50 states.

But it apparently doesn't reach local companies and people, or maybe it does
but then it quickly leaks away again. I wonder why that is.

~~~
lifty
A lot of it is going into prop-ing up corporate debt. I remember that they
even bought junk rated bonds.

~~~
mrep
Looking at the most recent balance sheet [0], corporate bonds look to be under
the other securities section which has 86 billion in assets or about 1.2% of
the asset sheet. Most of the balance sheet is taken up by U.S. Treasury
securities and Mortgage-backed securities.

[0]:
[https://www.federalreserve.gov/releases/h41/current/h41.htm](https://www.federalreserve.gov/releases/h41/current/h41.htm)

------
rspoerri
Not sure where they are getting the wir-currency facs from. But they are
definately wrong about 1/5th of swiss companies using it. 60‘000 members of
wir (private&company) versus ~600‘000 businesses in switzerland cant match up
with that statement.

------
cameronbrown
This seems like a horrible idea. How does nobody realize that you can't just
"will" a currency into having value? A piece of paper won't produce value...
At least bitcoin gains it's value from traders buying USD with BTC.

~~~
Sir_Substance
Local councils can create some value by allowing people to pay council taxes,
fees and fines with the issued currency. Enough to peg it 1:1 with the USD?
I'll be honest, I don't know how countries like panama manage that, so hell if
I know how a council would do it.

Fundamentally, this is what underwrites the US dollar as well. If you don't
pay your taxes you (eventually, provided you aren't connected enough to avoid
it) get arrested. You can generate your wealth in corn or software or boat
building, but you have to pay your taxes in US dollars. You can't barter your
boats for corn and pay your taxes in corn. Thus, (almost) everyone in the US
needs some US dollars to avoid being jailed. This is the foundation upon which
the value of the US dollar is built.

Of course, making sure it doesn't blow up in the councils face in a few
months/years time due to lax issuing controls is a different matter.

~~~
magicsmoke
I suspect there may be a psychological effect giving these currencies value as
well, considering they've only been rolled out in small towns. Imagine living
in a 2000 population town like in the article where everyone is socially
connected. If you refused local currency because you doubted its future value,
your business could very quickly become a local pariah.

Taxation is necessary to maintain the value of currency when dealing with a
country of millions of people, but somewhere on the sliding scale as the
population numbers we deal with decrease social factors outweigh purely
economic factors. One of the biggest impacts modern capitalism has on human
society is its ability to strip away all social considerations from financial
decisions. In the premodern world your shopkeeper was also your neighbor, and
every transaction was filled with social considerations like your relative
wealth, recent hardship, or length of acquaintance. In the modern world,
everything has a fixed price regardless of whether the buyer is a foreign
stranger or childhood friend. Only by stripping away messy individual social
connections does trade among 7 billion people operate efficiently.

------
Kaze404
This is pretty much what we're doing at
[https://cambiatus.io](https://cambiatus.io). We have a handful of successful
communities that use the platform to a very useful degree, and we're expanding
the platform to be able to accommodate other community shapes and needs as
well.

~~~
stevewodil
That domain doesn't resolve for me,
[https://www.cambiatus.com/](https://www.cambiatus.com/) works.

~~~
Kaze404
Thank you. We use the io domain for our stating platform so I always get them
mixed up :)

------
vonwoodson
My grandpa didn’t get the opportunity to empathy much wisdom on my before he
died. But, he did tell me “Never take wooden nickels” and that sounds like
good advice to me.

------
blunte
I understand that this is expressly forbidden in the US.

~~~
Taikonerd
Is it? Nobody is stopping Tenino (the city in the article)... nor did they
stop them back in 1931.

~~~
blunte
I'm not an expert of constituional law, but Article I section 10 says:

No State shall enter into any Treaty, Alliance, or Confederation; grant
Letters of Marque and Reprisal; coin Money; emit Bills of Credit;

[https://constitution.congress.gov/browse/article-1/section-1...](https://constitution.congress.gov/browse/article-1/section-10/)

~~~
Taikonerd
Huh, interesting. I'm also not a lawyer, but I guess that means that _states_
can't (but cities and towns can)?

------
biolurker1
Any city can create an ethereum token and use it. That's a fundamental aspect
of blockchain

