Local Currency Multiplier

[wlm4 at cornell.edu (Will]

>I just read your comments on the discrimination of credit resources, and
would like to ask an unrelated question.
>
>As a professional, can you give me a feeling for the real world effects of
the local currency (worth I believe about $10) on Ithaca's economic
multiplier effect? I'm interested in how to help small towns build a better
infrastructure to avoid the "Wal-Mart Effect" of siphoning off money from
the local system.
>
>Thanks.
>
>R. H. (Dick) Richardson Office: 512-471-4128
>Zoology Dept. Home: 512-476-5131
>Univ. of Texas FAX: 512-471-9651
>Austin, TX 78712
>

Our Credit Union is a participant in Ithaca Hours, a local currency. The
system issues money (about $80,000 to date) that is tradable locally. It is
estimated that $500,000 in exchanges have been made over three years.
Hours must be reported for income tax purposes, and they're totally legal.
The structure of the Ithaca Money system is that the Hours issued controled
by two groups: the Board and the Potluck Barter, the second being more open
and less formal. Marketing of the system is done separately by a privately
owned newspaper, Ithaca Money, which pays a coordinator.

The Credit Union accepts Hours for all fees (including mortgage, consumer
annual and business loan application fees) AND for up to one hour per loan
payment a month. We do about $600 in Hours trade a month. We spend the
Hours for services like cleaning, advertising, postering, carpentry, as
bonuses and some staff take them for part of their salaries.

The impact on the local economy is significant but hard to measure
definitively. Taking examples, though, make it easier to see the impact.

STORES. Turback's, a local fine restaurant, accepts hours for 100% of its
bills. This, in conjunction with an early bird dinner special has opened
this expensive dinner to a whole new clientel. The restaurant has fixed
costs which are covered by having extra diners during off hours. The owner
uses Hours to buy produce locally and to purchase reapirs on house and home.

FARMERS MARKET. We have a thriving local produce market which early on
endorsed Hours whole heartedly. Farmers are perhaps more used to barter
transactions. The acceptance of Hours gives these retailers an edge over
grocery stores.

PERSONAL SERVICES. Massage, haircuts, crafts, trades, teaching. In these
areas mention in the Ithaca Money newspaper means greater exposure to home
business.

SO, back to the original question. What I have seen Ithaca Hours do for a
multiplier is two fold 1) add marginal business to local companies that are
willing to commit to local spending 2) give a way for home based startups to
find an audience inexpensively and quickly. Beyond that, Hours introduce
users to a way of thinking about our economy.

I'm excited about the next steps in local money, which will be a) a store
front to give more exposure to small locally produced products b) a startup
fund which will use new issues of Hours to fund business startups and
expansion. My interest in the project is in institution building.
Alternative institutions are themselves comments and rebuttals and answers
to the current problems.

************************************************** **********
William Myers
Alternatives Federal Credit Union
301 West State Street, Ithaca, NY 14850-5431
Voice (607) 273-3582 ext 817 FAX 277-6391
E-Mail Alternatives-Myers@Cornell.edu
************************************************** **********



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William Myer's provided some very interesting insights on Ithaca Hours
activity in the local community but side stepped Richardson's concern about
the multiplier effect and the silphoning off of capital via the absentee
owners -eg Wal Mart.

The basic concept of the Ithaca Hours appears to be to stimulate local
exchange- puitting willing labor in contact locally, with willing users of
that labor- or service or product. The problem, though, is that when a
party needs items not available locally and that product is owned or
provided by a source which lies outside the influence of the local
currency.

To match this outflow and potential community mismatch, there needs to be
an exchange rate between the two currncies- either officially or
unoficially- Or there needs to be some response which essentially causes
import substitution to occur. That is to say, instead of bulying "omported
tooth paste" one finds a local product which can be obtrained for local
currency. While the local currency in Ithaca has many turns and
mutllipliers, the total value to the economy is small compared to the total
business done in US currency- and that is the secrete- When the Itaca
Hours become significant,m then the issues regarding outflow and related
problems start to become very apparent and the community needs to start
serious thinking.

tom abeles
tabeles@tmn.com

Incidentally the smallness is the beauty, it meets a local need without
having to deal with the larger socio-economic issues. But, that is coming
tpa




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