What is a local currency?

By Aloaha

What is a local currency? In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area.

Originally published on www.valletta-coin.com

A local currency acts as a complementary currency to a national currency, rather than replacing it, and aims to encourage spending within a local community, especially with locally owned businesses. The currency may not be backed by a national government or be legal tender. About 300 complementary currencies, including local currencies, are listed in the Complementary Currency Resource Center worldwide database. Many of them exist in the Euro Zone with more than 30 alone in Germany.

For example: Berliner Regional, Chiemgauer, Freitaler, Gradido, Hallertauler, Illtaler, KannWas, Kirschblute, Landmark, Nahgold, Palzer, Rheingold, Roland, Sterntaler, Urstromtaler, Zschopautaler

Advantages of local currencies:

In a world obsessed with speculation and saving, local currencies have certainly got the Germans thinking again about what money is primarily for: paying people to deliver services and products and creating employment!

  • Strengthening the region
  • Strengthening the community
  • A way to boost local economy and culture
  • Local purchasing is a preference to buy locally produced goods and services over those produced farther away
  • The local multiplier effect with economic benefit accrued to an area from money being spent in the local economy
  • Good for the environment, as you are you are buying products from regional producers
  • New method of payment to keep money and added value in the region

According to Professor Gerhard Roesl, author of a report commissioned by the German Bundesbank:

” The Bundesbank tolerates the local currencies, which are regarded as a kind of ‘social money”

Good money for bad times

Local currencies are one way of ensuring life goes on in hard times. Just 30 miles from Rosenheim, the birthplace of the Chiemgauer Currency, is the Austrian town of Wörgl. In 1932, during the Great Depression, Wörgl issued its own currency – it was so successful that it became known as “das Wunder von Wörgl”, impressing both John Maynard Keynes and Irving Fisher.

While times are not as bad as the 1930s, opinion is growing that we must find different ways of doing business. Josh Ryan-Collins, senior researcher in monetary reform at the New Economics Foundation, the independent think-tank, says: “We need to re-democratise the monetary system, to have a set of alternatives for issuing credit outside the banking oligarchy. Alternative currencies can play a vital role in that – particularly in conjunction with the exciting developments in ICT which enable consumers and producers to exchange with each other across a larger area and based upon values other than globalization and economies of scale.” Ryan-Collins and the NEF were closely involved with setting up the Brixton Pound, one of the UK’s alternative currencies – there are also the Totnes Pound, the Stroud Pound and the Lewes Pound.