Alternative currency

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Alternative currency is a term that refers to any currency used as an alternative to the dominant national or multinational currency systems (usually referred to as national or fiat money). Alternative currencies can be created by an individual, corporation, or organization, they can be created by national, state, or local governments, or they can arise naturally as people begin to use a certain commodity as a currency. Mutual credit is a form of alternative currency, and thus any form of lending that does not go through the banking system can be considered a form of alternative currency.

When used in combination with or when designed to work in combination with national or multinational fiat currencies they can be referred to as complementary currency. Most complementary currencies are also local currencies and are limited to a certain region.

Barters are another type of alternative currency. These are actually exchange systems, which only trade items; thus without the use of any currency whatsoever. Finally, LETS is a special form of barter which trades points for items. One point stands for one man-hour of work.

Often there are issues related to paying tax. Some alternative currencies are considered tax-exempt, but most of them are fully taxed as if they were national currency, with the caveat that the tax must be paid in the national currency. The legality and tax-status of alternative currencies varies widely from country to country; some systems in use in some countries would be illegal in others.

Contents

[edit] Examples of alternative currencies

[edit] Advantages

Some alternative currencies devalue rapidly (they are called Schwundgeld); this increases monetary spending. The Miracle of Wörgl is a event that showed the potential of this increased spending through the introduction of a local currency known as Freigeld. Local currencies also have the benefit that they cannot be spent abroad, and thus the money always keeps circulating locally, benefiting only the local economy. Alternative currencies are reported to work as a counterbalance for the local economy. They increase in activity if the local economy slows down, and decrease in activity if the local economy goes up.[3]

[edit] Disadvantages

Alternative currencies as local currencies cannot be spent abroad, limiting its use.

According to professor Nikolaus Läufer, the use of local currencies such as Freigeld only increases the economy temporarily. Longer lasting use of local currency results in a decline and stabilization of the economy. This as the increased rotation speed of the money is eliminated by the decrease in the amount of money (as currencies as Freigeld reduce in value rapidly). [4]

[edit] See also

[edit] References

  1. ^ ROCS
  2. ^ ROCS
  3. ^ James Stodder RECIPROCAL EXCHANGE NETWORKS Implications for Macroeconomic Stability report
  4. ^ Natural Economic Order Theories (Silvio Gesell)
  • Thomas H. Greco, Jr., "Money: understanding and creating alternatives to legal tender". White River Junction, Vt: Chelsea Green Publishing, 2001.
  • M. Raddon, "Community and money: men and women making change". Montreal: Black Rose Books, 2003.
  • Bernard Lietaer, "The Future of Money". Random House: published January 2001.

[edit] External links


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