What's 'Funny' about the Bank of England's money?
What makes Local Currency 'Real'?
How does my local business get started?
How do I spend local currency?
Will Local Currency cause inflation?
Do I pay tax on Local Currency?
What will happen when the pound devalues again?
Currency is a tool used to measure the value of a product or service, facilitating ‘trades’ (to enable the disposal of one thing to acquire another) and enabling like-for-like comparisons between them. Basic forms of transaction may consist of bartering essentials such as food and clothes, but most exchanges are symbolic, demonstrating ‘guarantees’ of purchase value.
Theoretically, the Bank of England promises to underwrite the value of its paper currency and ensure the receiver gets ‘paid’ for goods and services, although in practice this is largely meaningless. The holder who presents notes to the Bank in fact has no right to anything except other pieces of paper adding up to the same face value, a situation replicated in most other countries.
The coin is the other major publicly held currency, and in most countries is a token, whose ‘face’ value is much higher than its metallic value.
Locally issued paper money is one viable alternative to the Bank of England system. The basic unit of currency we used equated to 12 minutes of labour, 1 LETs Favour or £1 (calculated using £5 per hour as a minimum wage), and could be used for goods and services within the Borough of Calderdale .
A further alternative example which has worked is Sainsbury’s ‘Reward’ vouchers. Earned by shoppers at Sainsbury’s stores, the vouchers can be redeemed at the store, but also as part-payment at other outlets, (e.g. ‘Blockbusters’). These other outlets accept the vouchers because they know that shoppers will spend additional cash while in the store, and may become regular customers.
The Reward vouchers and local money effectively work in the same way, encouraging people to shop at pre-determined local outlets.
What’s ‘Funny’ about the Bank of England’s money?
The Bank of England’s notes originally represented deposits of gold coin and bullion with the Bank and until 1931 (when Britain finally came off the gold standard) could be exchanged for gold at a fixed rate - hence the words “I promise to pay” on the face of the notes. Since 1844, the Bank has been authorised to issue notes against securities - the fiduciary issue of notes - instead of just gold or silver. After 1939 only a nominal amount of gold was held and today the note issue is almost wholly backed by securities.Recently the Treasury launched an auction aimed at reducing the UK’s remaining gold reserves by half. The sell-off will be the start of a 415 tonne sale by the Government. The gold will be replaced with Euro, Yen and Dollars.
Pound notes are controlled by outside forces, such as multinational corporations, foreign investors and large banks. Pounds visit our community for a short while then leave, having being used primarily to pay for food, accommodation, fuel, and car costs. Lately more money has been leaving Calderdale than has been coming in. This creates debt, poverty and suffering.
The pound’s value has continually fallen in real purchase terms, primarily because it is backed by nothing more than debts that can never be repaid. To cope, the Bank of England prints more notes in order to buy even more things it cannot afford. That’s real Funny Money. If the pound ever loses the confidence of its traders and investors it would collapse, just like the rouble.
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What makes Local Currency ‘Real’?
Local currency is money created locally by everyone who advertises their willingness to accept it. It is real because the notes represent real skills, labour and time of local residents and real production capacity.
The idea is similar to the co-operative principle - it is not the investors who benefit most but the participators, regardless of age or abilities. With each usage a self-help network is weaved, creating local employment, helping local small businesses, and encouraging exports. Local money stays local, and unnecessary imports such as food, clothing, tools, services and culture can be replaced with locally produced items.
Local currency is backed by local labour, and can become completely independent of national currency. This makes it the only form of currency that can be completely inflation-proof
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How does my local business get started?
It was an easy, no-risk promotion for local businesses - we paid for the printing of the ‘vouchers’ (the notes), the distribution and the publicity. All the businesses had to do was contact us, put one of our FREE ‘Calderdale Green Currency Accepted Here’ posters in their shop window or use the free finished artwork on their own publicity leaflets.
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You were in total control of how much local currency you accepted - some businesses accepted local currency as 100% of the price for goods and services, others limited it to either one for every ten pounds sterling spent, or even one per customer. We recommended you started accepting local currency initially as only a small part of the purchase cost so that you earned local currency gradually. You could change this rate at any time.
It encourages local people to buy locally - local currency can only be used to purchase goods and services within the borough of Calderdale. This keeps money in the community.
Goods that originate locally do not have to be shipped half way round the world, and pollution from transportation is therefore reduced. Locally-produced food does not need chemical preservatives to keep the produce fresh during protracted haulage.
A relationship between producer and customer is nurtured; if you know the person growing your food or making your cupboard personally, they are much less likely to rip you off.
As more businesses start to use alocal currency, you in turn will be able to buy more items with the currency, and the amounts of ‘money’ people have to spend on local goods and services will also grow.
How could I spend local currency?
- As part-payment in shops and businesses throughout Calderdale
- As part-payment for the services of plumbers, electricians etc.
- For your own web-page, email address or advertising on the Internet
- For book-keeping, marketing or desktop publishing
- As part-payment for locally produced fruit and vegetables or baking
- As part-payment for printing or faxing
- As payment for services such as massages, aromatherapy etc.
- As part-payment for painting, decorating or landscaping
- As donations to local charities (local currency has the same tax deductible status as national currency)
- As a bonus payment to your employees
Perhaps the best example of how successful an alternative currency can be is in Ithaca, where the modern conception originated. Everyone listed in the local trade press ‘Hour Town’ agreed to accept the local currency at the outset, and since then more than 2,000 people and 350 local businesses have been actively involved. A web-site details all participating businesses, with food being the largest category (other examples include a bank, movie theatres, grocery stores, plumbers, carpenters, electricians, day care centres, health clubs, and restaurants). Hundreds more people have accepted local currency without being official members.
In Calderdale we worked with the Calderdale Local Exchange Trading System and the Alternative Calderdale-Online scheme to ensure as many businesses, services and individuals as possible had a reason to participate.
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Will Local Currency cause inflation?
In a word, no. Local currency, gradually issued, is inflation-proof. When people are utterly dependent on sterling there will always be unmet financial needs just as there will always be unemployment. Local currency allows local people to use their own labour and effort to buy items they would otherwise not be able to obtain. It helps fill the gap between the amount of national currency in the community and the amount of money needed by the community to flourish. Where there is no local currency, this gap is filled with loans and debt. This situation further decreases the amount of national currency available to spend locally. A local currency can help free people from the vicious cycle of debt.
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Do I pay tax on Local Currency?
In a word, Yes. Although social trading is not taxable, anything that would normally be taxed (such as VAT on items) must be declared and tax paid in pound sterling. You need to collect and pay the tax in pound sterling. The easiest way to do this is assume the full price is in pounds and calculate the tax then deduct the amount of local currency you would be willing to accept.
Note that businesses can offset their tax-deductible expenditure in local currency against pound sterling.
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What would have happened when the pound devalues again?
Because the national currency is backed by debt and is controlled by the big multi-national corporations it can easily be devalued the minute it stops being flavour of the month - after all a pound in 1960 bought 12.7 times more than a pound will today.
Local currency is flexible, however, and a number of possibilities exist. We could have:
- Raised the exchange value of the local currency to match the pound’s current buying power and a new acceptable minimum wage
- Declared the local currency a permanent millennium pound. This would mean that the local currency would buy labour and goods at year 2000 values forever
- Recalculated all prices in local currency as agreed after negotiations between all segments of the local economy, making the local currency completely independent of the pound sterling
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