It was not until the Civil War in the 1860s that the federal government set up a system of national banks and issued a national currency, known as the greenback. Even then the greenback was established only as a way to fund the war; it was always expected to be mothballed when hostilities concluded. But the single currency backed by the government proved popular with the people and the dollar soon became the single standard of exchange in the United States.
But localized currency did not disappear with the arrival of the American dollar. They are still with us today and are called complementary currencies. These exchange systems operate in the shadow of the national currency to promote local economic development and weld ties among social groups. While complementary currencies are not legal tender like the dollar, they are readily accepted as a medium of exchange among members of the community where they are used.
One of the best examples of a complementary currency are local barter groups where members perform tasks, trading the work for other, often dissimilar services. Since two hours of yardwork may not equate one-to-one for six hours of bookkeeping barter clubs often assign value to the tasks and issue barter dollars for their completion. These dollars can then be exchanged freely among club members for services although they are worthless outside the club.
In the United States, Ithaca Hours in the upstate New York college town of Ithaca claims to be the oldest such local currency system in the country, started in 1991. The organizers have pegged the value of an hour of labor at $10.00 and the hours are paid in paper currency. The currency can not only be used in exchange for goods and services with participating businesses and individuals around town but can be the foundation for zero-interest business loans.
Frequent flier miles are another familiar complementary currency. These rewards can function as currency when they are redeemed to cover travel-related expenses such as other flights, hotels and car rentals. Depending on the program they can even be traded like currency. But like all complementary currencies rules regarding their use are dictated by the issuing organization.
And that is often the rub with complementary currencies. Unlike dollars backed by a national government which is unlikely to disappear, dollars in a complementary currency can become worthless if the issuing organization breaks up or goes out of business. Complementary currencies thus serve useful functions in their specialized communities but are not fertile fishing grounds for investment opportunities.
Editors’ Picks
USD/JPY holds near 155.50 after Tokyo CPI inflation eases more than expected
USD/JPY is trading tightly just below the 156.00 handle, hugging multi-year highs as the Yen continues to deflate. The pair is trading into 30-plus year highs, and bullish momentum is targeting all-time record bids beyond 160.00, a price level the pair hasn’t reached since 1990.
AUD/USD stands firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
FBI cautions against non-KYC Bitcoin and crypto money transmitting services as SEC goes after MetaMask
US FBI has issued a caution to Bitcoiners and cryptocurrency market enthusiasts, coming on the same day as when the US Securities and Exchange Commission is on the receiving end of a lawsuit, with a new player adding to the list of parties calling for the regulator to restrain its hand.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.
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