How to be Your Own Central Banker

by Chris Campbell

If a city is allowed to create its own currency, I began to think, surely an individual can as well. 

Meaning, anyone… yes, anyone… can become his or her own Bernanke or Yellen.  How exciting is that?

And this isn’t some airy-fairy idea. It’s real. In fact, Laurie F., is living it. She is her own central banker. She showed me.  Don’t believe it? Well, you will. Because she’s given me permission to show you her currency too --

Attached,” Laurie F. wrote in her email, “is a sample of my private music-lesson-backed currency I created back in 2003.

“They're printed on special paper I can identify. “There are not many in circulation... mostly bought as gifts... but they are transferable and have appreciated 35% since I printed them and increased lesson prices.”  And look, it’s even backed by something.

See? Laurie F., dear LFT reader, is her own central banker  Don'tt be jealous, though. You can be one too. And we’re going to show you how. That’s right. In this extra special two-part series, we’ll show you what it takes to become your own central banker.

So here’s what we have for you today…

First up, we’ll dive into other local currencies that currently exist. That way, you can get an idea of the kind of currency you want to create. Then we’ll expand on why creating your own currency is important in today’s economic landscape. Then, after that, we’ll dig deeper into what the future might hold for you when you are your own central banker.  And then, finally, we’ll show you how to create a currency of your own.

So let’s begin with the Brixton Pound

The Brixton Pound is one of the U.K.’s hippest and most popular local currencies. Since 2009, tons of residents have been happy to pass these loud and colorful bits of paper around.

And in 2011, they even set it up so Brixtonites can pay for goods and services with it through text messages on their cell phones.  According to one shop owner, Tony Benest, who accepts the currency at his organic food store, the concept is very simple to understand: “It’s an additional form of payment for people who don’t have a credit or debit card, or don’t want to get too involved with the banks.”  Easy as that.

Our next subject is a little more involved: the Swiss WIR Bank…

Some call it Switzerland’s “secret weapon”...

“Most people don’t know it,” Washington’s Blog reads, “but one of the main reasons Switzerland’s economy remained stable for so long is that the Swiss maintained an alternative currency system.”  During the Depression, when banks shuttered the doors, the blog goes on, “16 Swiss business people got together and formed the Swiss Economic Circle or Wirtschaftsring-Genossenschaft (“WIR” for short).

This Circle created an alternative system of credit. That way, businesses could keep running and the economy keep humming. Since the banks had stopped lending and the Swiss had hoarded everything else, people quickly embraced it. The WIR was a perfectly adequate medium of exchange. In fact, it was even better than the official currency.

Here’s how it works…

The WIR bank manages the national currency, the Swiss Franc, and its own currency, the WIR Franc. The WIR is fixed 1:1 with the Swiss Franc.

The bank issues the WIR and loans it out at zero or absurdly low interest. It also lends out the Swiss Franc -- but at the going market rate. That way, a business can choose to take a mixed loan or either/or. When an individual or a business borrows in WIR, it must pay the loan back in WIR. This forces the borrower to accept the currency in exchange for its goods and services.

Astonishingly, the WIR bank turns over about 2 billion WIR per year and has about 1 billion WIR outstanding. Over 62,000 small and mid-sized companies participate. And the WIR makes up about 25% of all Swiss business.  Incredible? Oh, you ain’t seen nothing yet.

Now, let’s look at the Ithaca Hour…
 

“We print our own money,” Paul Glover, a resident of Ithaca, New York writes on the Ratical blog, “because we’ve seen federal dollars come to town, shake a few hands, then leave to buy rainforest lumber and fight wars.

“Ithaca Hours,” Glover goes on, “by contrast, stay in our region to help us hire each other. While dollars make us increasingly dependent on multinational corporations and bankers, Hours reinforce community trading and expand commerce…”  How do the Ithaca Hours work? It’s simple…

One Ithacan hour is equal to $10, the estimated average wage in Tompkins County. While most charge an Hour for an hour’s worth of work, dentists, massage therapists, lawyers and the like typically charge several Hours for their services each hour.

“We have a growing Ithaca Hour community,” another resident, Elizabeth writes. “We can see and feel that we're part of doing this. I don't feel that way about the national economy, which is so dependent on centralized, impersonal government and business, that we've become alienated. Hours show us that we don't need somebody far away to allow us to do things; we have the power here."

Hour notes come in five different denominations.

And they can be used, according to Glover, to “buy plumbing, carpentry, electrical work, roofing, nursing, chiropractic, child care, car and bike repair, food, firewood, gifts, and thousands of other goods and services. Our credit union accepts them for mortgage and loan fees. People pay rent with Hours.

“Some of the best restaurants in town take them, as do movie theaters, bowling alleys, two large locally-owned grocery stores, many garage sales, 55 Farmer's Market vendors, our local hospital, the Chamber of Commerce, and 350 more businesses.

“We can capitalize new businesses with loans of our own cash. Hour loans are made without interest charges. Local currency gradually expands our control over the local economy.

“We regard Ithaca's Hour as real money,” Glover says, “backed by real people, real time, real skills and tools. Dollars, by contrast, are funny money, backed no longer by gold or silver but by less than nothing.”   They have a success story page with over 300 entries, if you’re interested.

just a 10% shift of sales from chain stores to local stores in any community could result in a $137 million boost and 1,600 new jobs.
Forget about some waste-ridden willy-nilly plan from the government to create jobs. Stop waiting for “Change.”  This is how change happens. And it doesn’t cost a dime from the tax pool. It’s simply a matter of shifting spending habits.

Here’s something to think about too: If a 10% shift of sales can create 1,600 jobs…

Allow us to summon author Woody Tasch’s popular inquiry: “What would the world be like if we invested 50 percent of our assets within 50 miles of where we live?” Indeed.

It’s important to realize that every dollar spent is a dollar invested in something. It must go somewhere. And although small businesses create three out of every four jobs in this country, our financial industry has “evolved” to serve only big and international business…If it serves any master at all, that is.

“Of all the trillions of dollars madly flying through the financial markets,” Amy Cortese pointed out in her book Locavesting, “less than one percent goes to productive use, in other words, to providing capital to companies that will use it to hire, expand, or develop new products.

“The rest is sucked into the voracious maw of trading and speculation. And that tiny fraction of productive investment goes mainly to companies big enough to issue shares in initial or secondary public stock offerings -- an increasingly exclusive club.”

If you’re like the vast majority of Americans, you’re shut out of this productive investment circle. This is where local currencies can help. While all the “official” currency is tied up in speculative activity, cloak-and-dagger stock offerings, and Wolf of Wall Street- style stupidity…

There could be a productive medium of exchange still available in your hometown. That is why local currencies are important.

And why you should become your own central banker.

© Laissez Faire Books, LLC