Local Currency:
Bay Bucks and Beyond

"When the national currencies fail through runaway inflation or for whatever reason, we may survive in some fashion through barter or labor exchange systems. But if we are to expand and grow and become not merely a counter-culture...then we must create a new money system to replace the present one in which all of the attributes we value (cooperation, self-reliance, community, etc.) can become the growing and dominant part of the entire culture." -Robert Swann

What is a nice Liberal Arts type like me doing pouring volunteer hours into our community currency and poring over websites on monetary theory? Why am I part of Traverse Area Community Currency Corporation (TACC), the nonprofit, all-volunteer outfit that has issued Bay Bucks, a local currency in Northwest Lower Michigan?

Ever since I was knee high to an ecological calamity, I've been more interested in advocating creative initiatives from the bottom up than in begging for incremental change from the top down. If what we need is systemic change, then small and local is how to begin.

Ever since the Industrial Revolution, economics has more often than not been the rationalization – if not the driving force – behind enterprises that damage the planet and shred human communities. It stands to reason, then, that alternative economics, a realm in which Robert Swann was a 20th century pioneer, should play an important part in our efforts to heal the planet one watershed at a time.

For several years other folks sharing some of these views have been talking about starting a local currency around here. When Chris Grobbel and Natasha Lapinski launched the Traverse Area Community Currency Initiative with Chris providing office space and funding part of Natasha's time, our local currency got some traction. When I was asked to serve on the steering committee, I could only agree. I wanted to participate in the demystification of money and, in a small way, help empower our community to shape its own economy.

What's more, I knew that this concept had a local history. A couple years ago, when researching a presentation intended to spark support for our initiative, I plunked myself down in the Traverse Area District Library before a microfilm reader. Because some long-ago volunteer had made the gift of service of creating an index to the Traverse City Record-Eagle, I was able to find all the stories on Traverse City's Depression-era stamp scrip issue.

During the depression in the U.S., there was financial and monetary chaos as a result of, among other things, a speculative frenzy on Wall Street. What was bid up and bought on the margin came down in a stock market collapse that vaporized millions in paper assets and saw bank failures, mass unemployment, and a dire scarcity of cash. The goods and services still existed, but the means of exchange – federal dollars – were in short supply.

Peering at the microfilm reader, I found some of the headlines from those days to be at least as arresting as the stories about the Traverse City scrip:

"Seeking Relief in Detroit Thru Trade $"
"Bank Proclamation: President Declares Full Holiday"
"Printing Presses Pounding Out Currency Substitutes"
"New York Makes Governor 'Bank Boss' Pending Scrip”
"'Prosperity Checks' Stir Business"
"Federal Relief Will Be Real Money"
"4 Rioters held at White Cloud Mortgage Foreclosure"
"Inflation Nears As A Portion Of Help To Farmer"
"Troops Pacing North Iowa To Quell Aroused Farmers"
"Keep American Dollar From Falling Too Sharply"

The amount of struggle at every level of polity, from FDR's new Deal on down to the Traverse City city fathers, to avert collapse or revolution was impressive. We tend to think of the Great Depression as, well, depressing, but it provoked a lot of activity. Among these were local, corporate, and statewide monetary initiatives (Michigan alone had about one hundred different depression currencies.)

Here’s an instance of how books can change, if not the world, aspects of it: The providential appearance, in 1929, of an English translation of Silvio Gesell's Natural Economic Order provided distressed municipalities with a means of revival. Gesell's 1906 invention of a "Free Money" (stamp scrip) was designed to circulate rapidly rather than to be hoarded. In order to maintain the scrip's face value a stamp costing a fraction of that value had to be affixed regularly. It was, in effect, negative-interest or demurrage currency. (Demurrage means compensation paid for detaining something.)

The most famous of these local demurrage currencies was issued in Worgl, Austria in the early 1930s. Worgl had been nearly bankrupt. Its Burgomaster prompted the town to issue 30,000 Schillings in stamp scrip. The notes circulated so quickly that "within 24 hours of being issued the greater part of the money had not only come back to the municipality in the form of tax payments," write Leslie Dunkling and Adrian Room in The Guinness Book of Money, "but had already been passed on its way again."

"Unemployment was reduced enormously, the shopkeepers were prosperous," the authors continue. During the first months of its issue the money made the complete circle twenty times. Within four months, public works worth 100,000 Schillings had been accomplished and all tax arrears paid off.

Irving Fisher, an American economist, chronicled these experiences in his 1933 book Stamp Scrip. Fisher's work evidently served as an instruction book in alternative local currency in the U.S. when, as those Record-Eagle headlines attest, there was god-awful desperation and groping at every economic level, from the household to the city to the entire nation, for ways to survive.

The Traverse City experiment was a privately initiated, publicly administered, initial issue of two thousand dollars worth of stamp scrip. The merchants who proposed the scrip anticipated that the money "issued by the city would turn over 50 times and create $1,000,000 in additional local purchasing power at the same time furnishing the city $2000 worth of development work without costs."

About 150 of the unemployed men in the city were hired and paid $2 a day for their labor. Most of what they did was public works including a Boardman River cleanup. Teachers received a portion of their salaries in the scrip, and the First Peoples State Bank accepted it in payment of interest. The stamp feature was complicated, though, and some folks found a way to cheat with it. The experiment ran from 1933 to 1934 and wound down after all the scrip was paid out in wages.

Bay Bucks is simpler than that. It is a fiat currency backed by the full faith and credit of those willing to take a chance on it. To date, that includes over one hundred local businesses. Most importantly Bay Bucks stems not from desperation, but a spirit of invention, curiosity and hope. Like all money, it means different things to different people. Unlike the federal dollar, though, it encourages us to question the very nature of money and its intrinsic purposes.

For more information about Bay Bucks, pick up a copy of our free directory, which can be found at the Traverse Area District Library, Oryana, and many other places around the area. Visit our website (www.baybucks.org) or telephone us (231-995-9680). We encourage your participation.

Stephanie Mills is an author of numerous books on environmentalism, and is President of the Bay Bucks Board of Directors. She is at work on a biography of Robert Swann.

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