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The proceedings should be online soon. Aside from the obvious limitations of the import replacement wishes of one of the sponsors, this promises to be very interesting. Someone I know put this together.

BerkShares, a local currency, has circulated in the southern Berkshire region of Massachusetts since September 2006. Eleven branches of five participating banks have issued 1,720,000 BerkShares.  Issue occurs when citizens exchange their Federal Reserve notes at a ratio of 90 to 100 for BerkShares.  Upon purchase and issue of BerkShares, federal dollars remain on deposit in the issuing banks in anticipation of any future redemption of the BerkShares.

John Isaacs’s design of BerkShares incorporates local heroes and paintings by local artists.  For his layout of the notes, he just received a Graphis 2009 Gold Award.  The design honors the values of community, economy, ecology, and sustainability.  International and national press, intrigued by the idea of a community issuing its own money in these troubled economic times, have filmed citizens in the Main Street shops of Great Barrington, using the local currency in place of federal dollars.

The phenomenon has drawn the attention of academic monetary economists, many of whom long have been interested in the prospect of “competing” currencies.  They argue that with a multitude of privately issued currencies, those currencies issued on sound principles would maintain their purchasing power and not devalue.  Their assumptions are that the currency having the greatest purchasing power would be the preferred currency and that the public would choose to trade in that currency over others. 

Monetary theorists are disturbed by currency monopolies, such as a reliance on government-issued currency.  Without competitive restraints, a centralized currency issuer may have a tendency to overissue or to issue for non-productive purposes, thereby leading to price inflation.

In imagining how to issue stable currencies, the “competing” currency school generally supports a currency backed by or tied to a standard that holds value.  The usual standard of choice is gold or other rare metals.

BerkShares is a non-governmental, privately issued currency.  The issuer is a non-profit, BerkShares, Inc., not a for-profit enterprise.  By design trade in BerkShares is limited to the Berkshire region.  The intent of promoters of the currency is to encourage more robust exchange between individuals and businesses and from business to business, thereby keeping the wealth of the region recirculating locally and fostering greater regional economic sovereignty.  BerkShares identify the economic leaks in the region, those places where the local currency cannot be spent.  The long-term goal is to provide a financing tool for new import-replacement businesses that produce locally for local consumption, thus stopping the leaks.

Background of the Conference

As the BerkShares Board of Directors considers the future evolution of the program, the American Institute for Economic Research (AIER) has called a mini-conference entitled, “Prospects for the Acceptance of Competitive Local Currencies:  The Future of BerkShares.”  Several eminent monetary scholars will join the BerkShares board and staff to discuss the requirements for growth of BerkShares into a more independent and sustainable currency.

BerkShares will be discussed in the context of the history of independent currencies.  We expect that speakers will address what BerkShares would have to do to move from the current federal dollar backing to, for example, an index of locally produced commodities, such as maple syrup, wool, wood products, local beer, field greens, and local cheese. The conference also will consider the responsibilities of a local reserve board for BerkShares, including regulatory authority, oversight capacity, and other policy-making tools.  This discussion will suggest a framework for how and on what basis to issue additional currency.  Finally, panelists will suggest strategies for making loans denominated in BerkShares.

Susan Witt, Executive Director of the E.F. Schumacher Society, and AIER staff, including Walker Todd, Kerry Lynch, and Linda Buckler, planned the conference.  We hope that you enjoy the presentations and the surroundings at AIER and will learn a lot about local currencies in general and BerkShares in particular. 

Papers presented at the conference will be available afterward through the AIER website,  www.aier.org,  and the E. F. Schumacher Society website, www.smallisbeautiful.org.  More information about BerkShares and media coverage of the project may be found at www.berkshares.org

Media Inquiries

Media inquiries for BerkShares and the E.F. Schumacher Society should be directed to Susan Witt, E. F. Schumacher Society, 140 Jug End Road, Great Barrington, MA 01230, 413-528-1737, www.smallisbeautiful.org or www.berkshares.org. 

For AIER, inquiries should be directed to Ryan Goodenough, Director of Communications, American Institute for Economic Research (AIER), 250 Division Street, Post Office Box 1000, Great Barrington, MA 01230, 413-528-1216, www.aier.org.

Biographical Summaries for Speakers

George Selgin is Professor of Economics at West Virginia University, on leave from the University of Georgia, and one of the leading theorists of free banking.  He is the author or editor of six books and numerous articles on economic history, monetary economics, banking, and macroeconomics. He also was a visiting scholar at the Federal Reserve Bank of Atlanta.  His newspaper columns have appeared in the Wall Street Journal, the Financial Times, the Christian Science Monitor, and other periodicals.

Ronnie Phillips is Professor of Economics at Colorado State University and is a past president of the Association for Evolutionary Economics.  He has been a visiting scholar at the Federal Deposit Insurance Corporation and a visiting scholar in the Bank Research Division of the Office of the Comptroller of the Currency in Washington, D.C.  He also has been a resident scholar at the Levy Economics Institute of Bard College.  

Walker Todd is an AIER Research Fellow and economic consultant with 20 years experience at the Federal Reserve Banks of New York and Cleveland.  He has taught at AIER, the Chautauqua Institution, and the Cleveland-Marshall College of Law at Cleveland State University.  He has numerous publications on banking, central banking, monetary and property rights topics, including those related to international debt, the International Monetary Fund, and the regulation of the banking system and financial markets.

Susan Witt has served since 1980 as executive director of the E. F. Schumacher Society, named for the British economist and author of Small Is Beautiful:  Economics as if People Mattered.  Ms. Witt is a founder and current administrator of BerkShares, a local currency circulating in the southern Berkshires region of Massachusetts that has gained wide national and international media coverage.  Her articles on citizen-initiated methods for shaping sovereign regional economies have appeared in a variety of books and publications.

John Wood is the Reynolds Professor of Economics at Wake Forest University.  He has taught at the National University of Singapore, Northwestern University, and the University of Pennsylvania. His book, A History of Central Banking in Great Britain and the United States, was published in 2005.  He has been an economist, consultant, and visiting scholar at the Federal Reserve’s Board of Governors and at the Federal Reserve Banks of Chicago, Philadelphia, and Dallas.

L. Randall Wray  is Professor of Economics at the University of Missouri-Kansas City as well as Research Director, the Center for Full Employment and Price Stability (at UMKC), and Senior Scholar at the Levy Economics Institute of Bard College, NY.  He is a past president of the Association for Institutionalist Thought (AFIT) and served on the board of directors of the Association for Evolutionary Economics (AFEE).  A student of Hyman P. Minsky while at Washington University in St. Louis, Wray focused on monetary theory and policy, acroeconomics, financial instability, and employment policy.  He has published widely in journals and is the author of Understanding Modern Money: The Key to Full Employment and Price Stability (Elgar, 1998) and Money and Credit in Capitalist Economies (Elgar 1990).  He is the editor or co-editor of three other books published by Edward Elgar. 

2 Responses to “Prospects for the Acceptance of Competitive Local Currencies”

  1. Michael says:

    Wish I could be there. I don’t see how it can be considered a “competitive currency” when they are exchanged at a fix rate. The most I could say is that it is a coupon for the people who use it, because the people who recieve them must exchange them back into Fed notes. Well, at least you can enjoy the 10% off!

  2. wintercow20 says:

    You are right on target Michael, this is why they need to explore strategies to sever their link to the dollar, among other things. The worst part for them, aside from the nuttiness of buying local, is that most of the people that use Berkshares, and take advantage of the discount, were already shopping at the businesses in town. My observation is that it has not increased the amount of business activity around here.

    An interesting empirical question is what the retailers are doing in response to this. I can’t imagine lots of them could survive any substantial hit to their revenues. Is demand around here that inelastic? If so, then why aren’t prices even higher? By the way, a small ice cream cone in Lenox can run you near $4.00 these days.
    How is married life?

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