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here are several reasons to use
alternative currencies. One reason is fear,
which seems to be increasing in both size and frequency all around us. More
people are fearful and their fears are increasing in scope. This is understandable,
with the Federal Reserve buying back bonds to keep the bond market afloat
(quantitative easing), interest rates on savings accounts currently less than
1.0%, and the annual inflation rate for 2013 at 1.2%.[1] If a
person saves their money, they are losing against inflation. This in itself is
probably why the stock market is still functioning because there is nowhere
else to put your money, but that is another story. People do not have to fear
financial collapse to fear their money is losing value.
Another reason to use
alternative currencies is to close the
loop. You may be creating capital in the primary economy, like
farming, fishing, mining, logging, or other resource extraction, where capital
comes from nature and you capture it for human use. You may be involved in the secondary
economy, where capital is already in the system, someone’s loss is someone
else’s gain, and where you can be a simultaneous winner and loser. The key in
the secondary, or zero-sum economy, is to have more wins than losses.
You may also be involved in
the tertiary economy, where capital is invented out of thin air, usually
by banks and governments. Examples of capital created in this economy are derivatives
(they derive their value from something else, like stocks) and fiat currency,
which is money backed only by faith. Generally, fiat currency is loaned into
existence, so this creates debt as it is introduced. The US dollar used to be
backed by gold until President Richard Nixon took the dollar off the gold
standard in 1971. Now it is just fiat currency.
The idea of closing the
loop is to create capital and keep it flowing back to people who either create
more capital, like farmers, or who recycle it locally, like your local
shopkeeper. Since most money is loaned into existence from the top down, this
is a grassroots reversal that also reduces the capital being drained off by the
top tier of a multi-tiered economy. What the folks in the tertiary economy do
is to create money out of thin air and exchange that fake capital for real
capital, whether in goods (like potatoes) or services (like getting your car
fixed). Soon the fake capital is being decimated by inflation and the real
capital is flowing uphill.
Another reason to use
alternative currencies is to get a fair
price for your goods and time. When you are using a system of money imposed
on you from above, you are unlikely to receive fair prices, simply because
there is always someone taking bites out of your dollar. This is why so many
state governments use sales tax to capture revenue. Even though it is “just
pennies,” pennies make nickels and nickels make dollars. With sales taxes, you
get nickel-and-dimed to death. With an alternative currency, you escape the
nipping and gnawing. This helps you get a fair price in itself, but dealing
with an alternative currency also incorporates a “fair trade mentality,” with
neighbors forced to reconsider you as a human being, not just a merchant trying
to buy low and sell high. This is significant, especially in sophisticated
marketing concepts. Think of corporate marketing’s penchant for “telling your
story.” Becoming a human is important.
Using an alternative
currency can also allow you to trade
your time for value, something you may be unable to do in the mainstream
economy. For example, I cannot get a “real” job, simply because I am too old.
Age discrimination is rife in the modern workplace and it starts in your 40’s. Time
dollars are one alternative.
With an alternative
currency using time dollars, you gain an hour’s worth of someone else’s
expertise for an hour of your own. Time can also be translated into
commodities. For example, with the Steiner (a form of scrip), you received
a Steiner for either 1 hour of your time, 5 pounds of potatoes, 2 dozen eggs,
or 2 pints of beer. This example illustrates another aspect of alternative
currencies. It gives you a tool for thinking.
A local merchant and I
developed the Steiner a few years ago to address the need for an alternative
way to exchange goods and services within the community. It was named after his
brewpub, the Frank-n-Stein, in Ferndale , Washington
With the Steiner, you have
several more ways to think of the transaction. You can think in terms of your
time and expertise or you can think in terms of potatoes as a rather ordinary
commodity. You can think in terms of eggs, which are so commonly traded
everyone knows what they are worth. You can also think of two pints at your
local pub and this broadens your scope because you buy pints partly for the
ambience in the pub, not just the beer. It interjects a pleasing note of
subjectivity into the calculation.
The Steiner is what is
called scrip, a printed currency or IOU as credit. Back in the days of
company towns and company stores, scrip was often used as a shorthand currency
and credit against an employee’s wages. The main problem with scrip is that it
can be easily counterfeited. This is not as much of a problem as you might
think if you are in a localized situation where everyone knows each other. At
that point, people know where the scrip comes from and whether it is good.
Scrip also allows you to defray the costs of printing and build up capital by
charging a little extra for the scrip. In the case of the Steiner, I charged
$10.00 for each new Steiner and two beers at my merchant friend’s pub cost only
$8.00. This built a little capital into the system. People were happy to pay
extra. Unfortunately, the Steiner is not being used now, but the system could
be ramped up quickly if needed.
In comparison to such a
multi-faceted approach, time dollars are a rather simplistic alternative currency,
with a plumber’s time equal to a doctor’s time. Personally, I do not see this
as a problem, but most professional people will.
One way to get around this
is the life dollar, where a person’s time is not traded one-for-one, but
on a “floating scale,” for want of a better term. This puts a plumber’s time
back to a lower level than a doctor’s time, of course, but there is more
agreement built into the way life dollars are used. Terms like “life energy”
are used, and this helps in incorporating the cost of energy into the
transaction. Mainstream dollars, in contrast, are entirely divorced from any
considerations of energy in their valuation.
The main problem with time
dollars or life dollars are the centralized accounting systems needed to
maintain them. This usually means a yearly fee is charged, which many people
find onerous. There are also problems of accumulating time/life dollars and not
being able to spend them at will. I know several people who have large numbers
of life dollars and no way to spend them. Meanwhile they pay a yearly fee for
this dubious privilege.
Mainstream dollars carry a
significant amount of political and social baggage in their use, which is why
alternative currencies are seen as a panacea. However, alternative currencies
are not usually thought of as replacements,
but as complementary currencies. In
other words, you do not just opt out of the money system altogether, but
complement mainstream fiat dollars with a small percentage of your transactions
in the alternative currency. This is where silver works well.
As I write this, silver is
trading under $20 per ounce. In the last few years since I started buying
silver, it has gone from a high of $40 to a low of $18. I started buying at $30
and lately I have increased my holdings at $19.50. This means my average cost
per ounce is around $25, but this way of thinking misses the point. I have no
plans to convert my silver back into dollars.
Silver is important because
it is a bridge between barter and mainstream dollars. Suppose that we
have a financial crash, panic or even a bank holiday, like Roosevelt imposed two days after taking office
in 1933. The bank holiday lasted only four days, from March 6 to
March 10, but during that time, all banking transactions were suspended across
the whole nation. The sole exception was making change. The reason for the bank
holiday was to stop the run on banks, which could often start with just a
rumor. During the bank holiday, the Emergency Bank Relief Act was passed, which
limited banks to only those approved by the Federal Reserve and created a de
facto deposit insurance program. The actual Federal Deposit Insurance
Corporation (FDIC) was formally created later that year.[2]
Now consider what would
happen if a bank holiday were enacted now, even for a day. Most people do not
carry enough cash to make it through a cheap meal in a café, much less buy food
and other necessities. There would be a panic exceeding the nasty scenes at gas
stations during the OPEC oil embargo of 1973 and the oil crisis of 1979. ATM’s
would be shuttered immediately and merchants would be unlikely to take checks
unless they knew the customer well. Even without a bank holiday, there are
enough natural disasters that could prompt a halt to electronic banking in
localized areas. In all of these cases, it would be good to have something that
everyone recognizes as valuable.
This is where silver
becomes a valuable alternative currency. It still has some use in industry, so
it has intrinsic value. Silver coins, whether from private mints or from
American and Canadian government mints (American Eagle and Maple Leaf,
respectively), are standardized at 1 troy ounce and have milled edges, so they
cannot be “shaved.” This is important. Roman coins in the later empire were so
debased by shaving and adulteration they increased inflation, which in turn accelerated
the collapse of the empire. Later in the Dark Ages, silver was often traded in
chunks, such as breaking apart arm rings, which is one reason Scandinavian
traders always had scales handy. A one-ounce coin that has a milled edge and
the imprint of the Canadian or American government is a safe currency, even if
the respective government is defunct.
In addition to being a
consistent measure of value, silver is not too valuable. For example, if
you came out to my farm with a silver coin right now, I would be happy to sell
you 15-20 pounds of potatoes, depending on the potatoes. However, if you had a
one-ounce gold coin, I would be loathe to trade at all, because I would have to
provide you with a whole wagonload of potatoes. Also, in a panic situation
where you need food, you might not be able to change your gold coins locally
for a fair value. (If you have to pay much more for your commodity because neither
you nor the other party has “change,” that is a bad bargain.)
Silver is easy to conceal
about your person, and it does not lose its value when it gets wet, unlike
paper dollars or scrip. It does not require a centralized accounting system,
like time/life dollars, and silver is amenable to people who do not think like
you – unlike most alternative currencies. In a panic situation like a bank
holiday or even when ATM’s do not work, it will be easy to convince even the
neighbor who hates you that your silver Maple Leaf is worth a bucket of potatoes.
As you can see, there are
many ideas about alternative currencies floating around. Some are better than
others, but it would be to your advantage to investigate all of them in your
local area. A local alternative currency stays local and promotes self-sufficiency
within the community.
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