Local Currencies: Three Ways Communities Can Create Exchange Systems

By Greg Roberts

Published September 2001

Money talks, they say, but what does that really mean? Money is nothing but a measure of value; it’s worth is based on its ability to be traded for other things of value. The problem with money is that not everyone has equal access to it. Some have too much, most have too little. To deal with the issue of scarcity, communities across the globe have started producing their own money.

Community based currencies are less scarce than our federally issued money in three dramatic ways.

They are only circulated in the com­munity where they are issued. Instead of money changing hands a few times, and then heading off to some corpo­rate head office, it is available in the community to be exchanged over and over again.

The community itself backs commu­nity currencies, by individuals’ willing­ness to provide goods and services. This means that money can be issued as in­dividuals experience need, rather than by some obscure mathematical formula.

Community currencies are not tied to the price system of the dominant economy. Individuals are encouraged to negotiate a socially equitable ex­change.

There are numerous examples of community based currencies, most fall­ing into three categories: Time Dol­lars, Hours and the LETSystem. Each of these types of currency share the features listed above but do so in very different ways.

Time Dollars

Time dollars are a measure of social exchange, in which individuals trade time by providing one another with services. Members in this system offer gifts of time, for which they receive credits to be redeemed at a later date. These exchanges are considered gifts, because they are recorded as time and not by type of service. In this sense an hour of raking leaves for a senior could be redeemed for an hour of massage. This system creates value not by its con­tribution to the Gross National Product, but rather on the quality of relationships that it fosters within the community.

Hour Dollars

The Hours concept is another form of community currency that uses a measure of time as a standard of value. In this system an Hour is a unit of printed money, worth the average wage in that region. Because Hours are paper currency, their circulation is limited not by membership, but by who will accept them. In order to stimu­late their circulation (which prevents scarcity) these notes have expiry dates, after which they begin to lose their value. Unlike other forms of local cur­rency, Hours are issued when indi­viduals or businesses agree to accept them. In doing so they are included in a directory and receive a nominal amount of currency to begin spending.

LETSystem

The third major type of local cur­rency is the system used by BarterWorks. LETSystem or Local Em­ployment and Trading System, are like Time Dollars in that credits are traded as opposed to actual paper notes. These credits are recorded in a central ac­counting system, but interest is neither earned nor charged on balances. LETSystems are considered as a form of community credit, which members are able to access through their de­mand for locally produced goods and services. In return members express their commitment to offer goods and services of comparable value.

Communities using these systems or combinations thereof are able to build local capacities by encouraging eco­nomic relationships through trade. They are able to do so when they can ensure that there are sufficient ways to measure these trades. Money may talk, but you have to be able to under­stand what it’s saying. Sometimes you have to learn a new language.