Tuesday, April 07, 2009

Local Dollars?

Back in the early days of the USA, it was a common thing for states, towns, and banks to issue their own currency. This allowed local communities to control their own economies, and for people to do business with companies backed by the faith of local governments who could afford to do reasonable oversight. That system was abandoned with the rise of the Greenback in the 1800s, when we went to a single Federal currency. But now, local currencies are seeing a rise in popularity again.


The idea behind these local currencies is NOT to control the local economy, but to keep sufficient liquidity on the local level when money is tight on the Federal level. It is an interesting idea, but one that is likely to cause problems if it becomes widespread. Bad money tends to chase out good, leaving businesses with an uncertainty about the value of the cash in their boxes and accounts.

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