From pounds to pesos, pfennig to francs, deutschmarks to dinars, kroner to krugerrands, money is a worldwide phenomenon easily used but less easily understood. Economists continually differ as to what the proper measure of national money supply and money demand constitute, assigning different levels of 'moneyness' to a variety of contracts and agreements. But before anyone can tackle these ideas, he must ask the radical question, What is money?

Money is the good whose intrinsic value to its possessor is found in its ability to be exchanged for other goods. "For in truth money guarantees to us that we may provide for our needs whenever we wish by offering it in exchange for some other merchandise, the object of our desires." Silvio Gesell wrote, "It is characteristic of money that it is bought, not because of its material, but because of its function as a medium of exchange; it is not consumed, but merely used as a medium of exchange. Money describes a circle around which it continually moves; it returns repeatedly to its starting point." Just as a wrench is valued for different functions than a pen, so too is money a good with its own specialised use values, some of which this paper will explore.

More specifically however, just as wrenches come in different forms for various applications, so too are there multiple types of money, each with its intended uses. After an overview of the history and theory of money and a non-exhaustive history of local currency, this paper will examine the laws pertaining to local currency systems today before presenting the history and theory behind a recently developed form of local currency, the Ithaca HOURs model. The viability of this paper-based fiat currency in other communities from a social and economic standpoint will be assessed through a close-up look at one Northern California community and then a consideration of its success in other communities nation-wide. Following this, the prospects and conditions for future success will be considered, both for the specific community studied in-depth and the model in general, and some possible amendments and re-designs to the model will be suggested.

It is the intention of this paper to begin to connect three audiences, each with its own individual purpose. For the theoretical economist, it should help him apply some of the traditional economic concepts to alternative monies and understand some revisions he may need to make to properly model and predict behaviour in the communities using these monies. By discussing the history of alternative currency, it intends to remind the economic historian that this is not an entirely new prospect, and provide lessons from past efforts. To the community activist, I hope to present some practical aspects based on dialogues with local currency co-ordinators and users, producing some factors that ought to be taken under consideration before deciding whether a local currency is a worthwhile undertaking or whether one would better serve his community by other methods. This document cannot be a complete reference and sourcebook to any one of these three audiences, so broad is the topic under consideration.

In order to keep this document at least partially relevant to the curiosity of the common man, I have skipped some areas of potentially interesting but lengthy theoretical debates and historical citation. Three books of several hundred pages each would need to be written to satisfy the theoretical economist's desire for connection to all the standard literature, the economic historian's wish for inclusion of all past monies and the details of their operations, and the activist's hope for a working model of alternative currency systems, complete with colourful anecdotes and detailed operational plans. It is merely hoped that this paper will be able to serve as a starting point for informing the interests of each and perhaps opening them to future directions to consider and questions to ask.

Soli Deo Gloria

April 2001

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