Venezuela To Introduce Local Currencies

[BayCityProgressive]

http://www.venezuelanalysis.com/news.php?newsno=2256

Caracas, March 30, 2007 (venezuelanalysis.com)— Venezuela’s President Hugo Chavez said yesterday that his government would like to introduce local currencies in communities, so as to help their development and to alleviate poverty. Local currencies would allow people to exchange goods and services without needing the national currency to enable such transactions.

Chavez said such currencies “can improve life and above all for the construction of a new social, economic, and political system” by creating an “alternative system of commerce.” Such systems have been applied in many places, according to Chavez, such as “in northern Brazil and in some localities of Mexico.”

Such as system would allow “the poor to possibility of acquiring products via exchange with an intermediary currency that could circulate, for example, in a determinate territory or would have validity for a determinate time,” explained Chavez.

[pitohui]

1. ok he's losing me there

everytime you have to change currency, you lose value and some damn banker takes the profit

a local currency traps a person to one spot forever unless they want to pay at times extortionate fees

it adds an extra cost to everything you do!

[malaise]

3. Aren't they doing this somewhere in New England n/t

[rockymountaindem]

2. I've never heard of anything like this before

And while I'm ambivalent about Chavez, this sounds like an interesting idea. I'm not too clear on how exactly such a system would alleviate poverty. I've taken some economics classes and I like to think I have a basic understanding of some macro concepts, but this escapes me. Anybody have any ideas on what exactly this would do?

[BayCityProgressive]

4. Here is some info on it

http://en.wikipedia.org/wiki/Local_currency

Characteristics & Benefits
The Wörgl experiment dramatically illustrates some of the common characteristics and major benefits of local currencies. <3>

Local currencies tend to circulate much more rapidly than national currencies. The same amount of currency in circulation is employed more times and results in far greater overall economic activity. It produces greater benefit per unit. The higher velocity of money is a result of the negative interest rate which encourages people to spend the money more quickly.
Local currencies enable the community to more fully utilize its existing productive resources, especially unemployed labor, which has a catalystic effect on the rest of the local economy. They are based on the premise that the community is not fully utilizing its productive capacities, because of a lack of local purchasing power. The alternative currency is utilized to increase demand, resulting in a greater exploitation of productive resources. So long as the local economy is functioning at less than full capacity, the introduction of local currency need not be inflationary, even when it results in a significant increase in total money supply and total economic activity.
Since local currencies are only accepted within the community, their usage encourages the purchase of locally-produced and locally-available goods and services. Thus, for any given level of economic activity, more of the benefit accrues to the local community and less drains out to other parts of the country or the world. For instance, construction work undertaken with local currencies employs local labor and utilizes as far as possible local materials. The enhanced local effect becomes an incentive for the local population to accept and utilize the scripts.
Some forms of complementary currency can promote fuller utilization of resources over a much wider geographic area and help abridge the barriers imposed by distance. The Fureai kippu system in Japan issues credits in exchange for assistance to senior citizens. Family members living far from their parents can earn credits by offering assistance to the elderly in their local community. The credits can then be transferred to their parents and redeemed by them for local assistance. Airline frequent flyer miles are a form of complementary currency that promotes customer-loyalty in exchange for free travel. The airlines offer most of the coupons for seats on less heavily sold flights where some seats normally go empty, thus providing a benefit to customers at relatively low cost to the airline.
While most of these currencies are restricted to a small geographic area or a country, through the Internet electronic forms of complementary currency can be used to stimulate transactions on a global basis. In China, Tencent's Q-coins are a virtual form of currency that has gained wide circulation. Q-coins can be purchased for Renimbi and used to purchase virtual products and services such as ringtones and on-line video game time. They are also obtainable through on-line exchange for goods and services at about twice the Renimbi price, by which additional 'money' is being directly created. Though virtual currencies are not 'local' in the tradition sense, they do cater to the specific needs of a particular community, a virtual community. Once in circulation, they add to the total effective purchasing power of the on-line population as in the case of local currencies.

[rockymountaindem]

8. Huh... goes to show that Wikipedia has an article on just about everything

As for the currency idea, it seems like a good one if it does what that article says. It's like an ordinary increase in the money supply targeted to take place only in regions that need it most instead of nationwide. Still, some drawbacks that seem to present themselves include the inability to use that money outside of its locale, although I guess that isn't such a big deal in a country where rural residents probably don't travel far from their homes. I think that the most important part will be instituting a good system to convert the local currency into national currency, however. I also don't get how distrubuting more money (albiet a different kind of money) isn't going to be inflationary.

[BayCityProgressive]

10. I really don't know if

it is a good or bad thing..I have just heard of economically depressed areas doing this before. I know one example is converting things to a "work hour". For example maybe if you owned a small car dealership and your town was going through massive unemployment..obviously not many people would be buying cars. Lets say you have kids. A unemployed person could offfer to babysit your kids for X number of hours and in return you would give her maybe a used car of some sort. It basically seems like a barter system and it seems in some local cases it could work.

[rockymountaindem]

14. Well, all money is a barter system. We just barter everything for money

instead of other things. Simply put, money is a way of storing and transporting goods and services without actually having to have them on hand. For example, if I need to move to California but I can't bring my fridge, I can sell it, transport the money I get easily and buy a new one at my destination. Obviously that's a simple way to look at it, leaving out things like depreciation etc. but that's what money is supposed to do for the individual.

OTOH, it appears to me like this is a way of expanding the money supply without having nationwide inflation or depressing the value of the national currency on the world market. Think of it this way... if the Federal Reserve were to say, "there's a depression in the Midwest, but not in other areas of the country. Therefore, we should undertake inflationary measures, but that would help the depressed area and hurt the rest of the country. So, let's make a new currency on a temporary basis that can only be used in ND, SD, NE, KS, MO, IL and OK. That way the 'real' dollar won't lose value on the world market and we can still buy imports in New York and California at the same prices as today."

Ultimately I think there has to be some kind of nationwide inflation as the result of a measure like that, but it would be minimal compared to a nationwide increase in the money supply.

[BayCityProgressive]

20. it should be interesting

it is also interesting to note that while inflation is high there, 19%...before Chavez it was 29%. Also facotring into inflation is government spending and the huge increase in demand of consumer goods, from what information I have gathered.

[roamer65]

5. We could do that here to destroy the Federal Reserve monopoly.

Chavez has an interesting idea. I hope it works.

[BayCityProgressive]

6. in all fairness

it isn't his idea..it's been around a while. The Green Party in the US supports it.

[WorldResident]

9. Yeah, why don't we just abolish the entire federal government while we're at it

States rights, baby! Now, Alabama can put those blacks back in their place! :sarcasm:

[originalpckelly]

19. I despise Chavez, but this idea is not Chavez's.

It goes back all the way to the Great Depression.

It's my conclusion that it's the most efficient economic system. The wonder of it, in theory, is that speculation doesn't occur and there are no bubbles or recession, just steady economic growth.

It's a very free market capitalist idea, unlike the fascism of corporate America.

I'm a real liberal, I've come to the conclusion that no specific currency should be controlled by a government, people should be completely free to choose the currency they wish to utilize.

[roamer65]

27. It has nothing to do with states' rights.

The American banking system is very monopolistic and could use a good dose of competition. It starves many good people of startup capital for small businesses, here and around the world. Chavez is simply implementing "microcredit" to get around the banking monopolies.

[WorldResident]

7. Chavez is an idiot

n/t

[BayCityProgressive]

11. thanks for the enlightened discourse..

[WorldResident]

12. OK, heres why he's an idiot

1. His idea to improve the economy is to essentially segregrate regions of Venezuela, thus preventing commerce within the country? Yeah, that's the ticket! Anybody that thinks that a simplistic barter system works well, which is essentially what this becomes, does not understand the efficiency in a currency promoting ease of commerce, and thus increased output.

2. Chavez's ultimate goal is to increase the money supply level. This will wreck Venezuela in the long run with hyperinflation.

I have no problem with socialist policies. I have a problem with socialist policies that are just whacko.

[BayCityProgressive]

13. Thank you for your post

at least now you put a reason you think he is an idiot :) . I really don't know anything about these systems. It would be interesting to find out if they are successful in the US and Europe where they are used. I don't think he is trying to abolish the countries current currency though. That isn't the aim of community curerency in other areas. My view was that this was an alternative for the unemployed or people who don't have hard cash for somethign they may need. I could definately be wrong though!

[WinkyDink]

15. I'm willing to give Chavez a chance. He's at least thinking in a creative

way with a decent motive.

Unlike SOME leaders I could mention......

[knight_of_the_star]

23. I want to know where he got the idea from

Because this honestly sounds just plain weird and like its begging to crash and burn spectacularly.

[Leopolds Ghost]

31. Just plain wierd and whacko, huh? Progressive municipalities in the US have been doing this

For DECADES. There is no law against alternate currencies in the US. The greenback didn't even exist until the Civil War -- at the time of the Revolution, ALL currency was locally backed and traded.

Local currency can be valued differently, e.g. work hours.

Check out the system in Ithaca, NY (Ithaca Hours).

Whole books have been written on this.

I bet you'd call a similarly unknown idea, land-value taxation, "whacko" too.

My home town created a local currency based on Ithaca's. It bombed for reasons I could have warned them about (it was confined to a small, wealthy subdivision with no business participation, and ultimately devolved into a nanny-share network.)

I have often considered restarting this system with my neighbors.

[knight_of_the_star]

17. I wouldn't even call this socialist

More like just plain weird. I would have more expected to hear this from a die-hard SCA nut than a leader of a modern nation.

[originalpckelly]

22. Actually, while I despise both socialism and Chavez, this is a great free market idea.

It's a more efficient system of distributing goods, and it doesn't allow there to be speculation in a market, which keeps the values of products equivalent to the work/etc needed to produce them.

It allows market forces to flow more freely, instead of building up.

I have a feeling that this more reality based system is going to work better, though I wouldn't be surprised if Chavez's socialist policies fuck it up somehow.

[WorldResident]

29. Having a single currency keeps the value of products equivalent

All this plan will allow to happen is that Venezuela can arbitrarily decide to export inflation from one region to another, thus redistributing wealth. I'm pretty sure the exchange rates will be fixed. If the exchange rate is floating, then this will lead to risk in accepting the value of the local currency in question.

There was a reason that Europe decided to move to one currency, and that was because this would enhance trade efficiencies among similar type countries. Moving away from one country currency will lead to either a redistribution of wealth and/or uncertainity over the value of the local currency in question.

[Leopolds Ghost]

32. Gee, WorldResident, you think common markets between rich & poor areas are a good thing?

We didn't think so when we were a poor area exploited by Britain. Our great nation was built on tarriffs and strengthening local commerce.

Neither did the Greeks apprecyiate Athens' zeal for free trade.

You may not think so, but profit does not benefit both parties to a trade equally. One side is always getting more than another, that is the incentive they have to engage in trade at all. The incentive of the other to lose money is because otherwise they would starve. That is why there are rich and poor regions, artisan classes and primary producer classes.

Any capitalist who denies this isn't a terribly good economist.

[WorldResident]

37. We're talking about a single country here, not global free trade

If Chavez wants to bring equality to the poor, there are much more straightforward ways of doing so with a lot less cost.

[treestar]

38. It doesn't have to segregate at all

It sounds like it is in addition to the national currency.

It sounds like it can create commerce among the poorer people at a lower level, rather than just shutting them out.

It will be interesting to find out how it works out.

[knight_of_the_star]

16. Huh?

Last time I checked this is something historically that has held BACK developing countries because having multiple currencies in the same country creates both instability and makes it hard to engage in international trade. That was one of the problems of the Articles of Confederation in America that each state had their own money, made it hard to get trade deals with anyone who was worth trading with.

[BayCityProgressive]

18. you may be right

it may be bad. I am not sure. I am under the impression taht they aren;t using this to get rid of hard currency though. I really don't know. If anyone has ever been involved in these expirements in other countries it would be great to hear what you think of them!

[knight_of_the_star]

21. To my knowledge it hasn't been deliberately done

I could be wrong, but I don't think there have been any experiments where a country went away from having a single centralized currency, I mean that's something that as a practice has been around since Mesopotamia at least.

[BayCityProgressive]

24. check the wikipedia article a few posts up

it gives details about local currency and where it is used. It isn't usually any kind of paper money like the national currency.

[BayCityProgressive]

25. Modern local currencies

There has been a tremendous surge in the use of local currencies over the past two decades. Today there are over 2500 different local currency systems operating in countries throughout the world. One of the most prominent is LETS, Local Exchange Trading System, a trading network supported by its own internal currency. Originally started in Vancouver, Canada, there are presently more than 30 LETS systems operating in Canada and over 400 in the United Kingdom. Australia, France, New Zealand and Switzerland have similar systems. Time dollars, Ithaca hours and PEN exchange are among the most successful systems in the USA.

[Leopolds Ghost]

34. PEN Exchange has been hurt by population turn-over

Gentrification and an overly-narrow area of focus have turned it into a nanny-share network.

I'm part of a community group in DC that is trying to get them to expand the system and provide some backing by tying it to business discounts.

It doesn't help if the area in question has an anti-small business attitude ("they bring traffic", "too many illegal immigrants working in the area already", "we want to live in a quiet community, build your day-care center somewhere else"), that sort of attitude.

It is inimical to a traditional small-town or neighborhood economy.

One community that would benefit extremely from an Ithaca type system is the "hippie" area outside Nashville that has no zoning. It is a neighborhood of 1960's tract homes (no traditional commercial space) that was rezoned commercial/industrial. Instead of tearing it down, every musician, potter, and recording studio from miles around moved in. Now the town has 500 residents, 500 businesses per square mile, and is home to most of the indie recording labels in Nashville... I read about it in an article recently. Zoning (which prevents a genuine free market) normally constrains local economies to benefit the CBD, which thrives on petrodollars.

[Leopolds Ghost]

33. No, the greenback didn't exist until the Civil War and led to a series of nationwide depressions.

Common currency means common victimization of the economic cycle, benefiting only the super-rich,

instead of some regions doing well when others struggle, reversing the flow of trade to benefit different areas at different times.

[NuttyFluffers]

26. utterly fascinating. we've been doing this in the USA and i never really noticed.

the good link that was provided before by Bay City Progressive
http://en.wikipedia.org/wiki/Local_currency

examples currently used in the USA. local currencies are also known as community currencies, FYI.
http://en.wikipedia.org/wiki/List_of_community_currencies_in_the_United_States

for something solid outside of wiki
http://www.schumachersociety.org/local_currencies/currency_groups.html

http://www.communityeconomies.org/links.php

hmm, i mean i've seen such things around, but it never dawned on me to think about their official category, history, nor their ramifications. well, i think it's a great idea after i spent more time on the subject. well, it certainly couldn't hurt, otherwise a lot of industrialized nations would already be hurting significantly by now. i think this is a wise implementation of tech, seeing as it's alive and well in use inside industrialized/post-colonial powers. good on chavez.

[1932]

28. Ithaca Dollars?

[Leopolds Ghost]

35. 100 Chavez Hours = 10 Diablos = 1 Arbusto.

:evilgrin:

[Jim Warren]

30. .....on a simialr note

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=540164&mesg_id=540164

[Leopolds Ghost]

36. Do Boardwalk Towns count?

You know when towns with multiple tourist attractions get together and
do common coupon/ticket programs that other local businesses buy into --
I guess you could call them "Mickey Mouse" dollars?