The E-Sylum:  Volume 10, Number 6, February 11, 2007, Article 28

ALTERNATIVE CURRENCIES TO THE EURO

Bill Snyder forwarded this article from the International Herald
Tribune.  An Associated Press article on the topic appeared this
week as well.

"Christian Gelleri, with his straightforward manner of speech, rumpled
suit and home office, hardly resembles the polished central bankers
whose every breath captivates financial markets. But just as Jean-Claude
Trichet, president of the European Central Bank, lays claim to the
title "Mr. Euro," Gelleri can plausibly call himself "Mr. Chiemgauer."

"Gelleri runs an organization that issues an alternative currency,
known as the chiemgauer, that consumers in the region southeast of
Munich use to buy everything from pizza to haircuts to rugs. Designed
to foster the production and consumption of local products and services,
the chiemgauer takes aim at the reigning central banking orthodoxy that
pumping more cash into an economy accelerates inflation and eventually
harms growth."

"Issued by private organizations, these currencies are probably better
understood as vouchers — pieces of paper that can be redeemed for goods
and services at specific regional businesses that have agreed to accept
them.

"By having charitable organizations sell them at a profit for euros,
the organizations create an incentive for people to obtain them in the
first place — on top of harnessing an altruistic desire to buy locally
in an era of globalization — and businesses that accept can tap into
a new vein of customers.

"But they also typically include a feature aimed at jarring users into
spending them more quickly than they would euros. In the case of the
chiemgauer, the notes lose 2 percent of their value each quarter if
people do not spend them in time."

"Regiogeld, a German association for alternative currencies, currently
tracks 21 such types of money in circulation in Germany, Austria and
Switzerland, with an additional 31 in preparation. Gerhard Rösl, an
economist with the University of Applied Sciences in Regensburg, has
also located similar experiments in Denmark, Italy, Scotland, Spain
and Italy.

"Gesell, a German émigré to Argentina and socialist activist, argued
that money that sits in a bank was like dead weight on an economy,
because it was accruing interest rather than being spent to fire
consumption and production. Gesell proposed that money automatically
depreciate over time — that is, inflation should be hard-wired into
the currency — to generate an incentive to spend quickly."

"Gelleri, a 33-year-old former economics teacher, contends that the
statistics bear out the anecdotes. While the euro money supply turns
over about seven times a year, the supply of chiemgauers does so at
three times that rate.

"Orthodox economists do not dispute that the chiemgauer's velocity
outstrips the euro's, but they contend that people will logically
draw fewer chiemgauers to protect themselves against the automatic
devaluation. Rösl, the Regensburg economist, jeeringly calls the
chiemgauer "schwundgeld" — "disappearing money" — to drive home
his point.

"Yes, people spend the money more quickly," Rösl said. "But this
money is expensive, because it loses value, so people are bound to
hold less of it than they would otherwise."

To read the complete article, see: Full Story

To read a related Associated Press article, see: Full Story

  Wayne Homren, Editor

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