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Milwaukee neighborhoods could print own money
2 neighborhoods consider printing own currency for exclusive use in local stores

By Erika Slife | Tribune reporter
December 3, 2008

They may be talking funny money, but it's not funny business.

Residents from the Milwaukee neighborhoods of Riverwest and East Side are scheduled to meet Wednesday to discuss printing their own money. The idea is that the local cash could be used at neighborhood stores and businesses, thus encouraging local spending. The result, supporters hope, would be a bustling local economy, even as the rest of the nation deals with a recession.

"You have all these people who have local currency, and they're going to spend it at local stores," said Sura Faraj, a community organizer who is helping spearhead the plan. "They can't spend it at the Wal-Mart or the Home Depot, but they can spend it at their local hardware store or their local grocery store."

Incentives could be used to entice consumers into using the new money. For example, perhaps they could trade $100 U.S. for $110 local, essentially netting them a 10 percent discount at participating stores.

worth a read here

Of course there are problems. Counterfeiting would be one. Second, it's tied to the USD. Waves of inflation could wipe out the relative value of it.

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Oh, oh. Don't tell Hogeye. He'll have a field day.

Of course, the danger of these kinds of schemes is that:
a. You can't spend the faux money anywhere else. If you get a new job in another location, you'd better not have your money tied up in the local Monopoly money.
b. Business are required to accept the U.S. dollar. They are not required to accept the faux money. If some of them stopped taking it, you're out of luck.
c. There have been "buying clubs" in the past, where people would put their money and use it among a small community, but when these places went bankrupt, people lost it all. There is no FDIC guarantee with the Monopoly money.
d. If the Monopoly money is tied to the USD, then there is no real advantage to using the fake money. And if it is not tied to the dollar, then the small size of the community makes it liable to huge swings in value. A single store deciding to no longer accept it could reduce its value significantly.

Wouldn't a bartering system be just as effective and avoid all this fake money silliness?

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Wouldn't a bartering system be just as effective and avoid all this fake money silliness?

Those were big during the 70s Nixon meltdown. Trouble is they require an administrator of sorts. They are not self-sustaining.
And the same problems apply with barter which Doug posted above.

The IRS closed down a lot of them in the 70s since they were oft used to hide profits.

Other differences: in 70s prices were rising, sometimes rapidly and interest rates were commonly in double digits. A house loan at
8% was considered a very good deal.
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Isn't the entire gift certificate and gift card market based on the exact same principle anyways?

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"Isn't the entire gift certificate and gift card market based on the exact same principle anyways?"

Not really but I can see how you may be led to believe that. Gift certificates are purchased for money (USD) and redeemed
in terms of USD. It's a service the stores offer. They are never worth more or less than their stated value when purchased
or redeemed.

The are the same as giving cash except with a restriction on where they can be redeemed and hence loose much value as an alternative.
Now if the issuing store gave
a noticeable discount on gift certificates then your situation of likening gift cards to barter or neighborhood money would come into play.

If a person chooses to sell a gift card for less than it's face then your idea would apply.

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L.Wood wrote: Other differences: in 70s prices were rising, sometimes rapidly and interest rates were commonly in double digits. A house loan at
8% was considered a very good deal.

DAR
Shoot, when I bought my first house in 1989 I paid 9%. I later refinanced to 7% something. I have heard of people paying up to 18% in the 70's.

D.
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"On Wednesday, some mortgage brokers were quoting mortgage rates of close to 4.5 percent for people with strong credit and hefty down payments.
The national average rate on 30-year, fixed mortgages was 5.06 percent on Wednesday, according to financial publisher HSH Associates — the lowest since the 1960s and down from 5.3 percent Tuesday." --Today, Link

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Shoot, when I bought my first house in 1989 I paid 9%. I later refinanced to 7% something. I have heard of people paying up to 18% in the 70's.

I mentioned 8% because we bought a house using city bond money. What is "city bond money?" Back in the 70s and 80s interest rates were so high that
few could afford to purchase a home. My former wife had never purchased a car on credit back then and ended up paying 19% on a car loan from a regular dealer.

A special act was passed by the state legislature which allowed cities to issue mortgage-municipal bonds. The money from these bonds was used to make home mortgage
loans to anyone under $30K per yr income provided they qualified for a regular home loan. Interest earned on the city bonds was tax free thus it allowed lenders to charge 8% for home mortgages
while others were paying 10 to 19 per cent on home loans.

Cities would sell the bonds. The proceeds would go via a local bank or savings and loan into a mortgage pool. The mortgage payments made by home owners would pay off the bonds.

It worked quite well with few abuses.

$30K per yr in 1978 was above median income for Arkansas.

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