a local solution?

ei.sdraob

Well we have many threads talking about current issues, but not many talking about solutions that can help us out of the hole (yourcountryyour rubbish doesnt count :P)

Anyways alot of commentators claim that the problem is lack of credit and this hurts the small business most at the local level

Instead of waiting for banks to do something (yeh they are too busy with self preservation) or the government (whose hands are tied by debt they got themselves in)

I present a new and innovative (nah im joking nothing new about this :P just need to use buzzwords to get attention of some types) solution, which was sort of touched on before on this site

the Local Currency or Scrip

read on...

The Wörgl Experiment

The Wörgl experiment that was conducted from July 1932 to November 1933 is a classic example of the potential efficacy of local currencies. Wörgl, a small town in Austria with 4000 inhabitants, introduced a local scrip during the Great Depression. By 1932 unemployment in Wörgl had risen to 30%. The local government had amassed debts of 1.3 million Austrian schillings (AS) against cash reserves of 40,000 AS. Local construction and civic maintenance had come to a standstill. On the initiative of the town’s mayor, Michael Unterguggenberger, the local government printed 32,000 in labor certificates which carried a negative 1% monthly interest rate and could be converted into schillings at 98% of face value. An equivalent amount in schillings was deposited in the local bank as cover for the certificates in case of mass redemption and earned interest for the government. The certificates circulated so rapidly that only 12,000 were ever actually put into circulation. According to reports by the mayor and economists of the day who studied the experiment, the scrip was readily accepted by local merchants and the local population. It utilized the scrip to carry out 100,000 AS in public works projects involving construction and repair of roads, bridges, tanks, drainage systems, factories, and buildings. The scrip was also accepted as legal tender for payment of local taxes. In the one year that the currency was in circulation, it circulated 13 times faster than the official shilling [citation needed] and served as a catalyst to the local economy. The heavy arrears in local tax collection declined dramatically. Local government revenue rose from 2,400 AS in 1931 to 20,400 in 1932. Unemployment was eliminated, while it remained very high throughout the rest of the country. No increase in prices was observed. Based on the dramatic success of the Wörgl experiment, several other communities introduced similar scrips.

In spite of the tangible benefits of the program, it met with stiff opposition from the regional socialist party and from the Austrian central bank, which opposed the local currency as an infringement on its powers over the currency. As a result the program was suspended, unemployment rose, and the local economy soon degenerated to the level of other communities in the country.

As I said this aint a new idea and is already being implemented in various towns

* http://www.businessweek.com/smallbiz/content/jul2007/sb20070717_097103.htm
* http://www.money.co.uk/article/1001193-small-uk-town-creates-own-currency-to-beat-the-credit-crunch.htm
* http://www.ballinasloe.com/content/view/1095/187/
* http://en.wikipedia.org/wiki/Local_currency

We could add a twist to this idea and use electronic payment method, instead of issuing local vouchers/money issue chip cards and have them tie in with a system where people can check their credit online / over phone etc of course paying whoever designs this (local it companies looking for work) in this new local currency so they indirectly have a stake too


For the "economists" here on forum, yee might be interested in reading this article
The Economics of Depression Scrip

Which has a good overview of Scrip's during depressions and has a good go at Krugman whose answer to everything is to print more national money and create more debt :rolleyes:

Remember the aim of this idea above is to help out where it hurts most, at the local level, since theres no point saving this "money" it changes hands quickly, no hoarding occurs and local economies are lifted


I hope i put this this thread here clearly (hey I even used caps when needed )

thoughts? discuss

RichardAnd

That was an interesting read and I wasn't aware something like this had been done before. I'm not surprised it was stopped by the powers that be however and I believe that precisely the same thing would happen if a town in Ireland attempted to do this.

It does show alot about human nature though. The idea of nations and states only really work when things are good. When the s**t hits the fan, humans loose their sense of unity with the rest of the country and start to fall into smaller groups. This is a perfect example of just that, those people lost faith the "bigger picture" and so they attempted to make something for themselves by themselves.

Let's not forget for a moment that money is just an idea and it only works so long as we all believe it to be of value. You could write a thesis on psychology about something like this.