Alternatives to the Pound

Local Currencies Compete with Sterling

Jan 22, 2009 Justin Schamotta

It's been a long time since the Bank of England would redeem money for gold. As trust in currency diminshes, it's time to consider the alternatives.

Lampeter, a small town in West Wales, wants its own currency. And why not? The Black Ox Pound has already been tested, albeit in the 19th Century. Last year, Lewes, a small mediaeval town on England's South Coast launched the Lewes Pound, which had last seen the light of day in 1895. Totnes, in Devon, printed its own currency, the Totnes Pound, in 2007. "The need for local currencies has only come up because of the utter mismanagement of national currencies," says Sabine McNeill, founder of The Forum for Stable Currencies. "They give people the opportunity to learn about everything to do with money and currency."

But what is there to learn? Contemporary Sterling is what is known as a "fiat currency" - no longer exchangeable for gold, but backed instead by securities. These securities are dependent on income the treasury will tax from the population in the future. This has led some economists to dub it "currency by trust" as it relies more on faith than anything tangible. Given the snowballing number of monetary unbelievers among the general public, a less hypothetical form of trade would seem welcome.

Totnes Pound

"The idea of the Totnes Pound is to try keep trade local within the town," says Jim Pilkington of retail outfit Salago. "We joined because we agreed to the spirit of the idea. Councils for reasons best known unto themselves have allowed out of town trading centers to flourish and expand." Jim is one of the 70 local traders in the picturesque Devonshire town who agreed to accept the new currency.

According to the Totnes Pound Project, the currency works like this: "People can exchange their Sterling into Totnes Pounds at a number of issuing points and can also accept Totnes Pounds in change from participating shops. This does not create new pounds, but does help them to circulate and enables shoppers to show their loyalty to the local economy. Some businesses spend the Totnes Pounds that they receive with other local businesses. This strengthens the local economic multiplier, which means basically that money stays within the community rather than leaking out."

Lewes Pound

The scheme in Lewes works in much the same way. "It's a good idea," says Ric Latham of Bow Windows Bookshop, who has been accepting Lewes Pounds since its launch. Others aren't so sure. One trader, who preferred not to be named, said: "I'm not sure it's been that successful as we only get between £3 to £8 a week through the till. I can't see it lasting beyond the deadline now that the novelty's worn off." With notes notes appearing on eBay and the towns' quirky reputations, there's a danger of the schemes being seen as gimmicks.

Another problem is the production of goods. "In theory they should encourage local economic activity," says Dr. Molly Scott Cato, a senior lecturer and reader in Green Economics at UWIC's Cardiff School of Management. "Even if the national economy flounders, local economies could still be flourishing if the people in them are productive and trade between themselves. The limiting factor is how much stuff is produced locally -- if everything comes from China a local currency can't help very much."

Micro Economy

With more goods being produced locally by the day, the future of local currency looks bright. "I personally use my Totnes Pounds at least once a week," said William Lana of Greenfibres. "It will last in one form or another." Whether Lewes continues its experiment will be decided in August, by which time two Welsh towns, Llandeilo and Llandovery, may have joined a third, Lampeter, in creating a new micro-economy.

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