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Local Currencies Emerging in U.S. Towns as Economic Downturn Lingers

By Bruce Carton

An idea popular during the Great Depression appears to be growing in popularity again today as the effects of the financial crisis continue: local currencies. The American Banker reports that in May 2010, people lined up around the block in Ardmore, Penn., to purchase "Downtown Dollars." Downtown Dollars are offered at a two-to-one exchange rate with the dollar, allowing consumers to instantly receive a 50 percent discount on purchases at participating merchants in Ardmore. Merchants then get the full value of the purchase when they exchange the Downtown Dollars for U.S. dollars. According to the American Banker, local currencies are perfectly legal and have gone in and out of vogue for decades. Today, more than 200 such currency systems are operated in the U.S., operating in different ways: "Some systems use community banks as conduits to exchange dollars for the local currencies and the reverse; in other programs, banks and credit unions let customers pay a portion of loans and fees with the local money. Still others don't involve banks at all." Large cities such as Detroit and Brooklyn, New York are now reportedly planning local currencies, as well. While the Downtown Dollars initiative has been a success, other local...

Full post as published by Legal Blog Watch on July 21, 2010 (boomark / email).