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A Work in Progress 1999 LOCAL CURRENCY HANDBOOK

LOCAL CURRENCY HANDBOOK

by

Allen C. Stansbury

Center for Community Futures

CENTER FOR COMMUNITY FUTURES PG. 1


LOCAL CURRENCY HANDBOOKTABLE OF CONTENTS

PAGE #

Forward 3Community Currencies: A New Tool for the 21st Century 5

Bernard A. Lietaer

Our Community Cash - Sonoma County 21Allen Stansbury

Our Community Cash – flyers and newspaper articles 39Articles:

Thinking Locally in a Global Economy 51Reprint from the Bershire Trade and Commerce monthly

Backers say barter builds community 55Reprint from San Jose Mercury News, January 26, 1998

Giving Money Local Color 56Reprint from the NY Times, May 28, 1998

Money that won’t leave town 57Reprint from the SF Examiner and Chronicle, July 5, 1998

Regenerating Community 59John L. McKnight

A Local Currency would bolster Taos Economy 64Reprint from Rocky Mountain Press

Website Resource Sites:

Complementary Community Currency Systems 65and Local Exchange Networks

Barataria Exchange Project 73 Amsteinet, Amsterdam 75 ECU ROMA, Ireland 82 3rd Sector, Madrid 87 SOCSystem Ltd. Scotland 92

Newsletters from:

Bread rising, Berkeley, California 95 Seed Exchange, Mendocino County, California 101 Our Community Cash, Sonoma County, California 107



FORWARD

by

Allen C. StansburyCenter for Community Futures

The 1999 Handbook on Local Currency is a second edition following an edition in

limited distribution in February 1998. It serves as a valuable resource for individuals

and organizations planning a local currency. It also assists those now engaged in

operating a local currency system. The handbook provides the reader with basic

information on types of currency systems and a model on how to create a local currency

system.

Our Community Cash in Sonoma County, California was selected as a model to learn

first hand how a local currency system comes together. The model provides information

from within and an understanding of how this community program is organized.

“Our Community Cash” continues as a work in progress. The earlier edition, begun in

late 1997, covered the initial stages of the development and organizing of “Our Com-

munity Cash” with no final conclusions as to the outcome or success. This follow-up of

May 1999 provides observations as to what did occur once “Our Community Cash”

became accepted as a local currency. As of this writing there are over 300 partici-pants

in a countywide system with a population of nearly 450,000. Since February 1998,

when the first edition of this work was distributed, two other local currencies were

organized, one in Mendocino County to the North and one in Marin County to the

South.

To assist in learning how local currencies operate, passages and articles are provided

from many contributors. Many of these individuals met June 11-12, 1999, at the 1999

Local Currency Conference in Chicago sponsored by the Center for Community

Futures.



On behalf of the Center for Community Futures, I thank all of those who worked with

me on this long project. I also wish to thank the many speakers and contributors to the

conference who have made it a success and have led us to a better understanding about

Local Currency and its issues.



Community Currencies: A New Tool for the 21st Century

by Bernard A. Lietaer*

The three most important concerns of our contemporaries in the developed nations areremarkably convergent--unemployment, the environment, and communitybreakdown--and there are strong indications that these same issues will remain on topof the agenda well into the next century. Emerging technologies promise to keepunemployment a major issue, even if all Western economies get out of recession. By2010, China will introduce as much carbon dioxide in the atmosphere as the entireworld does today. And community breakdown is one of the most systemic, deep, andcomplex societal trends of the past 30 years, with no signs of any reversal.

Precisely because we will have to live with these issues for the foreseeable future, onlya long-term structural approach can successfully resolve these problems. Here I showhow community currencies could contribute to tackling all three problems and alsopermit us to "retrofit" economic motivation to desirable human behavior.

1. Aligning Moral and Economic Incentives

There are three main ways to induce nonspontaneous behavior patterns: moralpressure, coercion, and economic incentives. For example, recycling glass bottles canbe promoted by education, by regulations, or by incorporating a refundable deposit inthe purchase price. A combination of all three incentives is obviously the mosteffective strategy.

When these incentives conflict, problems will arise. For instance, when there is aneconomic incentive to do something a regulation or law prohibits, we need costly andpermanent enforcement systems. Even in the presence of such enforcement systemswe expect smuggling and many more imaginative forms of cheating to occur. Moreevident are cases where moral pressure is supposed to overrule economic interests.Consider, for instance, the well-known saying, "Money is like manure; it does goodonly if spread around." This sentiment has been espoused in less florid language bymost religions for a long time. However, this moral pressure is diametrically opposedto the concept of receiving interest on money, which provides a built-in incentive tohoard currency. Whenever there are such structural contradictions many people areunable to afford, or simply do not care enough, to follow the moral advice.

It is possible, however, to design a coherent and operational currency system so thatthis apparent structural contradiction disappears. In other words, by questioning sometraditional implicit assumptions, we can realign the moral and economic incentives sothat they are in harmony.



*(Reprinted with permission from Bernard Lietaer, found at http://www.schumachersociety.org/frameset_links.html)



2. Functions of Money

To understand community currencies we need to better understand what money does.We will see that a community currency should fulfill at least some of the key roles ofany currency, and that a well-designed community currency can even fill some of theroles that the "normal" national currency does not.

Since the breakdown in 1972 of the Bretton Woods system, the world has been livingwith pure fiat currency--that is, there is nothing material backing the currencies of theworld. Nonetheless, money has continued to fulfill a number of different functions,only two of which are essential:

A standard of measure. We compare the value of the proverbial apples and oranges by expressing each of them in dollars, for example.

A medium of exchange that is more efficient than other forms--barter, for instance.

Money has sometimes played three other roles in the past, and happens to play themtoday as well:

A store of value. Historically, this has only rarely been the case. For example the word capital derives from the Latin capus, capitis, which means head, and referred to heads of cattle just as is still done today in Texas or among the Tutsi in Africa: "He is worth 1,000 head." Another example: in Egypt through the Late Classical period, and in Europe throughout the Middle Ages and until the late 18th Century, wealth was stored mainly in land and its gradual improvements.

A tool for speculative profit, most emphatically today when more than 95 percent of all currency transactions in the world are motivated by speculation, and less than 5 percent are for trades of goods and services. This has been systematically possible only since August 1972, when President Nixon created the floating currency nonsystem we now have.

A tool of empire. The control by the former Soviet Union of the external trade of Comecon countries via the "convertible ruble" is a recent example.

Though we tend to take for granted that money serves all the functions we are usedto--which today means all five functions for the U.S. dollar--it is important to realizethat money really needs to serve only the two essential functions in order to be anefficient currency.



3. Conflicts Among the Functions of Money

In fact, the secondary functions money serves invariably end up hurting the twoessential ones. Some examples follow.

Store of Value Versus Medium of ExchangeAt first sight, it really is convenient to have money also play the role of store of value.However, there is a formidable hidden cost: this identity significantly exacerbates theboom-bust economic cycle.

The theory of time preference of money, which describes the rational trade-offbetween consumption today and saving for the future, explains this: When someoneexpects higher uncertainty in the future, a larger proportion of his or her wealth islogically kept as savings, and less is thus available for immediate consumption.Therefore, at the first signs of a recession, anybody who has money will logically savemore and consume less, thereby exacerbating the recession for everybody else. Inboom years, consumer optimism prevails, and people will tend to simultaneously dipinto their savings to buy big-ticket items such as cars and houses, thereby pushing theboom into an inflationary period. While other factors also play a role in the creation ofbusiness cycles, it has been proven many times that consumer confidence significantlyexacerbates the problem. Providing incentives to ensure that the medium of exchangedoes not also incorporate the store of value function would therefore automaticallydampen this boom-bust tendency of the current system.

Speculation Versus Standard of Value Joel Kurtzman's The Death of Money convincingly describes why and how thespeculation on currency undermines currency's role as a standard of value. If, forexample, a German company wants to invest in a plant in India, the biggestuncertainty lies not in the risks of the business itself but in what currency to use tomake cash-flow projections: rupees, dollars, or Deutsche Mark? The initial investmentis in Deutsche Mark, and the proceeds will be generated in rupees, but at whatexchange rate can one match the two to determine the expected rate of return? Whilethere are some tools available to manage this risk for short-term transactions, theyoften are not available for the long-term risks typical in plant investments, or they aresimply too expensive. The net result: fewer cross-border investments, particularly inThird World countries, thereby reducing the worldwide efficiency of resourceallocation. We will never be able to determine how many investments have notoccurred because of this, but all indications suggest they are quite substantial.

Tool of Empire Versus Medium of ExchangeRecent history provides a telling example of the potential conflict inherent in these twofunctions of money: Before the collapse of communism, there was no need for



anybody to stand guard next to a plant in Poland to ensure that it would not establishcloser trade relationships with the West than the Soviet Union felt comfortable with.Having the Comecon currencies convertible only in rubles was an automatic andsufficient guarantee.

4. Problems with Interest

Another feature of today's money that we take for granted is that money producesinterest. This process has become universally accepted in the West only over the pastcentury. Indeed, for more than a thousand years all three major revealed religionsemphatically prohibited any interest on money because they considered it usury. It isonly since the end of the l9th Century that the Catholic Church, for instance, "forgot"about the sin of usury.(note 2) This happened to coincide with the period when theChurch itself, which for centuries used to be the largest landowner in Western Europe(that is, it was a capital user), found itself with financial assets instead of land (that is,it had become a capital supplier).

However, the problem with interest does not relate to any of these "moral"historico-religious reasons. Interest on money constitutes one of the most systematiccauses of our destruction of the global environment. Consider as metaphor, forexample, the life of a tree (or any other living resource): Because of interest, the netpresent value of any income far away in the future is negligible. So, it literally pays tocut down a tree and put the proceeds in a savings account instead of letting it grow foranother decade or century. Similarly, the only types of tree worth plantingcommercially are the fastest-growing varieties such as pine. (Nobody plants redwoodsfor commercial reasons.) So even when we plant trees, we are systematically losingbiodiversity.

5. Reprogramming the "Invisible Hand"

Let us assume now that we develop a currency whose sole objective is to fulfill thetwo main roles of money: standard of value and medium of exchange. To discourageits use as a store of value, we build in a "booster" mechanism: when someone earnsthe equivalent of $100 in this currency, we give him or her a purchasing power of$110 if the money is used today. It would be worth only $ 109 tomorrow, $ 108 theday after tomorrow, $100 on the tenth day, and $90 in twenty days, and so on.(note3) Now, what would happen?

The following patterns would become manifest:

A structural incentive to separate the functions of medium of exchange and store of value would be achieved, with the advantage of reducing the boom-bust cycle.

People would invest or spend this money soon, and those who receive it would in turn do the same. Therefore, additional economic activity would occur, and additional jobs would be created.



Decisions would be highly decentralized, given that any recipient of the currency would become actively involved in spreading the currency and thereby activating the job creation process.

The most important structural shifts would occur in the way people wouldspontaneously start saving and investing. Because the booster concept discourages theuse of currency as a saving device--particularly if such currencies are in widespreaduse-- something else needs to be used to store value.

The conceptual key to understanding this shift involves changing the "arrow of time"in the investment process. Under the present system, the discounted present value ofany investment has to be higher than the interest rate of a risk-free government bond.This implies that anything that produces value more than twenty years in the future isbasically worthless today, thus providing a systemic incentive not to care about thelong-term consequences of our actions. Under the proposed system, the incentive works in the opposite way: income in the future would become more valuable than income today, thereby automatically prioritizing the long-term implications of today's actions.

Once the basic necessities of life are covered, the logical uses of money in this newcontext would include investing in ways that will reduce expenses in the future (payback mortgages, improve home insulation, improve energy efficiencies, start one'sown food gardens) and investing in anything that will keep, or increase in, value (landimprovements, trees and forests, and anything else that grows over time). To preparea nest egg for your grandchildren's college, one logical step is to plant a small forest orhave a "savings account" that invests in such activities.

New liquid forms of savings would immediately be offered by the more agile financialinstitutions as soon as the demand for liquidity in the fixed assets just mentionedincreased. This could stem the trend toward disintermediation, because governmentbonds would yield much lower returns. In general, stocks would be preferred tobonds, thereby making access to investment capital at low leverage the dominant wayof financing businesses.

Consumption patterns would evolve toward products with longer lifetimes. Assumethat one has $100,000 available and two types of cars are offered for sale: the usualcar of today, which costs $20,000 and lasts four years, and one costing $100,000 thatlasts twenty years. In today's currency environment it is logical to buy the short-livedcar because one can put the $80,000 balance in a savings account and get more valuein the long run. With the proposed alternative currency it is logical to buy thelong-lived car. Today nobody builds such a car because there is no demand for it. Butin the future, it could spontaneously become the type of car in greatest demand. Notethat the total income of the car manufacturer is the same over twenty years (assumingno inflation), but that the burden on the environment is much lower. According to thesame logic, people would tend to build houses intended to last forever--andspontaneously invest in further insulation and other improvements whenever they have



extra cash.It is important to recognize that there would be no need to provide tax incentives orotherwise "educate" people to do all these things. We just reprogrammed the "invisiblehand" of financial self-interest to provoke these actions.

Today, many people try to convince others to act in an ecologically responsible way,but it is in the financial interest to do the opposite. With the proposed system,economic self-interest pulls automatically in the direction of ecologically sound actions.Only by such realignment of economic and moral motivations can we expect trulymassive changes in behavior patterns.

6. The Validity of "Booster" Currency

The idea of a "booster" currency is just a variation of what has been variouslydescribed in the Anglo-Saxon literature as "stamp scrip" or "stamp currency" and inthe German literature by "Wara" (merchandise currency) or "Frei Geld" (freemoney). Its theoretical concept was originally developed by Silvio Gesell about acentury ago. Gesell was an Argentine businessman and economist who has beenneglected by many theoretical economists because of the--at firstsight--unconventional nature of his "charge" or "demurrage" concept.

Gesell's initial premise was that money as a medium of exchange should be considereda public service good (just as public transportation, for instance) and, therefore, that asmall user fee should be levied on it. Instead of receiving interest for retaining such acurrency, the bearer in fact pays interest. In Gesell's time, stamps were the normalway to levy such a charge. Now, the generalized use of computers in payment andaccounting systems, as well as the availability of electronic debit cards, would makethis procedure much easier and convenient to implement.

Is such an unconventional concept as "charge money" a theoretically sound one? Theanswer is a resounding yes, and is supported by economists of no lesser stature thanJohn Maynard Keynes. Chapter 17 of Keynes' General Theory ofEmployment, Interest and Money analyzes the implications of such money,and provides a solid theoretical backing to the claims made by Gesell. Keynesspecifically states: "Those reformers, who look for a remedy by creating an artificialcarrying cost for money through the device of requiring legal-tender currency to beperiodically stamped at a prescribed cost in order to retain its quality as money, havebeen on the right track, and the practical value of their proposal deservesconsideration.(note 5) He concludes with the prescient statement that "the futurewould learn more from Gesell than from Marx." (note 6) The second part of hisstatement is now accepted fact. Might he also be correct on the first part?



7. Historical Precedents

The vast majority of the books on economic and monetary theory or history nevermention the possibility of such "charge" or "demurrage money." Even the monumentalHistory of Interest Rates, which covers interest from Sumer to today, doesnot mention it once.(note 7) Is this concept then just a theoretical idea, or is it apractical possibility? In fact, history records the remarkable ability of this concept toadapt to different cultures and circumstances--and to generate spontaneously thebehaviors we are trying to promote.

EgyptRecall the biblical Joseph, who interpreted the Pharaoh's dream and saved Egypt from"seven lean years" by stockpiling food. Why would the Egyptians have kept Joseph insuch high regard for inventing stockpiling? Its use had been widespread since thebeginning of the agrarian revolution several thousands of years earlier. Might therehave been more to it than the Bible mentions?

These stockpiles were also the basis of the Egyptian monetary system. Each farmerwho contributed to the stockpile would receive a piece of pottery having an inscriptionof the quantity and date of delivery of his contribution, which he could then use topurchase something else. These receipts, or ostraca, have been found by thethousands and were in fact used as currency. However, what the Bible missed is thekey to the system: there was a time charge on these receipts. For instance, if someonewanted to redeem an ostraca of ten bags of wheat after six months, he would onlyreceive nine bags. This demurrage charge reflected the costs of guarding the depot andquantities lost to rodents.

So we can understand that Egyptian farmers would never hoard this currency butinvest in what was most handily available to them: improvements on their land andirrigation systems.

This currency was used in Egypt for more than a thousand years, until the Romansforcibly replaced it with their own banking and currency system, more "modern" andhaving positive interest rates. Note the apparent consequences of this change: As longas negative interest currency was used, the Egyptians built monuments that would lastforever and maintained their agricultural system in remarkable condition, making it thebreadbasket of the Ancient World. All this quickly disappeared when the Romancurrency was generalized. Since then, Egypt has remained for two thousand years a"developing" country.

The Middle AgesWhat triggered the exceptional economic and spiritual prosperity in Europe,particularly from 1150 to about 1300, when the extraordinary blossoming of all the



cathedrals took place? Few people are aware that this period coincides with theexistence of the brakteaten monetary system, under which local lords issued silverplaques that were called back on the average every six to eight months and reissued abit thinner, amounting to a demurrage rate of about 2-3 percent per month over thisentire period. People would therefore automatically invest in anything that would lastalmost forever: improved land, tapestries, paintings, or cathedrals.

From an economic perspective, cathedrals made sense as an investment in the future.There was fierce competition among cities to attract pilgrims from all over theChristian world, and cities competed for cathedrals, just as today they compete forWalt Disney Co. investments. The main difference, of course, is that cathedrals werealso symbols of faith, masterpieces for thousands of craftsmen who chose to remainanonymous, and designed as lasting beauty. Is it a coincidence that cathedralsflourished as the most grandiose symbols of community solidarity in Western history,yet declined as soon as the brakteaten system was replaced with the king's monopolyon the creation of currency?

While the previous examples might be discounted because they seem to apply only topre-capitalistic economies, the following examples bring us to modern times.(note 8)

The 1930s in GermanyIn 1930, Herr Hebecker, owner of a small bankrupt coal mine in Schwanenkirchen,Bavaria, decided in a desperate effort to pay his workers in coal instead of Reichsmark. He issued a local scrip--which he called "Wara"--redeemable in coal. On the back were small squares where stamps could be applied. A bill would remain valid only if the stamp for the current month had been applied. This negative interest charge was justified as a "storage cost." The workers paid for their food and local services with these Wara. For example, the baker had no real choice but to accept them, and convinced his wheat suppliers to accept them in turn. The process was so successful that by 1931 this Freiwirtschaff (free economy) movement had spreadthrough all of Germany, involving more than 2,000 corporations and a variety of commodities as backing for the Wara. But in November 1931, the German Central Bank, on the basis of its monopoly on currency creation, prohibited the entire experiment.

The 1930s in AustriaIn 1932, Herr Unterguggenberger, mayor of the Austrian town of Worgl, decided todo something about the 35 percent unemployment of his constituency (typicalfor mostof Europe at the time). He convinced the town hall to issue 14,000 Austrian shillings'worth of "stamp scrip," which were covered by exactly the same amount of ordinaryshillings deposited in a local bank.

After two years, Worgl became the first Austrian city to achieve full employment.Water distribution was generalized throughout, all of the town was repaved, mosthouses were repaired and repainted, taxes were being paid early, and forests around



the city were replanted.

It is important to recognize that the major impact of this approach did not derive fromthe initial project launched by the city, but instead had its origin in the numerousindividual initiatives taken in the process of recirculating the local currency instead ofhoarding it. On the average, the velocity of circulation of the Worgl money was aboutfourteen times higher than the normal Austrian shillings. In other words, on theaverage, the same amount of money created fourteen times more jobs.

More than 200 other Austrian communities decided to copy this example, but hereagain the Central Bank blocked the process. A legal appeal was made all the way tothe Supreme Court, where it was lost.

Stamp Scrip in North AmericaEmergency currencies have a longer history in America than most people realize. Theyseem to appear with a curious regularity-- the 1830s, 1890s, and 1930s--coincidingroughly with the bottom of the long-term economic cycle called the Kondratieff wave.I will concentrate on the last period because it is the best-documented example.

The theoretician behind the movement in the United States in the 1930s was IrvingFisher of Yale University. He had analyzed the Worgl case in Austria and publishedvarious articles about its success. Subsequently, more than 400 cities, and thou-sandsof communities or organizations all over the country, issued one form or other ofemergency currency. Many were stamp scrip, involving the application of a stamp atprescribed intervals (monthly, for example). There was also a movement to issue thisstamp script officially nationwide: Senator Bankhead of Alabama presented a bill tothe Senate February 18, 1933, and Representative Petenhill of Indiana presented a billto the House of Representatives on February 22, 1933.

During this time Irving Fisher approached Dean Acheson, then Undersecretary of theTreasury, to obtain support from the Executive branch for the same idea. Achesonasked the opinion of one of his Harvard professors, who advised him that the systemwould work but that it would imply strongly decentralized decision making, which heshould check out with the President. Soon thereafter, President Roosevelt prohibitedany use of "emergency currency" and announced the New Deal centered around agrandiose centralized plan of large construction projects.

These examples all show that the concept worked in the modern world whenever itwas allowed and correctly implemented.(note 9)

8. Community Currency

"If you want people to fight, throw them a bone; If you want them to cooperate, have them build a tower." --Saint-Exupéry, Citadel



Today, local currencies are again mushrooming all over the world in an impressivediversity and increasing sophistication. As Hazel Henderson has pointed out, the keyto the success of a community currency, just as for any currency, is trust. In this caseit is trust in your neighbors, in the community as a whole, and in the community'sleaders.

My focus here is limited to emphasizing that once you have decided to have acommunity currency, why not use the best design available? It is important thatcommunity currencies concentrate exclusively on the two key functions ofmoney--standard of value and means of exchange--and therefore discourage the use ofthis money as a store of value or a means of speculation. The best way to ensure this,in particular for the more sophisticated electronic forms of local currency now comingonline (for example, the Minneapolis Commonweal experiment), is to build in abooster or another form of the demurrage concept.

The majority of the present systems simply use a "zero interest" concept. In contrast,the majority of local currencies implemented in the 1930s explicitly built in thedemurrage idea, typically through the process of requiring periodic application ofstamps. Stamps are a primitive way of achieving the desired objective; today, withsmart cards or electronic accounting for local exchange (LETS) systems, demurragecould be achieved much more effectively and conveniently by simply programming asmall charge on outstanding balances.

This small step would have several substantial benefits:

Every participant in the local currency system will become a motivated promoter. Oneof the features that many organizers of LETS systems have noticed is that over timethe originators tend to remain the dominant force promoting the system to new users.Some systems simply die when their original promoter is no longer available for this.Paul Glover, the founder of the Ithaca money system, mentioned that he spends agood deal of his time convincing new participants to accept the money.(note 10) Thisis typical, because the other members have no major incentive to actively promotenew participants: they can just keep the currency until they have some use for it. Incontrast, in Worgl or in Swanenkirchen in 1930, each participant was personallymotivated to convince his butcher, baker, or cousin to accept the money. One of thereasons that local currencies have multiplied in number today but have not spread aswidely as in the 1930s is this structural difference in motivation for memberparticipants. More jobs will be created. Community currencies now tend to create nomore jobs in the community than normal currencies. This was not the case in Worgl,for instance, where we noticed that every shilling of Worgl money created fourteentimes more jobs than a normal national Shilling.

Community spirit will be fostered. In many cases, the motivation for introducingcommunity currencies today is often less to create jobs than to foster communityspirit. Community currencies are indeed one of the most effective tools to achieve this.



The word community appeared first in written English in 1283. It is etymologicallyderived from the Old French and Late Latin, where it referred to a group of monkswho owned, operated, and lived from the fruits of their monastery. In other words, itreferred to the material organization of a self-contained economic entity. Benedictus ofAniane (5th Century) felt that such a process would automatically support the sharingof the spiritual objectives of their members. Consciously promoting more frequentinteractions and interdependencies with your neighbors has therefore long beensuccessful in generating this elusive quality of community spirit. Building in the boosterconcept or another form of demurrage would increase the density of these interactionsand therefore also spread its benefits.

Hoarding will become ill advised. Some community currencies have experienced thehoarding phenomenon. Sometimes this is even interpreted as a sign of success,because such behavior reproduces more closely the use of "normal" currency. Butevery time someone hoards the community currency, he or she is depriving others ofits benefits. In addition, as was shown earlier in the discussion of conflict between thestore-of-value and medium-of-exchange functions, there are even structural reasonswhy hoarding should be avoided.

Ecologically sustainable practices will occur spontaneously on a collective level. Whileother avenues can be used to promote sustainable behaviors, including regulations andeducation, why should we not use all the available tools? Reprogramming the "invisiblehand" to push for ecologically sustainable behavior would be extremely helpful. Thesebenefits will become generalized only if and when demurrage currency becomes thedominant currency. This circumstance is less farfetched than it appears, for somecommunity currencies could play the role of prototype experiments in preparation fora new Bretton Woods agreement.

9. Potential Misunderstandings

In today's politico-economic minefield some may discard the concept of communitycurrencies because of some simple misunderstandings. I address two such issuescoming from different parts of the political spectrum.

Is a Community Currency Just Another Welfare System?

To many people, anything that helps the poor is a welfare system. (note 11) Whilethat is indeed the case in most programs, community currencies are an exception.

Let us consider a practical example from a city that, by American standards, would beconsidered an extreme case of poverty. It will show that a community currency doesindeed help the poor--but by using market forces, not any transfer of resources fromthe rich to the poor. In fact, it makes some welfare systems unnecessary because itputs the poor to work to help themselves.

When Jaime Lerner became mayor of the medium-sized Brazilian town of Curitiba in



1973, he had a tricky garbage collection problem. The majority of the 500,000 peopleof Curitiba lived in shanty towns (favelas), which had been built so haphazardlythat even the garbage trucks could not get into them. The accumulation of garbageattracted rodents, which in turn spread diseases at alarming rates. The classicalsolution would have been a welfare program to try to clean up the mess, but Lernerdid not have that option because there were too few rich people in Curitiba, and thenecessary funds were not available.

The mayor was forced to invent another way. His solution was to pay public transporttokens to people for their garbage, under the condition that they pre-sort and deposit itin recycling bins around the favelas. For organic waste, which was composted foruse by farmers as fertilizer, people received chits that could be exchanged for food.The program worked spectacularly: the favelas were clean-picked by the kids, whoquickly learned to distinguish between the different types of recyclable products.People could leave the favelas by public transport and travel to the center of townwhere the jobs were. The additional buses and gasoline were paid for with theproceeds from the sale of the pre-sorted garbage to the glass, paper, and metalmanufacturing companies. Even "normal" money was saved because fewer trucks andless gasoline were required to pick up the pre-sorted garbage. And all this does noteven include the savings due to reduced disease and a more efficient labor market.Today, Curitiba is clean, prosperous, self-sufficient, and the only Brazilian city I knowto refuse money from the state. It has a state-of-the-art public transportation systemand a popular mayor who has been repeatedly reelected. Perhaps most significant, astrong sense of community and pride has arisen in a place where none was visiblebefore.

There is a general lesson here that politicians from every country should becomeacquainted with: welfare programs can be replaced by imagination and creativity if theright leadership is available. Also, politicians get reelected for providing suchleadership.

Won't This New Money Create Inflation?A common reaction to the concept of a local currency is that it will increase the moneysupply and therefore fuel inflation. This reaction is further reinforced by theobservation that the built-in incentive to get rid of a booster or demurrage currencyreflects behavior observed in an inflationary environment. What happens beyond thesefirst impressions?

Consider the issue of increased money supply: Do airline frequent flyer programsincrease total airline flying? The answer is obviously yes. But does a frequent flyerticket create inflationary pressures on air fares? The answer is no, because the airlinewill readjust as needed the constraints on frequent flyer usage (by, for example, havingfrequent flyer seats available only on weekends or in off seasons, or only for red eyeflights, or only for a certain percentage of the seats). In other words, the airlines willensure that only otherwise empty seats will be used by frequent flyers.



The same is true for community currencies: their natural niche is linking unusedresources to otherwise unmet needs. The more sophisticated community currencieseven specifically target this application. The local businesses participating in theCommonweal experiment in Minneapolis accept the community currency only forotherwise unused resources, as when, for example, a restaurant accepts communitycurrency from early diners. Even the quantity of local currency issued is only 75percent of the discounts of goods or services made available to the system byparticipating merchants. So long as community currencies are issued specifically toensure the use of otherwise idle resources, inflationary pressures cannot be generated.

In summary, while the behavior patterns generated by the booster concept may looksimilar to what is observed under inflation, the cause is different. More importantly,the consequences of spending are diametrically opposed: Under hyperinflation, societycollapses, while with community currencies the fabric of society is reinforced.

It is important to realize that "normal" national currencies and community currenciesplay different roles. Nonetheless, theory and practice show that it is possible to designa truly symbiotic relationship between them. This will be the subject of another article.

10. Conclusions

Community currency is a tool for tackling the major contemporary issues ofunemployment, community breakdown, and ecological destruction. This toolrepresents some (very) old wine that could play a broader role if served in the newbottles that today's technologies make available.

Is this community currency phenomenon a short-term fad that will disappear when theglobal economies pick up again, or is something more significant going on? In supportof the thesis that this is only a temporary fix, one can point out that its reappearancetoday corresponds with the long economic cycle termed the Kondratieff Wave.Indeed, as I pointed out earlier, U.S. "emergency currencies" have appeared with theregularity of clockwork in the 1830s, 1890s, 1930s, and now. But I wouldnevertheless argue that--unless govemments decide to snuff them out for the wrongreasons--the community currencies we see today are only the beginning of a significantnew long-term trend.

My claim is based on the observation that the current cycle is structurally differentfrom all the previous ones. One of the most compelling explanations for the origins of

the Kondratieff Wave has focused on the fundamental shifts in technology that haveworked their way through the entire productive system. At intervals of about everyfifty to sixty years, we have seen the "water technology" of the 1830s be followed bythe steam engine in the 1880s, the internal combustion engine in the 1930s, and themicrochip in the 1980s. But the information age is creating a situation withouthistorical precedent: jobless growth, or economic production growth, accompanied by



worsening individual conditions. The scales of ecological and community breakdownare similarly without historical precedent. Since the centralized tools for stemming thisphenomenon have failed, the local community is the most logical place to dosomething about it. As I have attempted to show, community currencies have aproven track record for solving problems for which we have no other tools ofequivalent simplicity and effectiveness.

It is ironic that we find ourselves again in quandaries similar to our predecessors of the1930s. Most of the advantages described here for letting people help themselvesapplied at that time as well. We will never know for sure whether Hitler would havebeen propelled to power if the people of Germany had been allowed to continue tosolve their problems from the ground up and find employment and dignity in their owncommunities.

Would it not have been worth letting them try it?



Works cited:

1. Joel Kurtzman, The Death of Money: How the Electronic Economy Has Destabilized the World's Markets and Created Financial Chaos. New York: Simon & Schuster, 1993.

2. Willis Harman, "Whatever Happened to Usury?" World Business Academy Perspectives 6(2) (1992): 17-23.

3. Such a tax on hoarding is technically defined as "demurrage." All the values given are all for illustrative purposes; in practice, a lower demurrage rate would normally be used.

4. John Maynard Keynes, The General Theory of Employment, Interest, and Money. London: Macmillan, 1936, 1967.

5. Ibid, p. 234.

6. Ibid, p. 355.

7. S. Homer and R. Sylla, History of Interest Rates, Third edition. New Brunswick, N.J.: Rutgers University Press, 1991. In the authors' defense: they were primarily bond traders, so did not look for negative interest currencies.

8. Several of these examples are also mentioned in Hazel Henderson's paper in this issue [World Business Academy Perspectives, 8(2) (1994)]. However, I limit discussion to those cases that have the demurrage concept built in, and highlight the behavior patterns they have generated.

9. There was an erroneous application of the concept in Hawardem, Iowa, introduced by Charles J. Zylstra. The stamps were to be applied at each transaction, which created the opposite of what was wanted: everybody hoarded the currency instead of spending it. This currency became very unpopular, and is an example often mentioned by the detractors of the system.

10. 10.Personal communication, June 1994.

11. I define a welfare system as a means to circumvent market forces by redistributing resources from the rich to the poor, usually by means of taxes on the rich to finance support programs for the poor.



Below illustration is an American Colonial local currency, half-dollar

Center for Community Futures thanks Sergio Lub of Martinez, CA for his contribution.



Our Community Cash - Sonoma CountyA Work in Progress:

LOCAL CURRENCY IN AMERICAN

As America was developing as a British colony and as a separate economic entity, it suffered from the constraints of a lack of supply of currency. It was recorded in 1715 that all of the British colonies in North America tended to suffer from a dearth of the official British coinage. Consequently, they used a variety of substitutes including wampum, copied from the native inhabitants, tobacco and other natural commodities, and Spanish and Portuguese coins. The importance of these substitutes varied according to location. Wampum was the name applied without distinction to the two varieties of beads: Wampi or white in color, sliced from the inner whirls of periwinkle and purple or black from purple segments of the hard shell clam or quahog.

Even in 1760, demand for wampum as currency, and later as ornamentation, remained strong. A factory was constructed where steel drills were used to make the holes that were used for stringing the shells together. The factory remained in production for a hundred years. Soon after production began, the supply of wampum rose enormously. A result of this increase in output caused inflation and the worth of wampum decreased substantially.

During 1727, certificates attesting to the quality and quantity of tobacco deposited in public warehouses circulated more conveniently than the actual leaf, already used as money for over a century. Later these notes were made legal tender. This new concept of paper money, backed by something tangible, like tobacco, was copied in many or all of the other colonies allowing for the local economies of these regions to grow and prosper.

Also during this period other local currencies began to appear such as illustrated on the proceeding page. However, in 1764, the British Parliament enacted laws forbidding its American colonies to issue paper money as legal tender. This punished the colonies that had been careful not to over-issue paper money as well as those that had been irresponsible. The only exception was for military purposes.

"No law ... could be more equitable", wrote Adam Smith, "than the act of parliament so unjustly complained of in the colonies." Adam Smith was in favor of paper money but against it having the status of legal tender.

However, what was true in America soon was true in Britain. By the end of the 18th century, copper and silver coins in Britain were in short supply, so much so that many firms had difficulty in obtaining enough currency to pay wages. This led to payments in kind, i.e., and use of foreign coins and unofficial tokens. The token manufacturers greatly expanded the



amount of local currency available to offset the shortage of legal coins.

SONOMA COUNTY CALIFORNIA: A brief history and economic overview

Before learning how a local currency was created in a large geographical area such as Sonoma County California, it helps to know about its location, the local economy and demographics.

Sonoma County is an hour north of San Francisco and the Golden Gate Bridge on Highway 101. It is a county of nearly 450,000 with one of the highest populations and economic growth rates in California. To illustrate and view some of Sonoma County population trends and demographics, charts of the mid-decade census are shown below.

TOTAL POPULATION 422,100 Male 206,829

49% Female 215,271 51% BY ETHNICITY

White, non-Hispanic 351,650 83.3%Black, non-Hispanic 5,547 1.3Native American 4,397 1.0Asian or Pacific Islander 9,931 2.4Other Race, not Hispanic 15,854 3.8Hispanic 34,721 8.2

AGEUnder 5 years 28,319 6.7%5-17 years 67,457 16.0



18-64 years 240,311 56.965 and over 52,135 12.4

Source: California Cities, Towns, And Counties, 1995



AGRICULTURAL BEGINNINGS

Sonoma County began as an agricultural economy. Its early settlers harvested timber in the Russian River area and raised cattle for hides and meat on the Rancho Adobe, site of the first estancia of General Vallejo. The dairy industry grew out of this and then later the poultry and wine industry. Related agriculture industries included apples and hay crops.

The pueblo of Sonoma and its American immigrants played an important part of establishing California as a State, independent of Mexico. The Bear Flag revolt in Sonoma over 150 years ago is one of many events in California’s early history resulting in unity with the rest of the United States.

Near Sonoma, to the South and West, is one of the most famous wine growing regions in the world, Carneros, also home of the first commercial winery in California. Traveling north is the Valley of the Moon another important wine growing area connected to three other well-known wine areas: Alexander Valley, Warm Springs, and Russian River. Currently, Sonoma County offers visitors more award-winning wineries than any other viticulture region in the United States.

Sonoma is also noted for its Redwood forests, 76 miles of scenic Pacific Coast beaches (complete with a fishing village), and a restored Russian Colony outpost at Fort Ross. Western Sonoma is apple country, home of the Gravenstein. Towards the south, dairies abound supplying much of the region’s milk and cheese products. The coastal areas have long provided opportunities for commercial fishing, particularly for Salmon. However, this industry has been on the decline during the 1990’s due to over-fishing.

A significant new industry tourism has evolved over the last 50-60 years due to attraction of the agricultural areas. Tourism thrives in Sonoma for several reasons. Visitors were originally attracted to Sonoma because of its coastal access and the summer resorts on the Russian River. Now, the major attraction is the wine industry and the historic sites in Sonoma.

While these are strong areas for employment, wages in agriculture and tourism are traditionally lower pay and often require individuals and heads of households to seek other means of economic support.



.CULTURAL AND ECONOMIC DIVERSITY The central county area is located in several cities: Santa Rosa, Windsor, Rohnert Park, and Cotati. This area is predominately manufacturing, services (retail, health, banking, and financial), government, and education (Sonoma State University). Most of the job growth is in manufacturing, primarily in technology, software, and test and measurement instruments. Two growth industries in technology have emerged in recent years: telecommunications in the Telecom Valley of Petaluma and Medical Engineering in the Santa Rosa area.

Hewlett Packard is the county’s largest manufacturing employer followed by Optical Coasting and DSC (a new telecommunications company). California Gold Dairy Products is the second largest revenue generating company in Sonoma.

Sonoma County is no exception to this high technology trend. In 1995, the most recent year studied, the Gross Regional Product (Output) for high tech in Sonoma County fell squarely in between the two other largest sectors, Agriculture and Tourism, with a growth rate far greater. According to the American Electronics Association: There are more than 200 high-tech establishments in Sonoma County, double the amount that existed in1990. Nearly 10,000 people work for these high-tech firms in Sonoma County, about 2,000 (30%) more than in1993. The total payroll of Sonoma County's high-tech firms is $452 million Sonoma County's average real annual high-tech wage growth has been 20% since 1990. The average annual salary for a Sonoma County high-tech employee ($50,537) is nearly double theaverage wage for the local private sector as a whole ($26,054).

.



A clear indication of the economic and employment diversity in Sonoma County is shown in the chart below.

This diversity has led to the exploration of new economic opportunities and alternative lifestyles.

EMPLOYMENT AND LABOR SUPPLY

The most up-to-date and detailed industry data aggregated at the county level shows that the largest employment sectors in the five year 1990-1994 period continues to be services (38,700 in 1994) up from 1990; and retail trade (31,100 in 1994) up 7.9%. They are followed in size by Government (24,900) down 4.8%, and Manufacturing (20,600) up by 0.5% over 1990.

Wage and salary employment rose by 2,000 jobs over one year ago. The noteworthy hiring occurred in services where gains were widespread among component industries. However, payroll losses took place in durable goods, manufacturing, communications, and construction.

The Santa Rosa Metro Area (Santa Rosa to Petaluma corridor) unemployment rate was 5.0% in October 1995. This represented 11,900 people looking for work. One year ago, there were 13,400 job seekers and an unemployment rate of 5.1%. By the first of 1999 the unemployment rate was consistently near 4.5%.

In its projections of additional labor supply and demand for labor between 1990 and 2005, the Association of Bay Area Governments states that Sonoma County will be the most balanced of all Bay Area counties. During this 15-year period, labor supply in Sonoma County is expected to increase by 64,300, just above a projected demand of new jobs during that period. A key quality-of-life implication of these projections is the continued self-sufficiency and balance of the Sonoma County economy in coming years.



Though highly desirable for its quality of life, Sonoma County's economy demonstrates contradictions that affect housing and related needs. There is a disparity between the high cost of housing and the employment available. Wages have failed to keep pace with inflation and housing costs over the past decade. Prolonged unemployment and under employment have contributed to the rise of substandard housing and homelessness. The most affordable housing stock in the County is located along the Russian River and in unincorporated areas of Santa Rosa. Those areas most vulnerable to natural disasters, like the recent floods of January and March, 1995.

Civilian Labor Force Projections April

1990 1995 2000 2005Male 110,330 116,400 130,100 141,300Female 92,641 92,700 104,700 114,800Total 202,971 209,100 234,800 256,100

Source: ABAG Projections 96

AGRICULTURE OUTLOOK

Sonoma County's $3 billion agricultural industry continues to grow in value and prestige, holding its ground despite urban growth.

In 1996 Sonoma County farmers earned a record $390 million in gross income for crops ranging from wine grapes to goat cheese, lettuce to turkey eggs. When the $390 million in raw crops are sent to wineries, creameries and other processors, it multiplies the county's total farm economy to $3 billion, according to Ben Stone of the Sonoma County Economic Development Board.

Leading the way is the wine industry, which accounts for $2 billion of the county's total $3 billion agricultural economy. Dairy farming, apple production and vegetable growing continue as mainstays in the farm economy.

This earthly bounty has attracted the attention of wine and food writers who have described Sonoma County as an agricultural Eden, comparable to Tuscany and Provence. National food magazines wax poetic about Sonoma lamb from coastal pastures matched with cabernet sauvignon wines from the Alexander Valley free-range Petaluma chicken and Chardonnay wines from the Russian River Valley.

There is growing recognition for Sonoma County as a wine and food region. Leading the way for our food products are Sonoma County wines. Consumers associate the name Sonoma with quality and it is opening the door for even small farmers.



Sandwiched between the vineyards, which carpet nearly 38,000 acres of land in Sonoma County, are the small-scale farms raising fruit, vegetables, berries and herbs served in San Francisco restaurants and sold at gourmet markets.

Property owners with a couple of acres are exploring crops other than wine grapes, and are taking pastureland and turning it into high-value crops. If they already have the land, it takes a small capital investment to start a 1- or 2 acre vegetable farm. Sonoma County, which ranks 16th in the state in the value of its farm products, has about 550,000 acres or 54 percent of the county’s total acreage devoted to agriculture.

Those looking to harvest more income from their land are mostly part-time farmers who grow such specialty crops as heirloom tomatoes, chili peppers and Asian pears for farm markets and upscale stores and restaurants. If the crops are unusual enough, grown organically and of the highest quality, they find ready buyers at a top price. Growers in Sonoma County cannot compete with cheap land, cheap water and cheap labor of the Central Valley.

Sonoma County's cooler climate, a leading factor in producing world-class wine grapes, also yields better-tasting fruits and vegetables. Zucchini grown in Sonoma County has thicker skin making it taste better and keep longer. Sebastopol apples are sweeter than the apples from heavily irrigated orchards in Fresno.

ECONOMIC FUTURE IN THE 21st CENTURY

Six key "clusters'' of companies are expected to drive the Sonoma County economy in the future.The Sonoma County Economic Vitality Partnership project, which started four years ago, has identified six "leading'' clusters within the local economy that have the potential to stimulate growth in incomes for Sonoma County residents without damaging the region's quality of life.

These six clusters are creating jobs and increasing production faster than the rest of the local economy. Combined, the six clusters provide jobs for 71,400 people last year, or more than two of every five workers in Sonoma County. The clusters also produced $3.8 billion worth of goods and services last year or about a third of the local economy. The clusters are:

1. Agriculture, wineries and food processing: One of the most productive clusters, providing jobs for 11,070 workers and producing $821 million in output last year. Employment is split almost evenly between agriculture (primarily vineyards and livestock) and food processing (mostly wine and milk).

2. High-value manufacturing: Composed mostly of high-tech manufacturers, this cluster supported the jobs of 10,670 workers and produced $760 million in out put last year. Large companies, usually divisions of firms based outside Sonoma County, dominate this sector. However, it relies on goods and services from many small local suppliers, nurturing growth of companies in the supply chain as production increases. High-tech manufacturers are an export-oriented industry, selling their products outside the county and bringing money back into the region. They will benefit from several trends in the coming years: Developing



countries are making huge investments in technology to catch up with developed nations, tariffs are falling, and intellectual property rights are getting stronger.

3. Information technology: The smallest but fastest-growing cluster over the last five years, providing jobs for 970 workers and producing $120 million in output. Small firms that start locally or spin off from larger high-tech firms in the area dominate this sector.

4. Tourism: The second-largest employer within the six clusters, with 18,970 jobs and $523 million in output. A variety of businesses are bundled within this sector, including transportation, restaurants, hotels, museums and other entertainment venues. This cluster, which sells its services to visitors primarily from outside the county, serves another important role in the county by providing career opportunities to people without higher education degrees.

5. Retail trade: The largest of the six clusters, providing jobs for 21,530 workers and producing $1 billion in output last year. Stores in Sonoma County attract shoppers from across the North Coast, making the county a retail center for the surrounding region.

6. Professional services: The second fastest growing source of jobs among the six clusters, with 8,190 workers and $532 million in output last year. These firms benefit from the increasing specialization of tasks as large companies outsource functions, including hiring and personnel management, accounting, public relations, printing, advertising, mailing, research and testing.



OUR COMMUNITY CASH – The Group

In April 1997, several interested individuals came together to explore the idea and concept of local currencies. An informal committee was formed to learn how a local currency would be helpful in their daily and business interests and how it might be useful for others in Sonoma County.

Bill North, volunteered to organize the group. Their backgrounds are quite diverse. North was a social worker for the Community Support Network in Santa Rosa. Stephan Goya began with an initial design of the currency. He was a former Urban Planner and now a manufacturer of wind chimes in Healdsburg. Batja Cates, a third member of the group was a grass roots organizer. She conducted alternative financial workshops in Healdsburg.

Soon after the group began to meet, Michael Reins, a Marriage and Family Counselor became involved and provided some leadership. Patricia Haramanti, a community organizer living in Petaluma, later joined. Another, was Michael Sandler a graduate from the University of California, Berkeley and interned on the Berkeley Bread Project. Based on his Berkeley experience, Sandler put a lot of the time and effort in getting Sonoma’s system off the ground.

Early on, an important decision was to make the organization all volunteer. Meanwhile, the creation of the currency took priority and any decision or discussion on how the organization would evolve was put in abeyance.

EXPLORATION, DISCOVERY, AND SELECTION

Many discussions were held with organizers of Berkeley Bread, Paul Glover at Ithaca Dollars, People Power in Santa Cruz, CA, Sand Dollars in Bolinas, CA, Michael Linton at LETS, and others. The group gathered a great deal of material from these and other sources. The group carefully reviewed each different currency type including Time Dollars and LETS.

They conducted a comparative analysis of strengths and weakness of each currency. After a careful review of their advantage and disadvantages an hour-based currency was chosen. The choice was based on several important considerations:

A printed currency represented something tangible, it can be seen and felt A printed currency is easier for the user to conceive and understand as a media of exchange

of services for other goods or services A printed currency offers ease of implementation A printed currency is easier to market and therefore provides capability to outreach its users A printed currency can be tracked providing capability to determine its economic value

By August 1997 the informal committee had selected the name “Our Community Cash” as its official name based on the Ithaca Hour concept. Each unit of currency is one hour equal to ten dollars per hour. As a comparison, Berkeley Bread is equal to $12.00 for each hour.



Most Local Currencies are based in small geographical areas. Consequently, a very important part of their decision was to make the currency available countywide. While each member of the group was from different parts of Sonoma, it was felt that the diversity of Sonoma would serve as the foundation of strength for “Our Community Cash” local currency.

VISION AND STRATEGIES

The group vision was to create a system that will be as practical as possible. Their intent is for an action-oriented program with a short development time. This lead to an informal organization reflecting a noticeable lack of organization and with the leadership passed between members. However, according to the group, “there continues to be progress” while they focused on their three main objectives:

Increase awareness Conduct sign-ups Print the currency

In September the decision was made for twice monthly meetings, (2nd and 4th Tuesday). They selected a community center in Santa Rosa to hold their meetings, discuss status activities and provide progress reports. The meetings are quite open and informal.

Another important decision was to initiate a design contest. The idea of a design contest was to bring about community awareness in Local Currency, stimulate interest, and gain early participants. The contest was advertised in the local press and the group received seven entries. However, no one entry provided what the group wanted. They continued with their design efforts through meetings among themselves and with graphic artists who volunteered their time.

A goal was made by the group to sign up 100 initial participants. The goal was quite simple: interested people would sign up and list three things they wanted, three skills that they could provide. This list was then published in a newsletter along with the participants’ telephone number. Participants then began trading. The media of exchange was the printed currency. Participants would receive five free Hours, worth $50.00, just for signing up

By the end of the year, 1997, the group had reached halfway to their goal. During the first few weeks, the group became energized to sign-up the remainder of the initial 100.

MEDIA ATTENTION AND OUTREACH

Perhaps the greatest strength of the group was the capability to perform outreach and grab the interest and attention of the community. An important element in this was the interest of the news media, print and electronic to inform their subscribers of the story. Many of the articles that appeared during 1997-1999 are reprinted in the appendix. Readers of this handbook can make extensive use of this material and format.



September 1997 was a mile stone in creating local interest. Sonoma County Independent newspaper made the first announcement of “Our Community Cash.” The article September 4, 1997 aptly labeled “Funny Money.” It was based on an interview with Bill North, highlighting the usefulness of local currency. Stephan Goya was featured holding a copy of his idea of a local currency “River Peoples Money.” It did a lot to stimulate interest within west Sonoma County.

This led to a start of an outreach program. According to Michael Reins this was important:

From that article, we had a call from an Economics teacher in Petaluma. Mike Sandler and I taught a class at the high school on alternative currencies and Bill North made it to the afternoon class and did a similar presentation. This helped get us oriented to our message. It was a good opportunity for us to get focused and to practice talking about our project. The class was on October 17, 1997.

This experience encouraged Mike Sandler to write a press release announcing the design contest. The press release successfully generated several articles and as well Television coverage.

It also resulted in TV coverage on the local Santa Rosa station, KFTY, Channel 50. A clip of interviews with several of the group on the main street in downtown Sebastopol aired October 27, 1997, on the 7:00 pm news and again at 10:00 pm. Sandler and Michael Reins appear in the video along with a local restaurant owner in Sebastopol, successfully recruited by Sandler. Of interest to anyone viewing the tapes is the enthusiastic reaction and support by the reporter and the news anchor.

This TV coverage stimulated considerable local community interest resulting in many calls to the group members. Sandler recorded both televised newscasts so that it could be shown at other venues. One was at the monthly meeting of the Community Support and Agriculture Alliance. They are among several interested groups seeking alternatives to increase their economic strength. This resulted in several members signing up as charter members.

The press release also resulted in an article in the November 20, 1997 edition of The Press Democrat, a copy included in this document. Again, it stimulated interest and some participation throughout Sonoma County.

Their outreach also included meetings with the Mayor of Petaluma, Patty Hilligoss, and later with the CEO of the Petaluma Chamber of Commerce. In November and December, the two Mikes worked the Christmas Craft Shows and the local Farmers Markets to recruit subscribers.

In December Sandler and Reins did an interview on KRCB, a local public radio PBS station. This was in the “Community Spotlight” forum of the station’s format. It was a four-minute spot. Other radio spots regarding the concept of “Our Community Cash” were on KSRO and KZST news.

Mike Reins contributed an 800 number through his work. He included a recording of the KRBC interview. Later he placed a classified ad in the Gazette, which included the new 800 number.



The design contest was completed by the end of November 1997 and there were seven entries. However, the designs were not complete enough. The group decided that parts of each could be included in the final design. Consequently, the redesign began to proceed.

A professional graphics illustrator, recruited by Batja Cates, volunteered to draw up and do a layout of a final composite of the designs along with some new ideas from the group. Along with the design, decisions relating to colors, ink, and paper style and grade were also up for consideration.

PHONEBANK AND NEWSLETTER

Outreach is the prime activity of the group at this time in the development of a local currency. Considerable effort is being made to contact interested individuals and groups to increase the organizational membership and subscribers. One activity discussed was creating and carrying out of a phone bank. Group members were in contact with Family Connections to use their phones to contact potential subscribers and suppliers. This phone bank has since evolved into a phone tree.

Another is the use of a newsletter. The purpose of the newsletter is to bring together subscribers and users of “Our Community Cash.” A listing of buyers and seller are printed in the newsletter, similar to the listing provided in Berkeley’s Bread rising monthly. The newsletter provides important information about upcoming events within the community, advertisers, and sign-up forms. The newsletter is published about twice a year using a plain paper copier. The latest edition was printed, giving it a more professional and long lasting look. A copy of one of the early editions can be found in the Appendix.

Marketing “Our Community Cash” entered into the 21st Century with a website. Sonoma State University Students created it as part of a class project. It provides a series of descriptions as follows:

“Our dollar is a community based currency that allows us to receive the things that we need in exchange for the opportunity to utilize our skills and resources. This currency is totally legal, effective and practical. It keeps the people's hard earned money where it belongs... in Sonoma County. “This currency is a supplement to the national currency and helps us to maintain economic security. Money is an agreement within a community that some "thing" is valued, whether it be acorns or Our Dollars. This money is 100% backed by human labor and human time. This is untrue of the national dollar which use to be backed by gold, but is now fiat money; Money that is not backed by anything tangible.

“We use Our Dollars to do a variety of things: haircuts, investment advice, Internet/computer help, massage, cooking, editing, chiropractic, tutoring, design layouts, artistry, movie rentals, jewelry, child care, housecleaning, music lessons, clothes, etc. All of these things can be acquired by using Our Dollars.



“How do you get Hour Dollars? Simple. Each person or business becomes a member and receives their first set of Hour Dollars. They are then given a directory of places that they can spend these dollars throughout Sonoma County. To keep the currency circulating, the person or business must agree to accept Our Dollars in exchange for services.

This website has evolved from a class project to a more professional one where new subscribers can enroll on line and review an updated database of sellers and buyers.

A basic component of any local currency today is the database. To facilitate the use of Our Community Cash the membership is placed on a database as subscriptions are accepted. This database, on Claris File Maker, also provides a feature for easy conversion to the newsletter publication. By the end of January, 1998 there were over 70 entries in the database with over 400 services and needs listed and by June 1999 there were over 300 entries.

Many community groups have been contacted and interest has been expressed. This includes the Community Support Agriculture group in Sonoma County. This is a group of about 12 organic farmers who serve over 400 subscribers. Others are Chamber of Commerce organizations and other community groups.

ORGANIZATIONAL STRUCTURE

While there is no formally recognized organization structure, the group has discussed several legal structures. One is to incorporate as a non-profit under IRS code 501C3. The other possibility is to create the program under the umbrella of another organization. However in January, 1998 the chosen focus became outreach, currency design, newsletter, and membership.

Besides the four or five core members of the group who regularly attend the meetings, there were usually about eight or ten others. Many of them come to ask questions and discuss theories. A January meeting is typical. It was devoted to discussing issues related to the use of local currency. For instance, there was considerable discussion about counterfeiting and how to avoid it. The solution was quite simple, the paper being used was quite hard to locate and the design was complicated enough that it would not justify someone to go to the trouble to duplicate the currency.

After the design contest the group brainstormed about what they liked about the design. It was difficult for the whole group to come to a consensus. Consequently, several members of the group volunteered to decide on the design. This included Jack Greenspun (a graphic designer), Mike Sandler, and Sharon Williams, an artist.

The California Live Oak was selected as the centerpiece of the 1-Hour currency reflecting nature and a connection to Sonoma County. This textured background design was selected out of one the seven contest submissions. For the ¼ HOUR currency, a local landmark, Goat Rock on the Sonoma Coast, was selected. On the backside of both an illustration of a Farmers Market is printed.



During this period, meetings were held with several possible printers. Design issues, colors, and paper types were discussed. Two colors, blue and brown, were possible choices for the background. To combat counterfeiting the printers recommended embossing. After printing, serial numbering was suggested as a second means to avoid counterfeiting. Cranes, a manufacture of paper made from recycle US currency was chosen as the printing stock. This choice gives a green tint to the local currency.

Another part of the design is the text. The text shown on the upper face is “Building a Community” while below is “while making a living.” On the reverse it states “Please trade this bill on OUR COMMUNITY CASH for 1 hour of goods and services in Sonoma County.”

On the backside are spaces for transaction dates. As a part of each transaction the buyer will put the date of the purchase on the bill before handing it to the seller. The seller in turn will place a date on the bill when they make a purchase. This is important in monitoring transactions. As the bills are used in various transactions, there is some record has to how much is being circulated and how many transactions occurred during a given period.

The group decided on two bills, the larger 1-Hour and later a 1/4-HOUR bill was printed for circulation. Both were placed in circulation on June 21, 1998 to nearly 150 participants.

ECONOMIC INDICATORS

The group engaged in some advance planning for after the currency is circulated. They will be tracking transactions as they occur to gain an understanding as to how to increase use of the local currency and how to involve more participants. Tracking will consist of:

Number of subscribers/participants Number of goods and services to be offered Number of transactions in local currency

By the end of April 1999 there were over 1,540 HOURS in circulation. Based on some very limited information it is anticipated that this generated a conservative estimate of $60,000 in the community in the first ten months of its life.

Additionally, there are transactions between members where local currency was not used, simply because there was not enough for the transaction. These were large barter transactions of services. One such transaction was between an electrical engineer and a contractor. The engineer needed his garage rebuilt and the contractor needed electrical services for a house he was building and they did an in-kind trade.

During the first year of the currency life, there were no commercial or retail shops involved in the program. However, there were a number of local small trade fairs around the county in which individuals traded their products using “Our Community Cash.”

It is anticipated that by July 1999 there will be four shops: a small market, a clothing store, a vegetable farm, and a pizza shop. To aid the recruiting, effort, a form was devised to sign up



businesses. Businesses currently involved are limiting participants to use their local currency at specified times, i.e. Wednesday afternoons. As more individuals participate the demand for more retail and commercial services will serve as a reason to accept local currency.



THE LAUNCH

An important element in getting the community involved is a “Launch.” June 21, 1998 was the official launch date for “Our Community Cash” at the local Community Center. The event was well promoted Promotion was done by putting out small press releases which appeared in the local press and on radio.

Over one hundred attended, many gathering information and signing up while others obtained their new currency and began to exchange cash for services or made purchases.

Participants were encouraged to promote their services and engage in transactions. Others used the occasion to set up tables for their brochures and promote their goods and services. Several workshops were held to discuss and inform how to make use of Community Cash.

The event was quite successful and got the program off on a good footing. In ten months the program doubled the number of subscribers.

Both the 1-hour and the ¼ hour notes were distributed at the launch. Each is shown below including one of the backsides. As transactions are made the backside is initialed along with a date in the space provided.


A Work in Progress LOCAL CURRENCY HANDBOOK



LOCAL CURRENCY FIRST YEAR AND THE CONTROVERSY

While “Our Community Cash” continued with its success in growth, the founders returned to the issue of local organization. Another was the currency’s use. But, first it was to determine on how to better make decisions. Meetings were conducted from July to September 1998, to find agreement. They looked at ways to consensus building and becoming more productive in their meetings.

For a while they used the “Concordance” model, a process that required consensus from all participants. They soon discovered that their decision-making process was bogged down more than before. This led to some frustration.

In October 1998 they took time out for a potluck with about 35 attending.

In November they were back to the drawing board, this time to define the Hour currency. This brought to head the major controversy.

There are those who advocated that an hour of one’s time was equal to that of anyone else’s. For example: if a someone sold a product to a doctor for a one Hour note, the doctor’s one HOUR of services would be equal in value to that seller regardless of its value if sold using US currency.

On the other hand, others believed that the value of the service or product should reflect what would have been received is US currency was used. They argued that there would be little or no flexibility in the system and those who make higher incomes would not find it beneficial and in the long run be excluded.

This discussion went on for several months generating considerable feelings. Eventually, many of the founders found themselves burnt out by the controversy. At this time, this issue has not been resolved…just put aside.

By the end of 1998, the group decided to maintain contact by phone and did get out a new directory of buyers and sellers. This time the circulation was over 200.

The group also continued its outreach and promotion effort. Mike Sandler managed to publish several articles in February and April 1999 in several local newspapers. Michael makes note that the US has redesigned its currency, the Europeans have created a new one. Meanwhile, in Sonoma County, there too is a new currency. These articles appear in later in this document.

This out reach effort included networking with new local currency organizations to the north in Mendocino County and to the south in affluent Marin County. Fairfax, in Marin, is a small urban bedroom community. Local organizers introduced their currency on December 7, 1998. This was a much more focused effort involving a small community and getting the cooperation of local markets.

On the coast of Mendocino, organizers were successful in creating the “Seed Exchange.” They



were also successful in getting 200 to signup for the initial offering. For this they created four denominations: $1, ½, ¼, and 1/8. Their first Local Currency Guide and Directory was quite extensive. Excerpts appear in the appendix along with articles that provide more detailed descriptions of their local currency program.

These local activities caught the attention of the Press Democrat newspaper serving Sonoma and Mendocino Counties. The PD (owned by the New York Times) published in March 1999 a very supportive and informative editorial on the Mendocino Seed and Sonoma County’s “Community Cash.” This brought a lot of attention to the effort.

STORIES

“Local Currency at the Health and Harmony Fair”

Patricia Haramati, “Our Community Cash”, contributed the following)

Its hot and crowded in the summer of ’98, we are at a little table next to the Eco village, promoting “Our Community Cash.” People are excited, hurrying pass, going some where else. The fair is about fun, entertainment ; but not here. All just have a table with some papers, nobody wants to hear about economics. People speed up to get pass this dull corridor.

“How do I get them interested?” I ask myself, “What do I have here? My love of local currency and a big blow-up of “Our Community Cash.”

I begin, coming out from behind our table, I catch up with a couple.Me: “How would you like to be paid for what you like?” Man: “I do not have time to do anything because I work” Me: “What do you do for fun?” Woman: “I like to cut hair.”Man: “I like to build wooden puzzles.”Me: “How would you like to be paid for cutting hair and building wooden puzzles?” I

lead them back to the table. In a few minutes they are signed up.I look around pointing to our big blow-up. I ask the next group of people if they’d like to

see some “big bucks?” We are laughing and conversing. The energy is building and getting contagious. Now people are taking flyers, sign-up

sheets, asking for information. After several hours, P. my helper goes to get some food to “fortify you,” she says.

But, I never eat. Our population, making contact with their local currency was far more filling than lunch.



OUR COMMUNITY CASH –

Flyers and Newspaper Articles


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