In our culture, we have a lot of focus on money. One could say our culture is utterly dependent on it and that our society even revolves around it in a lot of ways. So, what is it, actually? It’s a lot simpler than it appears when you look at modern complexities around it.
Money is a medium of exchange. It is a symbol for the thing that is of actual value that you buy with it. It works as long as people agree that it is exchangeable for value, you can say there is confidence in it. So people’s viewpoints about the value of money is the only thing that actually gives it value. Pieces of paper with printing on them have no value beyond what we assign and agree that they do.
What has actual value then? Goods or services that you can use or that you like. Natural systems provide many things that we use from materials to build things to clothing to food and water. Thus they have intrinsic value. People also have intrinsic value as our actions can offer others something that they need or want. So, the natural world and people have actual value. Money only symbolizes this value.
And this is key – anyone can create money – and then gain agreement and build confidence that it is valuable and can be widely traded within the designated area. And this can be a very simple thing to do.
A Short History Of Money
Many cultures have used barter to exchange things of value. This isn’t always practical if you don’t want anything somebody else has, in trade. Thus, people started using beads or pebbles or something else, to symbolize the value of what they wanted. You could pay 5 beads for his eggs, and then he can go to Lucinda and buy a goat with those beads. She knows others will recognize that the beads have value and she can get what she needs. Here are a few examples of things people have used to represent money. Most of them have been chosen because they could be carried around.
Clockwise from upper left: Parmigiano Reggiano cheese, so highly regarded that it was used both as currency and bank collateral in Italy; "reng," a yarn-ball of tumeric spice wrapped in coconut fibers that is used for trade in the Solomon Islands; cacao (or chocolate beans), widely used throughout Mexico and Central America; and Doty's block of salt, seen here in lower left corner, is 1,500 years old.
Salt is one of the world's oldest forms of currency. The word salary derives from the Latin "salarium," which was the money paid to Roman soldiers to buy salt. It was the main form of currency in the Sahara Desert during the Middle Ages, and was used extensively throughout East Africa. Typically, one would lick a salt block to make sure it was real and break off pieces to make change. Salt is still used in some parts of Africa as currency.
Money that has intrinsic value and use on its own is called “commodity money.” This is rarely used in modern times.
Another form of money is “symbolic money.” It has no value on its own, but people agree it can be exchanged for value (for instance: sticks with notches, strips of leather).
Examples of modern symbolic money are government currencies, movie tickets, coupons, and local currencies. Cryptocurrencies are a well known modern example of people creating mediums of exchange and gaining agreement to use them.
Local currencies today
So, how did people avoid the Great Depression by making their own symbolic money?
In the US, it is legal for people to create their own local currencies and other forms of exchange that do not resemble US dollars provided it is not in use nationally, i.e. directly or fully competing with the dollar.
In the Great Depression, some towns that created their own currencies did not suffer economically. This is because local resources, production and willingness to work did not change – only the availability of the national currency changed, and this caused problems buying things.
If the money in circulation doesn’t match the need to buy and trade, you can get deflation or inflation. When towns created their own currency or medium of exchange, they were able to maintain local trade for goods, food and services by creating money that represented goods and services.
Examples of Depression era “scrip” or local currency. These were backed by local banks, or employers, or community organizations or mutual aid societies (more on this topic later).
Today there are over 2,500 different local currency systems operating in countries throughout the world. Some examples in the US include Ithaca Hours (Ithaca, NY) and Berkshares (Southern Berkshires, Massachusetts). Permanent use of a local currency can buffer the local economy from the vicissitudes of national and international monetary systems.
Why use local currencies?
- It keeps money in the local community. When you spend money at Walmart most of it leaves the community. When you spend a local currency, it must be continually reused within the local community. Think of this: You buy $5 of local fruit; the farmer spends that $5 at his local auto shop, and that person spends the $5 at the local barber.
The local community has spent $15, from that one $5 bill. This will continue to add wealth to the community. What’s really happening is that we’re keeping the energy we all produce ourselves in our local system and supporting each other. The currency is an aid to help that to happen.
- It helps build community, by giving us an incentive to buy locally and get to know our own local services and goods. This helps make the community more resilient. Again, remember that in the depression some towns did not suffer a depression. They were still surrounded by farms, had skilled people in their community, and could provide their own needs.
The national level money stopped representing that because of the manipulations we discussed (modern economics), but the local community could still meet its needs. Of course, we’ve lost even more of that now, but a local currency can help incentivize people to strengthen local resilience. This is just one tool in many that we’ll discuss.
Ithaca, NY currency.
These currencies can be organized however locals would like them to be organized. Ithaca Hours started out as an “hour for hour” exchange - where one bill represented one hour of work, no matter what type of work it was. People started making their own agreements about the worth of various goods, and soon the “Hours” operated more like US dollars - with the value set by the seller - than an hour for hour exchange. This currency has been in use for decades now.
There are specific points that ensure local currencies are successful, and many ways that it’s been done. Some common denominators are:
Sufficient members sign up to make it interesting to use. This has usually been around 200 diverse merchants will to accept the currency. A motive is given to use the new currency; merchants give 5% off for using it, for instance, for a certain time period, to get people used to using it. Merchants advertise the currency in their store, events are done to launch it or promote it; it becomes part of everybody’s advertising campaign Local classes are done to teach consumers the advantages of using local currencies.
One example of how successful alternative currencies have worked:
- Potential members are educated and some are found that agree to the goals of the currency (such as supporting local business, supporting green business, or whatever the values are)
- They are signed up and agree to accept the currency
- Each member contributes something that they have produced (food, crafts, etc.) or a service
- A management structure is put in place that ensures that exchanges are fairly run. The manager can be paid for their time with local currency.
Local currencies vs Bitcoin and other cryptocurrencies
There is a lot of hype around cryptocurrencies. Some people are adamant that they can change the world for the better, and others think they are a scam or a Ponzi scheme. We can look at the different types of money to come to a conclusion.
Some cryptocurrencies are based on an actual value. They are an investment into an organization that is delivering something people want, such as a network that provides services. One example is Cardano. The currency's success is dependent to some degree on how much people want the services, and how well they are managed, like any other company.
Others are symbolic money with no underlying or intrinsic worth. They are worth as much as people decide collectively that they are worth. Bitcoin is the most well known of these. Since there are no governments or anybody else backing this value, it has the capability of crashing or spiking severely, based on the mood or emotion of investors. This is considered speculative.
Another important aspect to look at is the energy used to create money. Local currencies use paper, the energy needed to print it, and energy to track it. Some cryptocurrencies, like Bitcoin, draw tremendous amounts of electricity to perform their complex crypto functions. Bitcoin currently uses more electricity than some countries to perform its crypto functions.
Other cryptocurrencies have moved to a production method that uses only a fraction of the energy that Bitcoin does. This allows them to be exchanged faster and cheaper.
An important design question to ask would be - if an alternative currency becomes popular or dominant, how much energy would we need in order to produce it? Where would that come from? What effect would that energy use create on the planet or local ecosystems?
Even when using renewable energy, any currency that requires large amounts of energy to produce and maintain will slow down transition to renewables for day to day needs. This is because we have limited factories, distribution networks, and raw materials needed to produce renewables. Fossil fuels are being used to produce renewables currently, so that is a factor to take into consideration as well.
It is not in the scope of this course to analyze the viability of various cryptocurrencies but many regenerative designers are extremely concerned about the amount of energy used to produce this particular symbolic currency. To us, the design contains fatal flaws which more thoughtful and observant holistic design could avoid.
There are some cryptocurrencies that are run or supported by permaculture designers. These include SEED DAO, Regen Network, and possibly others. One purpose of these currencies is to finance regenerative projects. We have not studied these sufficiently to voice an opinion, but because regenerative designers are involved, we hold hope that they will offer a truly regenerative alternative currency/economics.
We are frankly excited about the potential of worldwide alternative currencies. If they were designed from a fully whole systems, regenerative perspective, they could be a part of a powerful change to how our economic systems work.
One advantage local currencies have is that they help build local economics and real life relationships. They encourage people to use local small businesses that participate. We feel this is a vital function for a resilient and regenerative future for many reasons, and anything that contributes to that has value.
We don't feel that cryptocurrencies are a replacement for these - they really perform very different functions that are complimentary in a number of ways. Cryptocurrencies are growing rapidly because people can make money on them (and also lose money), and for other reasons. Local currencies tend to be successful when people see and understand the support that they can help bring to small businesses, local farms, and community building.
Local currency is just one example of dozens of tools that people can use to create more economic options, choices, abundance and resilience. We’ll cover more strategies and specific tools to build local resilience and give people more choices in the next section.
Hands On Activity
List different types of commodity money you may be able to produce or that you have (like seeds, for instance).
List the things you have or can produce that are valuable, that you can exchange for symbolic money, whether dollars or local currency, barter, etc. (We’ll cover more types of money, or exchange mediums, in the next section.)