Why Use a Community Currency?

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CityHallCommunity leaders benefit from community currencies

Community currencies empower individuals and local businesses to take control of their financial futures back from central economic planners and Wall Street. That doesn’t just benefit producers and consumers. It benefits the community as a whole. Community leaders take note. The clearest mandate from constituents to community leaders during tough economic times is for polices that will create jobs. That usually means getting local government out of the way of job creators. Encouraging community currencies is another way.

A community currency based on hard money multiplies the effect of capital accumulation. That’s because capital accumulated in constantly depreciating dollars loses its purchasing power as the currency is inflated. Purchasing power is transferred from the holders of U.S. dollars to whomever receives the new money created by the central bank. It’s like diluting a household cleaner. It spreads farther but the solution is not as strong. A hard money currency cannot be inflated. It retains 100% of its purchasing power, which stays with whomever is holding it. It puts local capital on steroids, bringing its full job-creating power to bear locally. That means more jobs in a shorter period of time, built upon a sound money system that is less likely to fund unsound business plans.

The system also encourages people to use local vendors who accept the currency, meaning that more business is done in your community, rather than with big corporate retailers in town or on the internet. More jobs and more local business means more tax revenues without creating new taxes or raising existing ones. That helps community leaders get their work done without further impairing local businesses and homeowners.

Community currencies can also help bring in outside commerce from visitors. Using a local currency creates a unique experience for visitors, who are more likely to return to have that experience again. Visitors will often keep some of the currency for its conversation starting value, giving them an incentive to return to use it with local vendors.

In addition to all of the economic benefits, a community currency fosters a sense of pride and ownership of one’s community for all who participate. Like local landmarks, a community currency is something that people can truly call “ours,” just like the old clock tower or the vintage movie theater in town. For community leaders looking to boost the local economy, attract more outside commerce and build a sense of pride and ownership in the community, a community currency can be a powerful catalyst. It’s one way to truly lead their communities forward.

market1Community merchants benefit from community currencies

Community currencies benefit the community as a whole on several levels, both social and economic. They foster a sense of pride of ownership in the community and encourage local cooperation. They protect individuals against inflation, meaning their accumulated wealth can help them realize their own dreams instead of being redistributed to politically-connected corporations. They even benefit community leaders, who benefit from the job-creating and other economic effects of establishing a local currency based upon hard money.

Merchants benefit, too. In addition to the many benefits they share with consumers, there enjoy some unique benefits as merchants from a community currency system. Community currencies naturally build customer loyalty. Consumers are directed towards merchants that accept the currency and are less likely to make spur-of-the-moment, impulse buys elsewhere.  The nature of the transaction also fosters a more personal relationship with the merchant’s personnel.  Exchanging goods for coins with a human being is just more personal than swiping a plastic card through a card reader.

Merchants are also protected against the failure risks inherent in paper currencies. If the issuer of a paper currency goes out of business, as the “Recovery Certificates” issuer did in 1930’s Chicago, both consumers and merchants suffer a loss. Merchants naturally have more to lose in this scenario as they typically have more currency on hand. With the issuer out of business, they are left with nothing but worthless paper. Hard currencies have intrinsic value. Even in the unlikely event that everyone else stops using the currency, the merchant is left with coins made of silver or gold.  Failure is much less likely with a hard currency to begin with. Most paper currencies fail due to inflation and the crisis in confidence that accompanies it. Hard currencies today are virtually inflation-proof.

Community currencies can also be designed to create brand awareness. The American Open Currency Standard’s unique system allows each community to design its own tokens, which can still be used with participating merchants anywhere. Individual merchants can even design their own tokens. The marketing possibilities are limitless.

While the system encourages local business, it also gives merchants the opportunity to tap into national networks to sell excess inventory. Any AOCS approved local currency is transferable to and redeemable with any participating merchant. Have a unique product that is only available in your community? Consumers in other communities using AOCS currencies can purchase it from you with their own tokens. Being a participating merchant automatically puts you on their radar screen as a merchant to do business with. There is no such thing as a zero sum economy. When consumers benefit from community currencies, merchants benefit as well. Merchants are not only consumers themselves but also derive distinct advantages.

market_shopperCommunity currencies benefit consumers as much as local businesses

With all of the benefits community currencies can bring to local businesses, the benefits to individual consumers are often overlooked. These include social, economic and even environmental benefits. Participating merchants have an incentive to encourage use of local currencies. They often give substantial discounts to customers to use them in lieu of U.S. dollars or credit. One reason they can do this is the local currency will increase in value over time, while fiat currencies lose value. That means that community currency consumers are more likely to go to a locally-owned hardware store, for example, to purchase a garden tool or a fixture than to Home Depot or Lowes, which forces them to use depreciating paper currency.

Community currencies foster stronger relationships between local merchants and consumers, building a sense of community beyond the purely commercial. There is something inherently more personal in doing business with a local, hard currency than in swiping a card to transfer imaginary money to some distant, faceless corporation. Community currencies protect individual consumers from inflation and the rising prices that accompany it. 21st century Americans consider rising prices the inescapable result of a growing economy. This is erroneous. During the 19thCentury, prices fell dramatically even while relative growth was much more robust than it is today. Only since creation of the Federal Reserve in 1913 have prices generally risen over time. Inflation lowers the purchasing power of consumers over time, lowering their living standards. Community currencies eliminate the effects of inflation and reverse that trend. Individual consumers can experience the rise in purchasing power and living standards over time that Americans experienced for the first 133 years of their history.

Consumers also face less risk of unemployment when a community currency is firmly established. By neutralizing inflation and keeping purchasing power local, capital accumulation occurs more quickly. This accelerates economic growth, creating more employment opportunities.

For environmentally-conscious consumers, community currencies are far “greener” than fiat paper. By encouraging consumers to buy local, products don’t travel as far to get to the point of sale. That means less gasoline expended and less pollution. Hard currencies are more durable than paper. They will be reused over and over. When worn, they will still retain value for industrial use, jewelry or to mint new currency. They are one of the few items for which recycling is sustainable economically.

There is no reason you can’t enjoy all of the same benefits.  OpenCurrency helps communities introduce their own community currency, based upon hard money.