Economic Find: Communities Creating Their Own Money

Sometimes, there’s just not enough of the green stuff – the official currency – to go around. Throughout the world, communities are responding to this problem by creating their own money – paper, coin and electronic. These systems of alternative currencies are useful in a variety of ways: enabling people to increase their ability to buy goods and services (by filling a need like tutoring, baking, or helping turn a garden), building community, keeping money circulating locally, and revitalizing local or even national economies. This graph shows the worldwide growth of community currencies from 2005 through 2007 representing $3.2 million dollars of trade per year.

Here’s an example of how it works. Local participating businesses and individuals agree to accept and spend the alternative currency. People with limited ‘greenbacks’ can stretch their incomes by providing services, eg, one person earns community currency by providing computer training for her neighbor, she then spends this money at the hairdressers, the hairdresser spends it at the local market, and so forth. This spending creates what economists call a multiplier effect – a ripple effect of economic activist that stimulates the local economy. Timebanks are another system of alternative currency, in which people are electronically credited with hours that can be exchanged for other services. All hours are valued equally, whether it’s an hour of housecleaning or an hour of legal services. In New York and Montpelier, Vermont, and St. Louis, Timebanks have received large government grants to facilitate mutual assistance care for the sick and elderly.

There are some longstanding, large-scale systems such as the Swiss WIR Bank, a nationally circulated complementary currency issued by a cooperative of Swiss small- and medium-sized businesses. With over 60,000 member businesses, WIR currency circulates the equivalent of 1.65 billion Francs annually, helping small business get off the ground or expand, and allowing them to compete with international businesses and make it through tough times.




Created by CPE Member Economist Emily Kawano

October 2011



Luna, Mira. 2011. “Local Currency Creates Real Wealth Outside the Bubble.” Shareable.

Bendell, Jem. “The Money Myth.” 2011. TEDxTransmedia.

DeMeulenaere, Stephen. 2007 Annual Report of the Worldwide Database of Complementary Currency Systems, International Journal of Community Currency Research, v12, 2008, pp 2-19.