Brooklyn Starts Printing Money; Shockingly, Not the Counterfeit Kind

By Scott Reeves  AUG 18, 2009 10:15 AM

Local currencies are getting popular -- but they won't goose the economy.


Some citizens in Maine, Massachusetts, North Carolina, New York, and Arizona ask a basic question as the economy continues to falter: Why should Uncle Sam print all the money?

Governments typically crank up the printing presses to inflate their way out of massive spending, but local currencies are intended to encourage local spending to keep the money at home. The impact of funny money on hairstyles has yet to be determined. But if government-issued money is any indication, this is a big plus.

Stuck for a new look? Nothing good in the magazines? Well then, ape one of these grizzled figures on the world's coins and bills. It may be the end of what you optimistically call your love life, but at least you'll look as stately as Chairman Mao. Take a cue from the $1 bill and rock the George Washington look if you dare (wooden teeth permitting).

Warning! The President Jackson not recommended for kids. But take a look at these doozies:


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There’s nothing illegal about printing local currency. Local scrip such as the Brooklyn Torch, the Ithaca Hours, the Detroit Cheer, and the BerkShare in Western Massachusetts don’t run afoul of the Feds because there is no attempt to recreate or deface the dollar. However, transactions conducted in local currencies are subject to local, state and federal taxes that, alas, must be paid in greenbacks.

So why bother with legal funny money?

“The Plenty is not going to get siphoned off to Wall Street, or Washington, or make a stop in Bentonville [the Arkansas home of Wal-Mart] on its way to China,” B.J. Lawson, president of the board of the Plenty cooperative in Pittsboro, North Carolina, told the Los Angeles Times.  “It gives us self-reliance.”

That sounds like recycled gripes about Wall Street plutocrats, moneychangers and all those other evil-doers who make the economy run – and it’s nothing new. Frank Norris took on the railroads in The Octopus, a novel published in 1901, and offered a similar critique of big money crushing the little guy.

Local currencies enjoyed a brief vogue in the 1930s, when the Depression dried up both cash and credit. The return of local currencies now appears to be a mixture of the downbeat economy and crunchy granola politics. Local currencies are popular in university towns, including Madison, Wisconsin --  known as the “Berkeley of the Midwest” -- and Ithaca, New York, home of Cornell University and its ivy-covered walls. But local currencies have also popped up in Mesa, Arizona and Portland, Maine.

In Brooklyn, artists plan to launch the Torch this fall, the New York Daily News reports. The local currency will be exchanged 1-for-1 with the dollar, backers say, and will encourage residents to spend locally. There may be an ironic twist here because some say artists are the world’s most successful entrepreneurs, considering the junk they sell at hefty prices to a gullible public. In any case, Andy Warhol demanded greenbacks.

The Brooklyn funny money’s design will be whimsical. Suggestions include a mustache, an ice cream cone, a man with lighting bolts coming out of his eyes and a woman holding her finger over her lips saying, “Shush!”

Good silly fun, but such designs raise a basic problem: counterfeiting. The enterprise wouldn’t attract Mafia heavies or international terrorists looking to finance their next attack, but it would be a good Saturday afternoon enterprise for clever kids with an Apple (AAPL) computer, a sense of design and a touch of anarchy – especially if the local currency can be exchanged 1-for-1 for dollars and then spent on important stuff like movies, t-shirts and skateboards.

The possibilities are endless for a band of kids intent on sticking it to their intellectually flatulent elders. But this hasn’t been a problem in Ithaca, New York, where the Ithaca Hour has been used since 1991.

“Right now, there’s a lot of interest because of the economy, but a lot of these efforts come about to rebuild social capital,” Ed Collom, a sociology professor at the University of Southern Maine told the Los Angeles Times. “There’s been concern about lack of trust, neighbors not knowing each other. They see this as a way of neighbors helping each other.”

Maybe. But there’s a proven method to goose the economy: low tax rates, low regulation, and a nod to spending restraint.

Reagan’s tax cuts in the 1980s launched the biggest economic boom in history. It wasn’t perfect and eventually led to the Internet bubble and had a hand in the housing bubble. However, the recent $787 billion “stimulus” bill is beginning to look like a government bubble and massive government spending could knock the dollar of its perch as the world’s reserve currency. Funny money, anyone?

There’s no need to fret about any of that nasty real world stuff when the romance of a local currency beckons. At its best, a local currency represents the greenest of organic economies, the romantic dreams of “community” in a world increasingly homogenized by mass marketing.

Just don’t build your kids’ college portfolio around it.
No positions in stocks mentioned.

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