A Magazine about the Hudson Valley’s local economy, published by Hudson Valley Current.

Getting Beyond Our Trust In Fiats

 

How Two Bay Bucks Define New Currencies

By Paul Smart

    One of the keys to understanding all the new approaches to currency, as well as all things lumped under the general category “new economy,” is to get a sense of an effort’s mission, the “why” behind its invention in the first place. After all, one of the reasons we’re all looking into this field of reasoning in the first place is that our sense of valuation of “normal” money—whether traded on Wall Street, accruing interest via credit mechanisms, or simply added up via coins and paper bills—has slipped. The fact that all “official” currencies have been decreed by matter of “fiat” for the last 40-some years—meaning all valuation is now based on supposed supply and demand relationships, rather than the value of any underlying commodity—relies on one’s willingness to accept the authority of those entities decreeing such fiats in the same way the Bible and many religions say our world was created.

    For many during these days of endless questioning of any and all things authoritative, that involves a lot of trust.

    Enter all the localized currencies that have been rising across the globe, including numerous cities and regions here in the U.S., over recent years. And the care with which these efforts originating missions, and FAQs explaining the “why” part of those missions, are being wrought.

    “An increasing number of communities face the exact challenge alternative currencies are designed to address: a shortage of dollars and a dwindling number of ways to earn them, mixed with no diminishment in peoples’ practical skills within a community, or the number of hours in a day. Local currencies can offer a way to expand the assignment of economic value, so that activities like volunteering in a local garden, giving a neighbor a haircut, or reading to a homebound senior can help a person earn access to food and other basic needs, even if dollars never change hands,” noted Katie Gilbert in a 2014 Forbes’ piece on the phenomenon that’s only kept growing in recent years. “Historically, too, local currency systems have cropped up in periods when economies falter. During the U.S.’s Great Depression in the 1930s, several hundred municipalities and other groups across the country issued local currencies to keep the gears of regional economies turning. In response to more recent economic turmoil in Greece, a complementary money system called Local Alternative Units (“tems” in Greek) has emerged.”

    As users of the Hudson Valley Current have been learning, though, the nature of a new money systems need constant care, and a certain flexibility, to match community needs. Which means constant tweaks to those FAQs we have learned to rely on whenever new thresholds of understanding have to be crossed. And, just as importantly, a growing number of ways in which the ideas and ideals of local currencies get met.

    As an example, consider the two Bay Bucks systems currently in use in America. As well as the ways in which each has approached their FAQ pages online, the better to meet their communities’ needs.

    The older of the two, in the Grand Traverse Bay region of northern Michigan, started up in 2005 from the efforts of a volunteer board, the Traverse Area Community Currency Corporation, which itself began three years earlier. The currency was all cash, distributed from an initial printing of about $99,000 worth of Bay Bucks pegged to the federal dollar.

    “By accepting and spending Bay Bucks you support local community enterprise, help build social capital and regional economic resilience. Unlike federal dollars, Bay Bucks are spent into existence–not lent at interest into existence. Because it is backed by the faith and trust of this community, the wealth Bay Bucks represents stays at or near home, and holds the promise of helping us all live better,” is the tenor of the entity’s FAQ—fervently idealistic to the point where it allows its members to decide whether their use of the currency (“far more colorful (and beautiful) than US dollars”) should be considered “taxable activity” or not. “Bay Bucks is not related to the federal currency as a standard of value but as a unit of account. Bay Bucks is backed by our faith in our community—our demand for goods and services and the ability to provide them. Bay Bucks is a medium of economic exchange, like cash, checks, frequent flier miles and gift certificates. Put another way, if Bay Bucks are in your pocket, you can spend them nearby for things you want and need. Knowing how, where, and why to use Bay Bucks is where the added value comes from. Every time you use Bay Bucks you are expressing a commitment to our community.”

    The other currency, based in the San Francisco Bay area, started operating three and a half years ago as a commercial barter system where businesses with unused inventory or excess capacity can “deposit” that excess into an exchange, and then “withdraw” other businesses’ excess goods and services—all in a digital bookkeeping “currency transaction” form. It only accepts locally owned businesses as members, and has a built-in economy of scale plan based on necessary growth over the coming years.

    “We are a third-party record keeper. We record all transactions done on our platform and send monthly statements to all members on their sales, purchases, and balances. In addition, we provide brokerage services to help members trade and achieve their business goals. We also help members recruit new businesses they would like to trade with into the platform. Finally, we provide consultancy and educational services to help you and the public understand the benefits of using complementary currencies,” reads the much more prosaic and business-like Californian Bay Bucks’ FAQ.

    Unlike the Michigan Bay Bucks, much of their website is filled with details involving fees, methodology, and stern warnings against any attempts to monetize one’s bartering activity, including shifting such clients to a cash basis. And yet its underlying sense of mission does, in the end, also come through clearly.

    “Besides allowing you to attract new customers and build customer loyalty, using Bay Bucks will also build vibrancy and resilience in the local economy. This is because all members of Bay Bucks are local businesses,” they carefully note. “We enable local businesses to trade more with each other, so that the wealth stays in the local community. When you become less dependent on the global supply chain, you also become less exposed to exchange rate fluctuations and foreign economic downturns. When the local economy becomes more vibrant and resilient, you in turn will grow and become more prosperous.”

    Over time, it turns out, the Michigan experiment has floundered some. That’s been attributed to the fact that it’s always been run by a volunteer board, and its basis in a cash currency. The California operation, meanwhile, is growing slower than expected, but drawing in business interest because of its “platform” working with excess.

    Here in the Hudson Valley, our Current is working with its own communities, both existing members and businesses and those aiming to implement new economic theories within the region, to gear itself to truly local realities, as well as needs. Big changes will be announced in the coming months. And new FAQs.

    Will the announcements be a form of “fiat,” based solely on older concepts of authority and blind trust?

    Like the Bay Bucks from that area in northern Michigan many say is working to be like our Hudson Valley, or the San Francisco Bay area many here aspire to be like, we suspect whatever comes will be of this place. And right for our times.

    As all our newer currencies promise to be.