Last Friday, I gave a talk at a CLE seminar to the St. Thomas More Lawyers Society. In introducing the program's speakers, Dean Joe Kearney of the Marquette University Law School explained why each was qualified to speak on the particular topic to be addressed. With respect to me, he said that, as legal academic, I was (or, perhaps more accurately thought I was) qualified to speak on the law, the weather, the Brewers schedule or absolutely anything else. Substitute "blogger" for "legal academic" and the proposition still works.
Although I have a fair amount of course work in the subject, I am not an economist so I am ready to be corrected on this. But the notion that the East Side and Riverwest neighborhoods in Milwaukee ought to print their own money strikes me as completely pedestrian.
Imagine that the east side currency - let's call them "Bolshevik Bucks" - are purchased with US currency for redemption at participating east side businesses. For $40 US paid to a joint venture of those businesses, you get $ 50 in Bolshies. When you use them, the merchant receives eighty cents on the dollar from the joint venture. This makes it nothing more than a joint discount program akin to Disney Dollars with the marketing hook being neighborhood affinity. This appears to be the way that the Berkshares program works in Massachusetts.
There is nothing remarkable about that. It's called a "sale" and my wife tells me that they are happening all over the place about now. The only difference is that there is a patina of self righteousness that comes with promoting "sustainability."
The article suggests that this might be what's going on, but it's not clear. Another model seems to represented by the Ithaca Hours program in which businesses and employees agree to accept - to some limited extent - a local currency that is not redeemable in or pegged to US currency. In this iteration, the idea seems to be to create a mechanism for businesses and consumers to try to erect what the E. F. Schumacher Society calls a "protective membrane" but what is more commonly called a trade barrier.
As you might imagine, there is a limited demand for that type of currency because it is premised on the idea that economies of scale and comparative advantage are less significant sources of value than they are. The premise is that we ought to buy and produce locally and on smaller scales, presumably resulting in a kinder and gentler, if less wealthy, society.
Although some claim that these local currencies have a higher velocity (i.e., they circulate faster), there are apparently only $ 100,000 in Ithaca Hours (which are supposedly worth ten dollars per Hour) in circulation after 17 years. That doesn't seem very significant.
Apparently, the Camelot of the local currency movement is the Wörgl experiment. During the Great Depression, a town in Austria issued its own Arbeitsbescheinigungen. or labor certificates, that bore a negative interest rate, i.e., you could exchange them for Austrian schillings but at a depreciating rate, creating an incentive to use them or lose them. This supposedly resulted in a financial miracle in which depressed little Wörgl turned into the Lake Woebegone of the Tyrol. The idea is that, when people are overly liquid because they fear losing money, a depreciating currency (and inflation) are our friends. Maybe there is a circumstance in which this is true, but, if that's where we are now, I doubt that Linneman's, Outpost Natural Foods and Beans & Barley are going to lead us out. In any event proponents of local currency do not seem to propose it as a matter of economic management but as a way of life.
Are there legal problems? I don't think so - at least not in the examples that I imagine - but I'll leave that to others for now. That's too close to things that I am supposed to know about.
Cross posted at the Marquette University Law School Faculty Blog.