Local Currencies Make A Comeback in Recession

People nationwide may start hoarding their cash as recession fears grow. But in Riverwest—a progressive enclave of Milwaukee—residents have another answer to their money trouble: they'll print their own. The proposed River Currency would be used like cash at local businesses, keeping the area economy humming whatever the health of the country at large. "We can create our own value," explains Sura Faraj, 48, one of the plan's organizers.

It's an attractive idea when times are tight. Communities print what look like ordinary bills with serial numbers, anti-counterfeiting details and images of local landmarks (the Milwaukee River, for instance) instead of presidential portraits. Residents benefit through an exchange system: 10 traditional dollars, for instance, nets them $20 worth of local currency. And when businesses agree to value the funny money like real greenbacks, they also get a free stack to kick-start spending. It's all perfectly legal (except for coins) as long as it's not for profit and the bizarro dinero doesn't resemble the real thing. Dozens of such systems flourished during the Great Depression. In the 1990s, they re-emerged as a way to fight globalization by keeping wealth in local hands. Now the dream of homespun cash is back because it keeps people liquid even if they're unemployed or short on traditional dollars. (The U.S. Treasury declined to comment on the burgeoning interest in local currency systems.)

In the past month, Steve Burke, who runs Ithaca Hours, a currency system in upstate New York founded in 1991, has fielded calls from a half-dozen organizers hoping to mint their own money in Vermont, Hawaii and Michigan, among other places. Meanwhile, Susan Witt, who directs the nonprofit behind the BerkShares currency in Berkshire County, Mass., has heard from groups in New York, California and New Jersey, where last year Newark's city hall asked for advice on potential Newark Bucks.

Since BerkShares launched in 2006, almost $2 million has been exchanged for cash, and the equivalent of $180,000 is in circulation. "You can get a divorce, plan a funeral and go to just about any restaurant in town," Witt says. The biggest downside? Taxes. Even in the parallel world of earning and spending alternative currencies, Uncle Sam gets his cut.