« Welfare reform & the fallacy of composition | Main | GDP, welfare & defunct economists »

September 18, 2009


Leigh Caldwell

Nice summary. I've always known LETS and local currencies were a bad idea, and now I have a clear set of arguments for why.

I trust we will be able to persuade that other local currency scheme based in Threadneedle Street that their madcap ideas are similarly ill-founded.


The point of a "complementary currency" is to supplement the existing one, not replace it.

Users create the money by going into debt to each other, and then pay it off by providing services for others. They can create capital amongst one another in this currency, to alleviate the problems of raising conventional capital.

"And with conventional economics discredited (perhaps wrongly) by the crash, anti-economic ideas are gaining support. To paraphrase G.K. Chesterton, when people stop believing in economics, they’ll believe anything."

There is more than one type of economics; alternative currencies can be based on mutuality and trust. If that's anti-economics, then so be it.

Having said that; I agree with you this one probably won't work.

Francis Sedgemore

Chris - Do you distinguish between token-based local currencies, such as the "Brixton Pahnd", and LETS, which are in effect mutual credit systems?

When it comes to currencies, you make a good argument for businesses and communities adopting the euro on an informal basis. The only difficulty I can see is when it comes to paying Caesar his dues.

Miguel Madeira

An argument in favour (sort of) of local currencies:


Tim Worstall

The Brixton Pound is supported by the new economics foundation.

It is therefore, by definition, an insane idea which is bound to fail.


It might be bound to fail but 'tis fine to see a folly crash to the ground, a bit like socialism.


"It is therefore, by definition, an insane idea which is bound to fail."

And then it can get a multi billion pound bailout from the taxpayer, like other ideas that have failed.

Miguel Madeira

"The only argument for a Brixton pound is, as Luis says, a way for weak-willed Brixtonians to tie themselves to the mast. Maybe some would like to help local businesses, but they just can’t resist nipping into Greggs or Primark. If they held Brixton pounds instead of English ones, their temptation to do so might be limited."

A variant of this argument is that John could want to spend is money at a local shop, but only if the owner will also spend the money at another local shop.


One argument for the Brixton pound is that it creates a currency area that isn't (unlike everywhere else) dominated by monopolies.


You're assuming that retailers value the Brixton pound at parity with the GBP. They're more likely to offer discounts to people paying with Brixton pounds as they will tend to be used by local customers who will bring repeat business.

The concept will truly have arrived when you can pay for your eighth in Brixton pounds and get your change in GBP.


You dismissed a bit too rapidly (just a very little bit) the idea of a Brixton currency board: the Brixton pound emitter would be able to levy a seignoriage normally earned by the bank of England.

Admittedly, this is probably much lower than the incremental transaction costs, and this gain is a loss for the rest of the country.

@Leigh Caldwell: One reason of the success of LETS is (unconscious?) tax evasion. Now that LETS get older, they recommend to pay taxes on goods and services traded inside them.

Mark Herpel

Wow are you wrong on all points. Local currency does NOT discourage 'out of town' or 'cross border' trade. Local currency is used alongside the national currency, NOT in place of it. You you cannot buy all your products using the local notes you still need actual money. Buying goods one town over is using the national currency as you would always use it, there is no effect to outside trade. What is effected by local currency are the big chain stores. Chain retailers will take in money and send it out of your community. Spend a dollar at a chain fast food shop and that money immediately is transferred out of your community back to the retail outlet's headquarters and not respent locally. Local currency by it's nature cannot leave the town, it is respent with other shops. The fact that there is a two way exchange for from Brixton Pounds to national money, means this program will be a success. I'll see you in one year we can discuss it again. I suggest you gain some more knowledge on how these successful systems work, like reading about http://www.berkshares.org and stop trying to put a Macro Economic face on a local problem. The Berkshares local currency circulates on average through 4 local transactions before being converted back to USD. That is 4 times the local business of a USD spent on a chain store. Also the exchange rate for Brixton Pounds is FIXED, they won't be discounted, this, "...if weak demand in Brixton causes unemployment to rise there, a fall in the exchange rate can offset this" is a ridiculous non nonsensical point. You are looking at this wrong, it's not Macro Economic "Guns and Butter" story, it's simply a local person wanting to spend a portion of his income ONLY on local products so the money stays local. A very large recent study in Michigan, showed that just a 10% shift in spending to local shops and not the Wal-Marts of the world created jobs on the local level and was a big benefit to the local economy. Shop at Starbucks, McDonald's etc and about 90% of the money you spend will leave your community the day you spend it.


rolex air king watches

And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.

The comments to this entry are closed.

blogs I like

Blog powered by Typepad