As Local Currencies gain momentum, there’s an increasing amount of resources available for aspiring currency projects. To add to that body of knowledge, I’ve decided to write a ‘For Dummies’ elaboration on Local Currencies. What can I offer that’s new?
Well, as a banknote designer, I can offer an insight into the design motivations behind these physical notes. But I’d like this post to be shared with people who have no idea about local currencies, so I’m doing this in two parts. Part I – a text-light, image-heavy quick-guide for anyone who has no prior knowledge of local currencies (this post). In Part II, I’m going to talk specifically about the visual design of alternative currencies.
And just to clarify, we’re talking here about PAPER currencies…
First of all – names: Local Currencies, also known as Independent Currencies, Regional Currencies, Complimentary Currencies, Alternative Currencies, and Community Currencies. They may be technically different from each other, but they all have the same thing in common: alternatives to national currency.
Local/Alternative/Independent Currencies are nothing new. A few examples from history…
This is an example of American Colonial Currency. Different currencies were issued by the early colonies to serve as a medium of exchange, and pay for wars.
Here’s an example of British Provincial money. Changes in British banking laws during the 19<sup>th</sup> century allowed provincial banks to issue their own notes. Every county in England and Wales had, at one point during the 19<sup>th</sup> century, locally issued banknotes. Full disclosure: I personally helped catalogue the largest collection of Provincial Banknotes for Spink auction house in London.
German Notgeld was issued by German towns in response to the 1920s hyperinflation. Towns that issued their own Notgeld actually protected themselves from the worst of the hyperinflationary effects. Localities in Ireland, Sweden, Belguim and France have all issued their own Notgeld versions at various points in their histories.
Examples from history have all informed the present environment of local currencies – and indeed their philosophies. What philosophies are there? In my experience, there seems to be three separate philosophies in the Independent Currency space…
The first I call ‘Hard Asset’. Hard asset typically refers to people who advocate money backed by something tangible, such as Gold and Silver. But I’m going to expand this definition by considering anyone whose primary concerns are things such as privacy, debt-based money, and tangibility. The great things that paper money offers is, of course, privacy and tangibility. Given that these are real concerns felt my many, there’s a natural momentum for currencies with a hard asset ethos. Though at present, there are few paper currency projects that have been realized based purely on hard assets.
The next group: secessionist. This group includes anyone who has a political or legal motivation for setting up a new currency. Secessionist movements are exploding in number, as more people seek distance from centralized control, in all its forms. Though I’m only aware of a handful of currencies issued by truly secessionist movements, we are yet to see the larger movements adopt regional currencies.
Environmentalist – this is by far the most popular motivation of the three. But it would be reductive to say that any currency project that isn’t motivated by a return to hard assets or secession would be wholly motivated by an environmental imperative. I would use ‘Environmentalism’ loosely; this group includes any project that has a locally-focused social conscience. That’s pretty wide! But from my experience, projects with environmental motivations have a strong element of social conscience, and vice versa. For example, proponents talk about ‘the leaky bucket’ – the tendency for local money to escape via large corporations. This hurts local business, and burns fossil fuels in the transport of cargo to localities. Keeping money and production localized prevents the ‘leaky bucket’ phenomenon.
The reason why this last group is the most popular, is that – clearly – its the least contentious. Its very easy to obtain funding from government agencies when there’s money readily allotted for environmental concerns… as opposed to secessionist concerns! But, there are interesting dynamics in play which suggest this could change – we’ll return to that.
Independent currencies do not follow one model. They’ve been known to fit into 4 distinct models. Very briefly:
LETS – which stands for Local Exchange Trading Scheme – was started in 1987 in Vancouver. LETS is backed by a personal commitment to pay. It is denominated in, but not exchangeable with, a national currency. LETS tends to be informal, and not suitable for businesses.
Time-Based Paper – these projects are paper-based representations of labor. One of the most famous schemes is the Ithaca Hours currency. TBP currencies are run on a social service model, with no database or directory, and no connection with national currency – the major benefit being that there is no opportunity for taxation. TBS schemes work on the ethos that “everyone’s time is the same”.
Central Bank-referential Scrip – when most people think of local currencies, this is probably what they’re thinking of. These currencies are convertible 1-1 with central bank currency – thus, business involvement is easy.
I won’t cover the 4th model – loosely termed ‘Electronic Currencies’ – as this article is about paper currencies. E-currencies have been popular, and have only been bolstered by the Bitcoin model – which can be a template for anyone wishing to start their own currency.
In the UK alone there over 30 new currency projects planned in 2017 – this an impressive number. I believe there are several reasons for this. Primarily, the legal environment in the UK is quite conducive to local currencies. Most of these currencies follow the Central Bank-referential scrip model, which the Bank of England seems to encourage…for now. Of course, the model is no threat to the BoE. Secondly, Britain, for a small island, is a tightly packed snowball of regional accents and identities – local identity being the backbone of a local currency’s acceptance. These two factors alone create a benign environment for independent currencies. The law is not so friendly in France, for example. Not surprisingly, there are far fewer French alternative paper currencies. Credit is also due to the Bristol Pound, who have set up Guild of Independent Currencies – this acts as a resource hub for aspiring currency projects.
The largest scheme in the UK is the Bristol Pound, with over 250,000 GBP in circulation at last count. This is followed by the Brixton Pound, the Lewes Pound, Totnes, and Stroud. But this space is fact-moving, and these statistics have a short shelf-life. It is important to point out, that when all is said an done, there is only 500,000 GBP of local currency circulating in the UK. In currency terms, this is diminutive.
So, what do I see for the future of independent currencies? I’d like to introduce a few dynamics I keep a close eye on that influence how I see our economic and social future… (barring environmental upheaval or mass alien presence)
The first is the dynamic in play between Localism and Globalism. One way this is manifesting is in the conflict between Protectionism and Internationalism. These two mentalities are at odds with each other – and we’re seeing the consequences. Take BREXIT, for example. Here is Protectionism triumphing over Internationalism. The world media tried to spin the UK’s protectionism as nationalism. Why? Nationalism is easily associated with racism, Nazism, fascism, gas chambers etc. Its a lot easier to demonize nationalism than protectionism, because of its association with irrational hatred. The same card is played in the US elections.
Though farcical, the 2016 US elections are another symptom of the final clash between Protectionism (Trump) and Internationalism (Clinton) – or localism versus globalism. Again, the mainstream media misses the reason for Trump’s popularity; though absurd, he expresses a Protectionist sentiment (which has been parsed out of mainstream US politics) that appeals to a public seeking refuge from Globalism.
There’s another dynamic that runs parallel to ‘Local v Global’. This is the see-saw between Public vs Private. I’m drawing directly from the work of trader Martin Armstrong. Armstrong’s analysis shows that capital moves in regular waves, from Public (Government Bonds, for example), to Private (Equities and Gold), and back and forth throughout history. When faith in government is high, capital moves into Public forms of money – such as government bonds. When faith government in low, capital moves into PRIVATE forms of money – hard assets, and stocks.
Not only that, but these waves are FRACTAL – the theory works on multiple time-frames. According to Armstrong, capital moves between Public and Private in 6 waves, with each wave increasing in intensity, within a larger 309.6 year wave.
We are currently at the end of the final half-century Private wave, within the final 309.6 year Public wave. As these waves are both the sixth in their respective series, they are the most intense, and this intensity is being expressed in the social and economic situation we have today.
What does all this mean for Local currencies? I mentioned the different philosophies – Hard Asset, Secessionist, and Environmentalist. I said that the Environmentalist philosophy is presently the most widespread among local currency projects. But the larger dynamics in play suggest that local currencies my find a new impetus – the collapse in trust in government, from Public to Private; the collapse in faith in government’s ability to make good in its debt, and so… the collapse in government bonds.
Its very possible that the motivation behind independent currencies are about to shift – from liberal conscientiousness to urgent, blood-engorged necessity for an alternative to draconian and incompetent governments. For as quickly as government bonds will collapse, governments will tear apart society to find every penny to pay debts they spent themselves into – this is how empires die. The environment is ripe for secession and a return to hard assets.
This shows that interest rates are the lowest since – well, since humans began charging interest for things. This is the 5000 year trend that will reverse in our lifetimes. This matches Martin Armstrong’s analysis – Public capital will flee to Private assets.
For those caught like a deer in the headlights as their world goes up in flames, it will be devastating. But for independent currencies, all this is very healthy.
In Part II, I’m going to talk specifically about visual DESIGN of independent currencies. Stay tuned…