Developing own currency

The mayor of the town of Worgl (Austria) began printing a local currency in 1929. It was interest-free but lost one percent of its value every month. As a result it was circulated much faster than the official schillings. People paid their local taxes in advance and the work generated by the experiment dragged Worgl our of recession within a year. The success so frightened the national bank that the supreme court outlawed the scheme five years later. It has since been copied in Canada and Argentina.

A wealthy retired law professor, Giacinto Auriti, began in July 2000 to circulate a private currency, called the "simec," among citizens (and about 40 shopkeepers) in the Italian town of Guardiagrele (about 200 km from Rome), to "prove" his longstanding theory that any currency, if put in the hands of consumers instead of banks, yields more purchasing power. Auriti prints the simecs, sells them at par with the lira, and then guarantees to merchants that he will redeem them at double their value (by paying out from his family fortune), thereby encouraging merchants to lower their prices. The simec has caused an explosion of consumer sales, but the government believes the whole idea is ridiculous and will collapse as soon as Auriti stops guaranteeing simecs' value.

The precedents in Germany and Austria in the 1930s, or the situation with the Bia Kud Kum in Thailand now, should leave us with no illusions that central banks have the legal power and the political acumen to crush a local movement if they see it as a threat. The central banks are still ignoring the complementary currency movement, at least in Europe and in the USA. However, this is mostly because it is still too small and marginal to threaten their monopoly of emission. This is why I recommend—(1) not to use "fiat" currency emissions whenever possible ("fiat" currency emissions are a threat to the inflation control on the conventional currency of the country - and provide therefore a legitimate technical reason for central banks to intervene). (2) Always talk about "complementary currencies" and not "alternative" ones (as "alternative" implies that this currency could replace the conventional one (which it cannot and should not try to do). (3) cooperate internationally with a Net-based clearing system whenever appropriate.