The term 'Local Money' is included in the Economics edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Check for lowest price here...
Local Money is money that is created, printed, issued, and traded by an individual community. Communities that are struggling to keep their economies going are in need of a way of boosting the local economic picture. In creating money that can only be utilized by individuals and businesses in their own local area, they attempt to address this problem.
In the United States, local money’s history originated in the difficult era of the Great Depression. During this decade of the 1930’s, banks were failing in numbers not seen before. This created a real shortage of currency and loans in local communities and towns. Individuals and businesses worked together to find a solution to the problem. They teamed up and created their own currencies that became known as Scrip. Utilizing this newly created local Scrip, trade and exchange continued to go on even with a shortage of banks and hard currency in the smaller towns throughout America.
Today’s local money concept has made a comeback in the wake of the financial crisis and the Great Recession. Businesses began working with area banks to come up with their own local currency that could be purchased and issued to consumers in the area. In communities where local money has arisen again, a great number of businesses have signed on to the idea and consented to taking payment in the bills of this localized currency money. This is necessary in order for area consumers to feel compelled to obtain the local money in the first place.
The way that local money works in practice today is interesting. The currency is printed up and then offered by area banks in a participating community. The currency is then sold at a significant discount to its actual value. For example, $100 local money could be sold by area banks for only $95 United States dollars. The $100 local money can then by spent by the consumer at its full value in any business that takes the local money as a method of payment.
Already, over a dozen area communities throughout the U.S. have created their own local money currencies that are being honored on a fairly large scale. Not only is this helping out area businesses by keeping the locally earned paychecks in the communities, but since the currencies are sold at a five to ten percent discount to dollars, it allows struggling workers and families to stretch their incomes by using them. In communities that honor local money, they can be utilized to pay for groceries, gasoline, and even Yoga classes, as examples. Among the more successful and widely accepted local monies these days are the Ithaca Hours of Ithaca, New York; the BerkShares in Western Massachusetts; and the Detroit Cheers in Detroit, Illinois.
The BerkShares for Western Massachusetts are a model case study of successful local money. They can be purchased from twelve banks throughout the area. BerkShares are accepted at in excess of three hundred seventy different businesses in the region. As the largest local money network in the U.S, the BerkShares have so far circulated almost two and a half million dollars. Successes like these have encouraged other communities like South Bend, Indiana to begin creating their own local currency.