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The Future of Local Currencies

A member of the Stockbridge Mohican tribe is features on the 1  BerkShare note

BerkShares, a local currency, has circulated in the southern Berkshire region of Massachusetts since September of 2006. One million, seven hundred and twenty thousand BerkShares have been issued from eleven branches of five participating banks.  Issue occurs when citizens exchange their federal dollars 90 to 100 for BerkShares.  Federal dollars remain in the bank accounts in anticipation of any future redemption of the BerkShares.

John Isaacs’ design of BerkShares incorporates local heroes and paintings by local artists. For his layout of the notes he just received a Graphis 2009 Gold Award. The currency honors the values of community, economy, ecology, and sustainability. International and national press, intrigued with a community issuing its own money in these troubled economic times, have filmed citizens in the Main Street shops of Great Barrington, using the currency in place of federal dollars.

The phenomenon has drawn the attention of monetary academics, long interested in the prospect of “competing” currencies. They argue that with a multitude of privately issued currencies, those currencies issued on sound principles would maintain their buying value and not deflate. The assumption is that the currency holding the most value would be the preferred currency and the public would choose to trade in that currency over others.

Monetary theorists are concerned by currency monopolies, such as a reliance on government issued currency. Without competitive restraints a centralized currency issuer may have the tendency to over issue, or issue for non-productive purposes, thereby leading to inflation in the economy.

In imaging how to issue stable currencies, the “competing” currency school of thinking generally supports a currency backed by or tied to a standard that holds value.  The standard of choice is gold or other rare metals.

BerkShares is a non-governmental, privately issued currency.  The issuer is a non-profit, BerkShares, Inc., not a for-profit.  By design trade is limited to the Berkshire region.  The intent of the currency is to encourage more robust exchange between individuals and businesses and business to business, thereby keeping the wealth of the region recirculating locally and fostering greater regional economic sovereignty.  BerkShares identify the economic leaks in the region, those places where the local currency cannot be spent.  The long-term goal is to provide a financing tool for new import-replacement businesses that produce locally for local consumption, thus stopping the leaks.

As BerkShares Board of Directors considers the future evolution of the program, the American Institute for Economic Research, a Great Barrington economic research organization founded in 1933, has called a mini-conference entitled “Prospects for the Acceptance of Competitive Local Currencies: The Future of BerkShares.” Several eminent monetary scholars will join BerkShares board and staff to imagine growth to a more independent currency.

BerkShares will be discussed in the context of the history of independent currencies. Speakers will then address how BerkShares could move from federal dollar backing to an index of locally produced commodities such as maple syrup, wool, wood products, local beer, field greens, and local cheese. The conference will also consider the responsibilities of a local reserve board for BerkShares, including regulatory authority, oversight capacity, and other policy-making tools. This discussion will suggest a framework for how and on what basis to issue additional currency. Finally, panelists will suggest strategies for making loans denominated in BerkShares.

This mini-conference is scheduled for July 18th from 3PM to 5PM at the campus of the American Institute for Economic Research, 250 Division Street, Great Barrington, Massachusetts.  The event is open to the public for free, but space is limited and pre-registration is necessary.  Walker Todd is the conference director.  Short biographies of conference presenters follow.

Papers given at the conference will later be available through the American Institute for Economic Research’s website www.aier.org and that of the Schumacher Center.  More information about BerkShares and media coverage of the project may be found at www.berkshares.org.

 


Presenters at “Prospects for the acceptance of Competitive Local Currencies: the Future of BerkShares “

George Selgin is Professor of Economics at West Virginia University and one of the leading theorists of free banking.  He is the author or editor of six books and numerous articles on economic history, monetary economics, banking, and macroeconomics. He was also a visiting scholar at the Federal Reserve Bank of Atlanta. His articles have appeared in the Wall Street Journal, the Financial Times, the Christian Science Monitor and other periodicals.

Ronnie Phillips is Professor of Economics at Colorado State University and is a past president of the Association for Evolutionary Economics. He has been a Visiting Scholar at the FDIC and a Visiting Scholar in the Bank Research Division at the Office of the Comptroller of the Currency in Washington, D.C.; and a Resident Scholar at the Jerome Levy Economics Institute of Bard College. He also taught at Texas A&M University.

Walker Todd is an AIER Research Fellow and economic consultant with 20 years experience at the Federal Reserve Banks of New York and Cleveland. He taught at Chautauqua Institution, the Cleveland-Marshall College of Law, and Cleveland State University. He has numerous publications on banking, central banking, monetary and property rights topics, including those related to international debt, the International Monetary Fund, and the regulation of the banking system and financial markets.

Susan Witt has served since 1980 as executive director of the Schumacher Center, named for the British economist and author of Small Is Beautiful: Economics as if People Mattered. Ms. Witt is a founder and current administrator of BerkShares, a local currency circulating in the southern Berkshires region of Massachusetts that has gained wide national and international media coverage.  Her articles on citizen-initiated methods for shaping sovereign regional economies have appeared in a variety of books and publications.

John Wood is the Reynolds Professor of Economics at Wake Forest University. He has taught at the National University of Singapore, Northwestern University, and the University of Pennsylvania.. His book, A History of Central Banking in Great Britain and the United States, was published in 2005. He has been an economist, consultant, and visiting scholar at the Federal Reserve Board of Governors and the Federal Reserve Banks of Chicago, Philadelphia, and Dallas.

L. Randall Wray  is Professor of Economics at the University of Missouri-Kansas City as well as Research Director, the Center for Full Employment and Price Stability (at UMKC), and Senior Scholar at the Levy Economics Institute of Bard College, NY. He is a past president of the Association for Institutionalist Thought (AFIT) and served on the board of directors of the Association for Evolutionary Economics (AFEE). A student of Hyman P. Minsky while at Washington University in St. Louis, Wray has focused on monetary theory and policy, macroeconomics, financial instability, and employment policy. He has published widely in journals and is the author of Understanding Modern Money: The Key to Full Employment and Price Stability (Elgar, 1998) and Money and Credit in Capitalist Economies (Elgar 1990). He is the editor of Credit and State Theories of Money (Edward Elgar 2004) and the co-editor of Contemporary Post Keynesian Analysis (Edward Elgar 2005) and Money, Financial Instability and Stabilization Policy (Edward Elgar 2006).