In Community We Trust
Wouldn’t it be great if you could print your own money? You can, and it is perfectly legal.
Before you start running to the photocopier with your $20 bills, there are some legal caveats. You can’t simply copy U.S. currency, you have to create your own unique currency. You also cannot have a unit of currency which has an equivalent value less than a dollar. Neither of these are difficult conditions to meet. Beyond that you just need one more thing: trust.
Trust is the key to modern currency. We generally assume those green pieces of paper in our wallet have intrinsic value, but in fact U.S. currency hasn’t been backed by actual value (for example, the gold standard) for decades. Instead, the U.S. government established the Federal Reserve in 1913 by an act of congress. This partnership between the federal government and major banking firms prints its own money as it sees fit, and simply declares it to have value by fiat. This is why all American bills have “Federal Reserve Note” printed across the top on the front, and why nowhere on a bill will you see any “real value” equivalent. This differs from gold certificates or silver certificates, which were proxies for actual gold and silver, and which could be exchanged for the equivalent gold or silver on demand.
Essentially, our currency is nothing more than monopoly money with fancy engraving. It may say “In God We Trust” on the bills, but in actual fact it should say “In Big Banks We Trust.” But as long as everyone plays the game, as long as everyone keeps pretending these reserve notes have value, our economy keeps flowing. We will do our jobs (which create value in the world) in exchange for worthless pieces of paper, and then trade them for things of actual value like food and clothes and houses. We all just have to trust in the system for it to work.
Which brings me back to the idea of printing your own money. Printing fancy pieces of paper is easy. The hard part is creating the trust. People have to trust your money enough to accept it as payment for things of real value, and they will only do that if they think they can exchange your money with other people. It seems like an insurmountable challenge for individuals to achieve. And yet, Paul Glover did exactly that when he created Ithaca Hours in 1989.
One Ithaca Hour has a value equivalent to ten American dollars.
Ithaca Hours aren’t just a game. They are an established local currency in Ithaca, NY. They are accepted by hundreds of business in and around Ithaca. The Ithaca Hours Board has granted Hour no-interest loans ranging from 5 to 300 Hours to local non-profits. Since their founding, more than 11,000 Hours have been printed. That is the equivalent of $110,000 created out of nothing but trust.
Therein lies the real power of local currency. The people of Ithaca created money of real value out of nothing but trust. Trust in each other, and trust in their community. And since Ithaca Hours has no value outside of the Ithaca area, the wealth Ithaca Hours has generated in the community is locked to their community. No one can use Ithaca Hours to pull wealth out of the community, unlike U.S. dollars which can be traded anywhere in the world.
What strikes me most about the Ithaca Hours project is how bi-partisan the approach is. On one hand it is the spirit of conservatism: doing for yourself, not relying on big government, and letting the market improve conditions. On the other hand it is the spirit of liberalism: building communities, trusting in others, and working together. Good ideas can arise when we look beyond party lines.
Imagine what would happen if more communities developed their own currency. Local wealth could be kept local. Cities could give tax incentives to companies in the form of local currency, which would ensure those funds could not be funneled out of the community. Small local business could have the advantage over multination chains, since they would accept both local and U.S. currency. There are lots of possibilities once you break out of the idea that the government or corporations determine what is or isn’t money. And when you think beyond the usual right vs. left.
That is why we started BraveHumans. To look at issues from all sides, and move beyond the party lines.
Who knows how far we could go, if we only trust in each other.
Be Brave. Be Human. Trust.
Brian
Image Credit: Ithaca Hours.
February 18th, 2007 02:59
About a year ago when it appeared that a ground swell movement of citizens demanding to have some tough questions answered by the Congress regarding this thing called “National Debt” was about to get the publicity it was looking for. Aaron Russo’s documentary”`America;Freedom to Fascism” questioning the constitutionality of the federal Reserve Board and Their strong arm boys at the I.R.S.,was finally being shown to standing room only gatherings of concerned citizens. It appeared that we would finally be getting a sizable number of tax paying citizens behind the movement. I eas one of them.I had challenged my Representatives to”show me a law on the books” that required me to pay the Federal Government any taxes on the money I earned as wage. I also asked these two Rep’s to show me where in the Constitution that The Federal Reserve Board meets the requirements necessary to legally print fiat script as our money supply….I sent copies of these letters to the local newspapers. I also sent copies to the local gov’t(mayors) ofc.Not one person has followed up. I did not expect them to. They are as guilty of the crimes against us as are the family’s who own the Federal Reserve and ultimately own…us……Wake up Americans!!
February 18th, 2007 09:16
Steven,
Welcome to the site! Thanks for you comment.
The authorization for the federal government to levy taxes is granted by the 16th amendment, which was ratified in 1913. As for printing money, the constitution gives Congress the right to coinage and to regulate its value. This is usually interpreted as authorization for paper money, since it is necessary in the “regulation of value.”
I am aware of some of the counter-arguments. For example the argument that the 16th amendment wasn’t properly ratified, but these have not held up in court.
February 18th, 2007 17:53
Imagine what would happen if more communities developed their own currency. - I can imagine the chaos it will create on a national level. What will happen to trade when their currency is recognised within a community only? How about international trade? What’s the medium of exchange? Or we going back to cowry shells, stones, sticks as medium?
Thought provoking article.
February 18th, 2007 20:59
Interesting - I’m actually hoping that a New Economy will be created on the Internet thru Blogging!
Maybe something like these Ithaca Hours could be a stepping stone to doing this World Wide on the Internet!
Cheers! Billy ;))
Peace*
February 19th, 2007 00:04
Hi ipanema,
I’m not sure the chaos you’re worried about would materialize. A national currency would always be needed and (I think) strongly backed even if the Ithaca hours idea took off. The strength and limitation on it as I understand it, is that it is entirely local. This should forestall the breakdown you worry about.
-Grant
February 19th, 2007 10:12
Wow, that is a crazy idea. I would have never thought one could pull something like that off. You have a great blog. By the way, thanks for stopping by mine.
February 23rd, 2007 09:43
OK.
I admit it.
This is NEW to me!
And if you knew how old I was, you’d appreciate the impact of that statement!
Ithaca Hours, eh???
WOW!
I stick my nose into a lot of news but, this one is really “new” news!
Brian, I think I’m going to really like Brave Humans!:-)
February 23rd, 2007 09:58
Vincent,
Welcome! So glad you like the site. Tell your friends. Tell your enemies. The more the merrier.
February 23rd, 2007 10:51
Actually, this happens all the time.
Gift certificates, gift cards, and even coupons are based on a trust that the issuing organization will honor them.
Think about a gift card - you’re trading $20 for a piece of plastic. If you didn’t think that piece of plastic could “turn back into” $20 (worth of merchandise), you would never do it.
In fact, the U.S. Government has even recognized that this is a form of currency with all of the new laws regulating when businesses can recognize revenue from the purchase of gift cards.
Local currency is the same deal - trusting that people will trade them for items of value.
Dan
February 23rd, 2007 20:02
Welcome, Dan!
One one level you are right, since there are lots of things we use to “represent” things of value. But the difference between coupons/giftcards and local currency is that the former is on some level a legal agreement between individuals and a business, and they are only of value within the framework of that agreement. Local currency isn’t based on such a contract, and its value holds only through the collected trust of the community.
Brian
February 23rd, 2007 20:24
Brian,
I think you’ve stumbled upon a humorous tag line for the site: “Tell your friends; tell your enemies”.
Rick
February 25th, 2007 09:11
I always hear these claims of ‘paper money is worthless’ and ‘its not backed by gold/silver’. BUT, the fact of the matter is that gold and silver themselves have no real ‘intrinsic’ value (other than their use in electronics, which is a very recent development). They are simply moderately rare, shiny, heavy metals that make pretty jewelry. The only reason they have been historically used as currency is that they are easily recognizable and difficult to counterfiet.
The entire idea of money having to be ‘backed’ by something tangible is shear nonsense. Money is really just an intangible concept. It is an artificial representation of something physical (a product or service) being given away to someone else. Nothing more, nothing less. The most accurate way of defining money is this:
It is a certificate of ‘proof of service to your fellow man’. We produce something and give it away to another person that wants or needs it. They in turn give us a certificate that they previously recieved for giving something to (or doing something for) another person.
Norm
February 26th, 2007 11:39
Welcome, Norman!
On one sense, I agree with you. The “intrinsic” value of gold or silver only exists because they are valued material goods, and one can look at paper money as having value for the same reason.
But I wouldn’t go so far to say it represents something physical. I would say it is more accurate to say that money is a representation of power. When we exchange money we gain or release a measure of power in exchange for goods or services which have value.
Where I really have to disagree with you is in your statement that money is “proof of service to your fellow man.” Paris Hilton’s “value” is driven by inherited wealth, not by her tremendous service to her fellow men.
February 27th, 2007 18:27
You are correct that this concept of money is not universally applicable - two things that skew the concept are inherited wealth and the welfare state. But if you disregard these two things then it is indeed a very accurate way of describing it (and economic activity in general), IMO
I would not necessarily agree that money represents power per se, - rather, I would say that power is simply one of the many intangible items that it may purchase (or represent)