it's my understanding - very incomplete - that the ithaca thing works ok for ithaca but requires some backend loans for startups and the like that come from good ole fashioned fed bucks.
Pretty much. There have been lots of local currencies in the U.S., even after the federal government / USD got its ground, and all of them have gone kerplunk. They tend to spring up during recessions the most--the great depression saw a whooooole lot. The reasons are obvious if you have any monetarist sympathies. The reasons they die out are obvious, too. They tend to be sponsored by local advocacy groups rather than large banks. The "right" region for a currency may be very large, and because of
coordination problems it's very hard to spread that far (based on North American trade patterns, it's probably a north/south divide rather than an east/west divide--for a currency to be really successful in NY it may need help from the entire east coast and Canada). There's also the legal tender problem. The US government doesn't outlaw local currencies per se, but it does enforce one and only one currency as legal tender. If you make a contract in Brooklyn money and want the government to enforce the proper exchange/inflation rates, too bad. Can't pay for government services with it either, which makes it ever more useless in a world of increasing government scope. Businesses especially can expect to do business with the government. And of course there's a reputation problem. The Fed may not be the most reliable central bank in the world, but we generally have a good idea of what they're going to do. Not so with a new startup currency, at least not without some street cred. Maybe if Warren Buffet started a currency and promised not to inflate it, but until then.
Exchanging currencies isn't a problem, at least. No doubt lots of street vendors and larger businesses would pop up offering on-the-spot currency exchange for a small fee. Shouldn't be too much more stressful than going to an ATM.
My guess is the large banks problem is the biggest one. They may be worried about retaliation from the Fed.
Edit: I actually wonder how the Ithaca thing even works. Probably just a law of large numbers event. You start enough local currencies, at least one is bound to be successful.
Show Posts
