A few Questions on Local Currencies


Rufus F.

Rufus is an American curmudgeon in Canada. He has a PhD in History, sings in a garage rock band, and does many things. He is the author of the forthcoming book "The Paris Bureau" from Dio Press (early 2021).

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207 Responses

  1. Avatar Jason Kuznicki says:

    A local currency pegged to the dollar is intrinsically less useful than the dollar, because I can’t spend it everywhere.

    When I trade dollars for B-Notes, I lose value — the option value of spending them in California. Or just in Delaware. To spend those B-Notes anywhere else, I first have to dupe someone else into making the same bad bargain.

    Perhaps the lost option value is recouped in the value one takes in signaling — in sending a message. If so, great. But don’t tell yourself that you’re making your local community better by gimping its money supply.Report

    • Are you telling me that or them?Report

      • Avatar Jason Kuznicki in reply to Rufus F. says:

        I’m saying it to anyone who happens to believe Dicken’s final answer, which I find dubious in the extreme. Honestly, though, I hadn’t considered whether you were a part of that group. If you are then yes; if not, no.Report

        • Yeah, I’m not really in any group here; just curious about the topic. What you’re getting at is the gist of my question about pegging it to the dollar. If the goal is to boost local consumption, it seems like the local businesses would have to offer some sort of discount if you pay with the local currency. Maybe the novelty value really would get people out and spending the alternate currency at first, but I’d imagine that would wear off after a few months. Now if there were say local restaraunts with a special “BNote Menu” or things like that, it could boost sales.Report

    • Avatar Mike Schilling in reply to Jason Kuznicki says:

      When I trade dollars for B-Notes, I lose value — the option value of spending them in California.

      That is, it’s a lot like a gift cerificate.Report

      • Avatar Jason Kuznicki in reply to Mike Schilling says:

        Indeed! The deadweight loss of gift cards and gift certificates is a well-researched topic in economics, one that surely those creating a new currency ought to be aware of.Report

        • See, I thought of gift certificates too. But what about coupons? Do they result in loss? When I used to work at a small town grocery store, I remember our sales would spike on Wednesdays because the mailer with the coupons arrived on Tuesdays. It seems to me that, if these stores could work it so that a gallon of milk, say, was a quarter cheaper if you paid with the local currency, that might get people to buy more milk than they would otherwise, which seems to be the whole point. But that’s sort of up to the stores.Report

          • Avatar Jason Kuznicki in reply to Rufus F. says:

            You never buy a coupon at face value, so no.

            Here’s the easiest way to see the difference. If I buy you a gift card for $5, it costs me the face value, obviously.

            Now, I can choose a gift card from stores that sell various things, including everywhere from Home Depot to Victoria’s Secret. But the chance that you’re going to want $5 of merchandise from any one of these stores is never greater than the chance that you’re going to want five plain-old-dollars. That’s because $5 in currency can buy just as much at Home Depot, or Victoria’s Secret, or both. The option value may be small or even sometimes zero, but it’s never negative.

            Coupons cost the store on a per-unit basis. They make up the difference on volume and on side-purchases that aren’t covered by the coupons. I’m not sure if the stores could arrange it this way if they accepted BNotes for everything, every day. I also doubt that they will ever be able to pass those BNotes to their out-of-state suppliers.Report

            • Avatar rj in reply to Jason Kuznicki says:


              Did you ask if there is some sort of “B-Note Reserve Bank” backing the currency? Since they don’t just hand out B-Notes on the street, one would assume that the USD used to buy B-Notes goes somewhere and that businesses would want to convert B$ back to USD, as B2B suppliers are not likely to take B$ and employees wouldn’t want to be paid in B$.

              According to the B-Note website, you can buy B$22 for US$20. This means that there isn’t enough US$ to cover all B$ in the “central bank.” Since there should be some B$ money supply (M1) in the community at any given time, the odds of a run are low, but nonzero. But what happens if the currency gets more leveraged over time (through promotions and such) and everyone wants their $B converted back all at once?

              If there is an entity that keeps track of the USD that backs B-Notes, can they implement capital outflow controls? Do they have an enforcable contracts with vendors who accept the currency?

              If local currency is to be more than just coupons for local businesses, the people promoting the stuff have to take on the responsibilities of central bankers.Report

              • Avatar Jason Kuznicki in reply to rj says:

                I wasn’t the one asking the questions, but your concerns seem reasonable to me, and I would definitely have asked about how the notes were backed, what prevents a run on them, how the issuers ensure transparency (audit the BNote fed!) and such.Report

              • You know, I’ll just email them and see if they want to jump in here.Report

              • Avatar Jaybird in reply to Rufus F. says:

                (Ask them about parking tickets)Report

              • Avatar Scott in reply to Rufus F. says:

                I want to know if they expect retailers will have two different prices for their goods, one for FRNs and one for BNotes.Report

              • Avatar Jeff Dicken in reply to Scott says:

                No, we will discourage this. In fact, we are hearing from some merchants that they will consider giving additional discounts for people using BNotes, since the customer is showing that they value local businesses and their community.Report

              • Avatar Jason Kuznicki in reply to Scott says:

                How will you “discourage” having two different prices?

                I know how governments do it, and it’s not pretty.Report

              • Avatar Jeff Dicken in reply to rj says:

                Yes, there will be enough funds backing the BNote system to cover any and all exchanges. $20 converts to BN22, and BN22 converts back to $20. Your concerns about the funds being leveraged are valid, but with US banks holding 5%-10% of their stated backing funds, and the BNote holding over 90%, this is not an issue. There are also other dynamics, such as leakage, which mitigate the need to hold even 90% but we will be erring well on the conservative side in that area.

                The system is not designed, however, for merchants to convert back into dollars. We are headed toward having a network of businesses that can conduct a significant part of their trade in BNotes, as well as communities in which people will use them for personal transactions. This is not just a business tool, or a coupon-like promotion – this is real currency, for everything local that dollars currently accomplish.Report

              • Avatar Jason Kuznicki in reply to Jeff Dicken says:

                with US banks holding 5%-10% of their stated backing funds, and the BNote holding over 90%, this is not an issue.

                No, it’s still very much an issue. Confidence in U.S. banks is high in part because of the Federal Reserve System and deposit insurance. Confidence in the BNote can’t be based on either of these, so a much higher fractional reserve (at the very least) seems a necessity. Should confidence fall sufficiently, even 90% reserves won’t necessarily be enough.Report

              • 90% would always be enough, on account of leakage and the fact that not everyone abandons a new, good thing at the first hint of uncertainty. You’re just coming at this from a very negative standpoint. I can understand you being skeptical, but try to see the positive things that this will enable.Report

              • Avatar rj in reply to Jeff Dicken says:

                US Banks hold such low reserves because there are a lot of deposits and loan payments coming in and the expectation is that 5-10% will be sufficient on any given day. That number would be higher if we didn’t have deposit insurance.

                Now, if the B-Note is exchangable to USD at a rate of B$22=US$20, that means that a business either offers B-Notes at 1-1 parity and either eats the ~10% difference as a discount for being a virtuous shopper or offers prices in both denominations (which could make converting B$ purchases for US$ change a big headache).

                Assuming suppliers take the money, they have the same issue as the retail business – eat the 10% discount or charge different rates for $B and $US transactions.

                And while spending bills on small things is fine, businesses spend larger amounts. Is there electronic funds transfer?Report

              • Avatar Jeff Dicken in reply to rj says:

                Businesses don’t necessarily have to absorb any cost at all for accepting BNotes – if they are able to recirculate them, they come in like a dollar and go out like a dollar, and there are many ways they can accomplish this. Paying suppliers or for services, paying employees partially in BNotes if they spend money locally anyway and elect this, giving them as change, etc. No one has to pay anything, and in fact, merchants get the benefit of not paying the 3%-4% MC/VISA fee because customers will be paying in BNotes and real dollars.Report

              • Avatar rj in reply to Jeff Dicken says:

                The supply chain will always reach up to a point at which a user of B-Notes has to get dollars, either to pay taxes or pay a non-participating supplier. The 22-20 exchange rate will eventually become an issue for every business.

                Even if you pay employees in B-Notes that they can turn around and spend locally, they will demand more because the employer has denied them the right to spend money at Safeway instead of Eddie’s Market (yes, I used to live in Baltimore).

                The discount is an issue that you can’t wish away through goodwill. As I see it, there are only 3 options:

                1) Businesses eat the 10% and treat it like a loyalty card or some other discount scheme. This seems most likely.

                2) Businesses charge two seperate prices. Without BN coins, this will be very hard.

                3) The initial exchange rate is treated like a special offer and the rate goes to 1=1. The overhang from the initial 22=20 offer is covered by the inevitable float from users and collectors.Report

              • Avatar Jeff Dicken in reply to rj says:

                Oh, and yes, a debit card system will be coming along eventually. This first year is really just a limited test of the system.Report

              • Avatar rj in reply to Jeff Dicken says:

                Also, what is the contractual relationship between the “Central Bank” and B-Note users (consumers and the businesses that accept them). What if the B-Note conversion window closed? What are the enforcable rights that a B-Note holder has?Report

              • Avatar ML in reply to rj says:

                Just curious: what “enforceable rights” do owners of US dollars have? As a commenter below pointed out, all forms of money (and really, all economic systems) are built on faith.Report

              • Avatar rj in reply to ML says:

                “this note is legal tender for all debts, public and private.”

                It might not seem ironclad, but it is in effect and is certainly more solid than:

                “this note is good for some private debts at the whim of participating businesses and individuals.”Report

              • Avatar ML in reply to ML says:

                RJ, I can’t reply directly to your post… something to do with the blog software, I guess. The quote on the green pieces of paper is a nice sentiment, but in the end the entire system is backed up by faith and faith alone. If a majority of individuals come to the conclusion that the green pieces of paper are worthless, then your “enforceable rights” don’t amount to a hill of beans.

                Obviously, a brand new local currency will not have the same credibility right-out-of-the-gate as the dollar, which is why the BNote will be backed up by USD. Usage of BNotes is also 100% voluntary, and individuals will be limited as to the number of BNotes that they can exchange at one time. We’re not asking anyone to convert their life savings or pension into BNotes, and would not allow them to do so even if they wanted to.

                I appreciate your skepticism, but I would respectfully suggest that you direct some of it towards the oligarchy that runs the US financial system… I would think that you would find them to be a more worthwhile target then a small local currency project. It’s a bit like screaming at a young child who has a tiny hole in his shirt, while completely ignoring the fact that the emperor has no clothes.Report

              • Avatar rj in reply to ML says:

                Yes, the system is backed on faith, but that faith has worked for as long as anyone alive can remember and at least as a medium of exchange, it has worked out rather well.

                It’s the new kid on the block that has the burden of proof.Report

              • Avatar ML in reply to rj says:

                I am an accountant working with the BGCA.

                Initially, the BNotes will be 100% backed up by US dollars in a reserve account. 20 USD gets you 22 BNotes, and 22 BNotes gets you the same 20 USD back, so anyone who exchanges dollars for BNotes has the option to buy out of the system and be made whole again. There’s no risk of a “run on the bank” type of situation.Report

    • See my reply to Jaybird. There’s no loss of value. Instead, there is value gained by strengthening local supply chains. We become less dependent on corporations that do not have our best interests in mind.Report

  2. Avatar Jaybird says:

    Will the local government accept them as payment for parking tickets?

    How about the local power company for payment for your electricity bill?

    If you can’t pay your $50 public urination fine with Bnotes, I suspect that the game is being given away.Report

    • Avatar Jeff Dicken in reply to Jaybird says:

      Hi Jaybird,

      I’m responding to you and partially to Jason K., since the focus of this currency is initially the communities of Baltimore and not yet the City itself, much less other cities.

      Having a local currency encourages people to think about who they are supporting when they spend money. The goal is not to do away with the dollar, but to bring as much of people’s buying power as possible back home to their own neighborhoods. Yes, eventually, we will be backing the development of local energy generation and you will be able to pay for some of this in BNotes, but that is a longer-term goal. Yes, we do intend to work with the City to have them accept BNotes for certain fees, and this will also take a while to put into place.

      In the near-term, the BNote supports the use and growth of local supply chains. Jason’s contention that he would lose value going to the BNote is simply not true, unless he doesn’t value his community at all. At the very least, people using BNotes can get back the full amount in dollars that they initially exchanged, and at best, they are helping to change people’s perception of what money is, and what it’s really for.

      All local transactions that can be conducted using local currency *should* be done this way. There is no reason to support Bank of America every time you go to a yard sale or pay your babysitter. There is no reason to support Wal-Mart at all, unless you are willing to sacrifice local merchants on the altar of corporate profits. “Low prices” from corporate chains exclude their externalization of many costs, including needless pollution and exploitation of the workers who are doing their manufacturing. They are not a “benefit” that we can justifiably take advantage of any longer. Keep local business local, and keep it healthy!Report

      • Avatar Jason Kuznicki in reply to Jeff Dicken says:

        Jason’s contention that he would lose value going to the BNote is simply not true, unless he doesn’t value his community at all.

        So if I ever occasionally want to spend money at places that don’t take the BNote — then you’re telling me I “don’t value my community at all”?


        The more money I have in BNotes, the less I can have in other forms, like U.S. dollars. This has undeniable opportunity costs. It’s not a matter of love or the lack thereof for my local community. If a subset of businesses don’t take the BNote, then that currency is relatively less valuable. No amount of wishing (or motive-impugning) can change that.Report

        • You’re just missing the point. You can spend money anywher you want. If you can get the same thing at Belle Hadware as you can at Lowe’s, support a local merchant in the process, and have the money continue to circulate locally (maybe one of your friends has a cafe that the Belle owner frequents) instead of letting the money end up out-of state, that’s a real, tangible benefit – not just to you, but to the community and the city.Report

          • Avatar Jason Kuznicki in reply to Jeff Dicken says:

            Sheer mercantilism. On what basis do you conclude that the Baltimore area has an insufficient supply of currency anyway? Currency is not wealth, and a local currency doesn’t generate local wealth in or of itself.

            (Also, do you suppose Lowe’s is staffed by extraterrestrials? Because they fake the Maryland accent pretty well, I find.)Report

            • Avatar BlaiseP in reply to Jason Kuznicki says:

              There is no shortage of currency. There is a shortage of faith. Lowe’s has Jimmie Johnson inside a rolling advertisement on the tracks of NASCAR. The local merchant, well, since when did he lose his identity?Report

              • Avatar Scott in reply to BlaiseP says:


                “Faith” doesn’t pay my mortgage, FRNs do and if I can buy something cheaper at Wal Mart and have a few extra FRNs left over then that is where I’m going. The world isn’t a fair place and no amount of liberal wining about that fact is going to change it.Report

              • Avatar BlaiseP in reply to Scott says:

                Heh. Ever been around an arbitrage operation?Report

              • Avatar Jeff Dicken in reply to Scott says:

                Yes, clutch those pennies to your chest. Hold them tight. Certainly don’t give them to a local merchant who lives right down the street from you.

                This is not a liberal thing. This is not a conservative thing. That dichotomy is being used against us. Wal-Mart only cares about Wal-Mart. We, however have the ability to care about each other and about our common quality of life.Report

              • Avatar Jaybird in reply to Jeff Dicken says:

                We, however have the ability to care about each other and about our common quality of life.

                “When was the moment that you knew that Bnote was doomed to failure?”Report

              • Avatar Rufus F. in reply to Jaybird says:

                Jay, this isn’t the first time somebody’s tried this and they haven’t all failed. I think BerkShares are still going strong.Report

              • Avatar Jaybird in reply to Jaybird says:

                Did the ones that succeeded have different gameplans than relying on people caring about each other?Report

              • Avatar Rufus F. in reply to Jaybird says:

                In a sense, no. I mean there was more to it than just people caring about each other, but- the reason I was asking the questions in the first place- a number of places have tried the same basic plan and claimed to have good results. I’m just curious as to how that happens.Report

              • Avatar Jaybird in reply to Jaybird says:

                Scene from episode 2, season six of The Wire (the Bnote episode):

                first actor: fish
                second actor: fish fish
                first actor: fiiiish
                second actor: fish
                first actor: fish?
                second actor: fish… fish
                first actor: fish
                second actor: fish!
                (this goes on for another 5 minutes)Report

              • Avatar Jeff Dicken in reply to Jaybird says:

                You know, I can understand many of these arguments that attempt to reduce the system to just one of its components – caring about community, the 10% discount, exclusion of that one place you really want to eat from tonight’s choices – however, seriously, focusing on any one of these and deciding it’s the weak point in the system completely ignores that the system does employ all of the positive dynamics together in order to be viable and strong. Some people just don’t care about other people, bottom line, and they will not be likely adopters. We all have a choice to build and foster the society and the communities that we want, and this is just one tool with which to enable some very positive changes, both in people’s mindset and in their buying habits.Report

              • Avatar Jaybird in reply to Jaybird says:

                Build and foster the society and the communities that we want both in people’s mindset and in their buying habits in one hand, spit in the other.

                See which hand fills up first.Report

              • Avatar Jeff Dicken in reply to Jaybird says:

                Go to all of your neighbors. Ask them if they’d rather build and foster the society and the community they want, or if they’d rather have a handful of spit. Report back.Report

              • Avatar Jaybird in reply to Jaybird says:

                Dude, I *KNOW* what my neighbors *SAY* they want.

                They want to live in the millennium under the rule of our Lord and Savior Jesus Christ where the lion lies down with the lamb, swords are beaten into plowshares, and all tears are wiped away.

                We are still here, however.

                It ain’t about stated preferences.Report

              • Avatar Scott in reply to Jeff Dicken says:


                I don’t expect Wal Mart to “care” about me. I only expect them to sell me what I want at the best price I can find. If they cared more about me than returning value to their shareholders I would be worried.Report

              • Avatar Jeff Dicken in reply to Scott says:

                Yes, and that’s part of the larger problem that we’re attempting to address. Your choice is who you ultimately support with your money. Would you buy your breakfast cereal from a mass-murderer? And if you already do, but don’t know it, would you want to find out?Report

            • So, I haven’t said anything about the money supply, and I am not likely to. We will see what this enables in time.

              Lowe’s may employ local residents, but again you are missing the larger issue that national corporations have a focus on giving as little in the way of pay and benefits as they can, since the people working there are not the friends/neighbors/babysitters of the CEO. There is a lot lost in the equation of corps. coming into town and hiring – not all jobs are created equal, and a job a Lowe’s is inferior to a locally-created job at Belle, which would be enabled by your use of BNotes and dollars there.Report

              • Avatar rj in reply to Jeff Dicken says:

                When I lived in Baltimore, I waited tables at a locally-owned and operated restaurant. I don’t recall getting great benefits out of the kindness of the owners’ hearts or because they wanted to help the local economy. Actually, I don’t recall getting any benefits at all. Except, of course, sneaking food out the back.

                The benefits at Lowes may not be that great, but that doesn’t mean that they are at Belle.Report

              • Avatar Jeff Dicken in reply to rj says:

                You’re right – not all local businesses care as much about their employees directly. However, putting more money in the hands of local business owners means that more of it will stay local and be more likely to benefit their employees indirectly. The alternative is having the money drawn out of the community by Olive Garden or McDonald’s, never to return.Report

              • Avatar rj in reply to Jeff Dicken says:

                You’d be surprised how much revenue made by a restaurant stays local. Taxes, rent and labor make up the lions’ share of expenses, and that stays local. Franchise owners are very often local. The money that “leaves” goes to franchise fees and non-locally-sourced product.

                The Jell-O I buy at Eddie’s comes from the same factory as the Jell-O at Safeway or Giant. The only difference is that I pay more for it. Same goes for a wrench at Lowes.Report

              • Avatar Jason Kuznicki in reply to Jeff Dicken says:

                Again with the mercantilism. Having more money doesn’t make an economy more wealthy. Not even a local economy.

                Integrating that local economy with the national economy — so that goods and services flow freely and are cheap — that makes the economy wealthy. In fact, I love Baltimore so much, I’d like it to be closely connected to the richest economy in the world…. the United States economy.

                (Say, if I hate my local community because I don’t use the BNote, what conclusion do I draw about you, and about the United States? Why do BNote users hate America?)Report

              • You know as well as I do that logic doesn’t always run both ways. 🙂 If you don’t use the BNote, you are simply tacitly accepting things the way they are. I, for one, things things are in need of some improvement.

                Whether or not one feels the BNote is the means to achieve that improvement is an open issue.

                It’s not necessarily *more money – it’s greater collective local control, as excercised by each individual on their own behalf, of the flow of money within their own communities. Economies of scale seem like a good thing, but the externalized costs are not good on the whole.Report

              • Avatar BlaiseP in reply to rj says:

                Ever run a restaurant? I run the best jazz bar in Central America, Cafe Q. There are three people I give a shit about in a restaurant: the cook, the maitre d’ and the customer. The maitre d’s job is to ride herd on the surly waiters and fire them at the first opportunity, they’re the weak point in customer satisfaction and they’re all high-drama. And, as you point out, they’re usually thieves. Good waiters are hard to find and I pay mine very well. A restaurant is theater. People can eat cheaper at home. I buy local and I hire local because I get better value for money and I can pare down the operation to sole suppliers.Report

          • Avatar Scott in reply to Jeff Dicken says:


            Instead of creating your own currency, why not encourage folks to shop at local stores? Isn’t that the real purpose of this exercise?Report

            • Avatar Jeff Dicken in reply to Scott says:

              Because the BNote will encourage people to shop at independent local stores, but it will also enable a host of other things as well. We wil be able to start a micro-loan program, to provide for small and short-term loans that banks won’t provide. We can put some of our resources into revenue-generating projects that, for example, build out solar infrastructure for sustainability. We can encourage people to become local suppliers of things that are currently purchased out-of-state. There are many more possibilities, and we are excited to see how people will use BNotes to improve their communities and their lives.Report

            • Avatar tom van dyke in reply to Scott says:

              Seems the 11-for-10 scheme is the same as a 10% discount card.

              I admire the “shop local” sentiment, but this comes with a lot of ideology attached and a helluva lot more overhead.Report

              • Except that the businesses don’t necessarily give up the 10%. By not having to pay the MC/VISA fees, if they are recirculating their BNotes they may even come out ahead. The system is designed to be as overhead-free as possible.Report

              • Mr. Dicken, merchants saving credit card fees is a strong point, although it doesn’t address the point of why people use credit cards in the first place.

                I’m looking at the success of Berkshares, and it seems to me a fundamental advantage is that the county is semi-agrarian, creating its own wealth and foodstocks.

                An urban environment is dependent on trade with the outside, nowhere near self-sufficient for its own needs. The hardware store owner must pay greenbacks for his stock; he does not create that wealth from scratch.

                So too, that the money held in reserve might be put into right-headed but unprofitable investments in things like solar power gives one pause. And micro-loans—lovely in principle but not always self-sustaining, and especially vulnerable in bad times.

                Even the Berkshares scheme seems vulnerable to various catastrophes, a particularly bad winter or growing season, when paying the supply-and-demand price within the Berkshares world is simply prohibitive, esp compared with prevailing prices outside it.

                The one virtue of currency and finance—for which we pay a great price—is liquidity and a price/value balance. Since catastrophes are localized, a local currency is stable only within a rather narrow range of boom-or-bust.

                But thank you for your time.Report

              • Solar power investment would be years down the road. Micro-loans are closer, but yes, we will need to have the funds available for them aside from the backing funds for the system.

                The BNote will not replace the dollar, and it’s not intended to. It will coexist with the dollar and carry out any and all local transactions for which people will use it. If we eventually decouple from the dollar, it may also provide a stored-value bridge to whatever new system is employed.Report

      • Avatar Jaybird in reply to Jeff Dicken says:

        I ask because the government needs to be backers of this currency if it is to work at all, it seems to me.

        If I purchase these dollars and can only use them at Joe’s Buffalo Wings And Baked Beans or Jane’s Needle Nut (two delightful local businesses with owners who live in the neighborhoods they serve!) then my Bnotes are useful only as a medium of exchange for folks who frequent these businesses or folks who owe money to folks that they know frequent those businesses.

        *IF*, however, I know that I can pay my local sales taxes with Bnotes? Katie, bar the door. Every single person I interact with is going to have to deal with local sales taxes in the next couple of days.

        If, however, I know that the local government does not support the local currency, I can probably expect to hear from Joe and Jane that they don’t take Bnotes anymore, as the only other person who took the Bnotes were businesses unrelated to their core constituency.Report

        • Avatar Jeff Dicken in reply to Jaybird says:

          The government really just needs to get out of the way, and let people conduct their business. Not likely, since there will still be taxes, but central bank money is not needed for local trading.

          And it’s for businesses, but also for any currenctly-dollar-based local transaction. Your point about the small businesses no longer taking BNotes is the reason we are focusing on the size and diversity of the business network, as well as underscoring the ability to use them in the community. The more widespread they are, the more faith people will have that their value will get them what they want when they want it, and the network continues to grow and strengthen.Report

          • Avatar Jaybird in reply to Jeff Dicken says:

            Hey, don’t get me wrong. I *ADORE* the idea of competing currencies! Our country needs more of them!

            My fundamental problem is one of sustainability and *THAT* seems predicated on getting everybody to buy in to the idea of Bnotes being “just like money” (in the shared illusion sense).

            If the government (which will refuse to get out of the way and just let people conduct their business, for the record) does not buy into the “money as shared illusion” idea wrt Bnotes, this will, effectively, kill the currency in its cradle.

            (I’m not saying “ought”. I’m merely calling it like I’m seeing it.)Report

            • Avatar Jeff Dicken in reply to Jaybird says:

              Yes, it would certainly help to have some kind of official sanction. I do expect that we’ll be able to engage the city in that conversation, since we’re supporting business and hopefully creating local jobs.Report

  3. Avatar DensityDuck says:

    This seems like the equivalent of those arcades where, instead of putting quarters into the games, you get a “points card” and you slide the points card through a slot.

    The idea being that, if one “play” costs 147 points, and you get 202 points for each dollar you spend, you’re less likely to realize that you just spent seventy-five cents to play “Pac-Man”.Report

    • Seems like, but isn’t. And the comments focusing on exchanges are pretty much missing the point. This currency project is about people and the value that they create in their communities for each other, both in trading goods and providing services. It’s about bringing the social component back to commerce. It’s about realizing that the universality of the dollar, while handy when traveling, works locally to undermine real human connection and devalue us as it puts profit above all else.Report

      • Avatar rj in reply to Jeff Dicken says:

        Just saying “it’s about people” doesn’t exempt you from the things that have concerned central bankers and currency theorists for centuries, if not millenia: stability, convertability and widespread acceptance.Report

        • Avatar Jeff Dicken in reply to rj says:

          Yes, I believe that’s an integral part of this experiment – how much power over their economic system can legitimately go back to the very people carrying out transactions between each other? Can a central bank be limited in its scope and be kept out of private transactions where it’s not needed? We’re as interested as anyone in seeing what having this currency available can enable.Report

          • Avatar Jason Kuznicki in reply to Jeff Dicken says:

            I’ll say this — I would not be the one to forbid you from trying.

            The libertarian tradition, of which I’m a student, has a soft spot for free banking. But one of its greatest theorists, Ludwig von Mises, also explained in a very convincing manner why currencies tend to unify over time, and how (at one point in monetary history, anyway) commodity money in gold was selected through an invisible hand process as the one currency that more or less united the world.

            I’m not saying we should go back to the gold standard — not in the least. I am saying that a unified national currency, highly convertible to international currencies when the need arises, satisfies nearly all of the demands that gave rise to the old international gold standard, while avoiding many of that standard’s dangers. It’s a good system, and I don’t agree that it’s broken, at least not in any way that damages local communities.Report

            • Yes, the gold standard will not hold up any more. And the dollar has served its purpose well in supporting interstate and international commerce. It just needs a counter-weight. 🙂

              Really, we’re not at all libertarian, since they exclude some very important elements of human existence, including the central function of society to provide for those who are unable to provide for themselves. We are, however, for socially-minded free will.Report

            • Avatar BlaiseP in reply to Jason Kuznicki says:

              You clearly understand more about this subject than I know, so let me ask this question: why shouldn’t the B-Note be considered as a special sort of coupon, an extension of commercial paper, with the additional benefit of a fully-funded dollar reserve?

              I’m getting a two-dollar discount advantage by agreeing to denominate my trade in B-bills.Report

              • Avatar Jason Kuznicki in reply to BlaiseP says:

                Several features appear to distinguish this plan from coupons. The important ones seem to be that (1) there is a reserve, and we are told a full one, though I’m not an accountant and haven’t looked at the books; (2) you have to buy it rather than getting it for free; (3) the exchanges are intended to be multilateral rather than bi- or trilateral (merchant-consumer-merchant or manufacturer-consumer-merchant-manufacturer).

                These factors, especially (1) and (3), introduce complications that coupons never have. They implicate consumer confidence in the BNote as a store of value, because people will hasten to get rid of their notes if the safety of that store is in doubt. (This is exactly what happens bank runs, incidentally. It never happens with coupons because no one circulates them in anything other than the predicted routes, and because no one counts on them as a store of value in any sense.)

                This question of consumer confidence in turn implicates the aggregate demand for notes and how to match it with supply to ensure a stable valuation. Getting this right is very important for a supplier of money, and many of the old-time economic panics began in sudden, catastrophic corrections to the supply of money.

                I understand that commercial paper as currently regulated has the effect of easing shocks to the money supply. The degree to which a local currency can do this will be negligible, and it will not have (as far as I can tell) a commercial paper market at all.Report

              • Avatar BlaiseP in reply to BlaiseP says:

                Thanks, that’s useful. If I was running this scheme, I’d be paying close attention to what you’re saying here. I’d also be gathering feedback from the merchants, analyzing the motion of the BNote. I’d get a bunch of students from the nearest economist factory and have ’em stuff that data into a model, with an equivalent number of tagged US dollars to see how chump change moves as well. Betcha they’ll find similar motions.Report

              • Avatar Jeff Dicken in reply to BlaiseP says:

                Yes, this is all very informative. During the first year, the circulation of BNotes will be very low, so there will be little risk of shock. And I have to wonder to what extent shocks to the banking system at large are the result of dependence on over-leveraging, which this system is not designed to foster (or any leveraging at all, really).

                If no one in the system has more than $100 in BNotes at any given time, how does that affect people’s desire to exchange back for dollars? I suspect the comfort level will be much higher overall. We will be looking at circulation statistics as the BNote is rolled out, to gauge acceptance and find weak points in the local supply chain.Report

          • Avatar rj in reply to Jeff Dicken says:

            How does this give power to the people? All it does is force them to spend money in a way its proponents think is socially beneficial. Of course, willing participants agree on what’s socially beneficial, but voluntarily reducing participant consumer choice seems to me like the opposite of power to the people.Report

            • Avatar Jeff Dicken in reply to rj says:

              We’re not forcing anything. Business participation is voluntary. Resident participation is voluntary. Focusing on Choice is much like focusing on Low Prices – it still misses the built-in dynamic by which communities get stronger, benefitting everyone, regardless of whether they use BNotes or not.Report

              • Avatar rj in reply to Jeff Dicken says:

                So removing choices of people who get paid in B-Notes isn’t reducing their power as consumers or individuals?Report

              • Avatar Jeff Dicken in reply to rj says:

                Nope. Your question is poorly-phrased. The employees who choose to be paid in BNotes, maybe 10% of their salary, are the ones who would be spending those dollars in the BNote network anyway, or who decide that it would be a good thing to commit 10% to local purchases.Report

              • Avatar rj in reply to Jeff Dicken says:

                So it’s for people who would have spent that money locally anyway?Report

              • Avatar Jeff Dicken in reply to rj says:

                As far as employees go, yes, and those who are interested in supporting local businesses to a greater extent. When talking about paying employees in BNotes, it has to be clear that it’s the employee’s choice.

                Do you see how you switched the focus from employees to everyone using BNotes? That was a little duplicitous.Report

              • Avatar Scott in reply to rj says:


                I think that may really be the bottom line. If you really want to support local business then you will do it B-note or no B-note. Everything else is just white upper middle class liberalism trying to be hip.Report

              • Avatar rj in reply to rj says:

                I don’t think I was being duplicitous – the incentives that face employees getting BNotes is the same as anyone else who uses them – they’re like money, but accepted in fewer places.

                And I don’t mean to seem like a strident opponent of local currencies generally or the B-Note specifically, but I just wished that they were built on well thought-out banking and monetary principals and not just operated on the altruism of the participants.Report

              • Avatar Jeff Dicken in reply to rj says:

                Yeah, I understand where you’re coming from. It seems that taking the established banking principles and bringing more of a social element is going to involve some degree of altruism. This is all ground-up, and if there are key principles you feel would be beneficial and are not being incorporated, please feel free to say so. It’s as much your system as anyone’s.Report

              • Avatar Jason Kuznicki in reply to rj says:

                Jaybird asked: “When was the moment that you knew that Bnote was doomed to failure?”

                For me, it was when I learned it was “as much [my] system as anyone else’s.” When responsibility is collectivized, it evaporates.Report

              • Avatar rj in reply to rj says:

                For starters, I’d either get rid of the discount or let the currency float. The system is based on the inherent contradiction by having a 10% overhang that sloshes around the system like a game of hot potato until someone has to eat the loss and spend the money outside the system (which is inevitable). The more users and the more B-Notes outstanding, the more of an issue this will become.

                The other option is to treat it as a local discount card. Businesses write off the loss as a promotional expense and convert the B-Notes either by returning it to circulation as change or changing it back to US$ at 11=10 at the B-Note Central Bank.

                I’d also like to see some more ironclad contracts between the B-Note Central Bank and merchants, as well as a guarantee that B-Notes can be exchanged for USD at any time.Report

              • Avatar Jeff Dicken in reply to rj says:

                Hahaha, yeah – I’m not implying that it’s entirely collectively-run. However, everyone is free to find positive ways to benefit themselves, local businesses, and their community using BNotes. They are the mechanism – the means to many good ends – but not the end in themselves.Report

              • Avatar Jeff Dicken in reply to rj says:

                rj – Yes, the BNotes can be converted back to dollars at any time. But I disagree that this is inevitable. As the percentage of BNotes a business can circulate locally increases, their intake of BNotes can increase proportionately. It’s a self-sustaining local economic ecosystem, and the transactions with outside suppliers and all other dollar transactions are not affected. We can’t help it if a few businesses decide to take in more BNotes than they can use, and so have to exchange them for dollars, but this may be the exception and not the norm.Report

              • Avatar rj in reply to rj says:

                I disagree. If B-Notes take off and more than a nominal amount of any one establishment’s revenue comes from B-Note transactions, the convertablity problem will get worse, not better. I can find something to do with B$5 or B$20, but what about B$2,000? You need US$ to deposit into an interest-bearing account, US$ to buy from (most) suppliers and US$ to pay your employees, with a few small exceptions.

                Say your local hardware store starts getting a significant percentage of its business in B-Notes, they will have to change them into US$ because the wholesaler who sells the caulk, nails and hammers will take it.

                If the wholesaler takes the B$, he has the same problem: the factory that makes the caulk doesn’t take B$.

                You simply can’t have a currency premised on autarky in anything but token amounts within an economic system that is not an autarky.Report

              • Avatar Jeff Dicken in reply to rj says:

                So then isn’t the challenge to see what percentage of trade can actually be carried out locally in a systemic way? 10%? 20%?Report

              • Avatar rj in reply to rj says:

                It’s not a challenge to the businessman who has lots of B$ and nowhere to spend or invest them. It’s just a problem.Report

              • Avatar BlaiseP in reply to rj says:

                Let me outdent a bit from #89 and solicit your opinion of the following variant:

                Instead of a BNote, what about an interlocking discounting system, such as a BCard, representing discounts at local merchants. Let D represent a dollar’s worth of undiscounted merchandise and B represent an automatic percentage discount. The real advantage of this discounting system is gathering consumer data: who’s buying local stuff.Report

              • Avatar BlaiseP in reply to BlaiseP says:

                More fuel for the fire: Eau Claire Chamber DollarsReport

              • Avatar Jeff Dicken in reply to BlaiseP says:

                Hmm. I see the benefit in capturing the local-buying data, but to what end? In this scenario as well, wouldn’t the merchants bear the cost of all of the discounts being provided?

                I have to head out, but I’ll try to check back in here later… J.Report

              • Avatar BlaiseP in reply to Jeff Dicken says:

                As others have pointed out, someone’s going to eat the discount. The friendly neighborhood merchant and his buddies are capturing customer-specific information and enlarging their customer base.Report

              • Avatar Boegiboe in reply to BlaiseP says:

                We quite successfully implemented a Student Discount Card in Los Alamos, NM. The Los Alamos National Labs have lots of student employees–interns and co-ops–who get paid less than the local workers but find themselves in a weirdly isolated pocket of high cost of living. This makes them leave town for their entertainment and eating out, or just not eating out, more often than in other student-rich locales.

                So I, as Student Council Treasurer, went around to local businesses and requested that they give a 10% discount (or more, if they wanted) to anyone bearing a student discount card. We then charged students, like, $4 to cover the costs of a card-printer and to invest them in using the card. Students used the cards, and we informally asked our local partners now and again whether they’d had folks using the discount, to gauge the program’s success.

                The first year was slow, but I was told that later years went better. Eventually I think the program was absorbed into either the ski passes most students bought or their ID badges (I lost track of any contacts there after a few years).

                If 3-4 young folks in their spare time could create a system like this in a small town, can’t a much more broad-reaching Bcard plan like what Blaise suggests be successful?Report

              • Avatar BlaiseP in reply to Boegiboe says:

                The BCard scheme can also serve as a customer loyalty card, such as the larger grocery stores have, with corresponding discounts. Here’s one such scheme (caveat: this is just the first thing Google produced, and is not to be construed as endorsement or advertising)

                The BCard provides value at several different points: the price of entry is minimal and the technology is well-established. Data capture is consistent and straightforward. Discounting is the province of the merchant: some items might not be subject to BCard discount where all others are. A BPoint scheme could be established, redeemable for goods or even deeper discounts: my grocery store provides 5 cents per gallon discounts on gasoline at participating gas stations (BP stations to be specific, the card scheme is named Roundy’s, again, not to be construed as endorsement or advertisement).Report

  4. Avatar rj says:

    Its main value is for a certain upper-middle class cohort to signal to one another that they are willing to spout the same buzzwords: localism, sustainability, etc. The project will probably make money, if only because the notes look cool (really cool, imho) and people will buy them to collect and not to spend. Give a B-Note to a person in real need of a hot meal and he’ll laugh at you.

    Creating a currency with its main selling point of “it’s just like the dollar, except you can’t spend it at most stores” is like buying a Lexus hybrid: you’re not saving enough money on gas to justify the higher price and you’re not being “green” compared to buying a smaller car or a used car, but you do get a little chrome symbol on the back that tells everyone just how much you care.Report

    • Avatar Jeff Dicken in reply to rj says:

      Overly cynical view. This is about localizing as much commerce as possible. It’s about the reality, not the perception. Yes, they look good, and yes, people will want to collect some of them, but that doesn’t create the lasting change that we are working toward.Report

    • Avatar Jaybird in reply to Tony Comstock says:

      Come on, pretty mama…Report

    • Avatar Rufus F. in reply to Tony Comstock says:

      Right, the Bahamian dollar is used alongside the US dollar there. Does it boost the local economy to use the Bahamian currency? We always did use it, but we’ve always stayed with a friend who lived outside the tourist areas.Report

      • Avatar Tony Comstock in reply to Rufus F. says:

        I think the chief benefit to their economy is the Bermudan or Bahamian change you end up bringing home.Report

        • Avatar rj in reply to Tony Comstock says:

          That, and the fact that the Central Bank of the Bahamas can devalue the B$ if necessary. It’s no different than any other pegged currency, except that it trades 1-for-1 and businesses thus take USD with ease.

          Now, does that mean the CBB will ever devalue the B$? Probably not, since changing the exchange rate will erase any benefits from a more active monetary policy.

          That means it isn’t like the B-Note at all.Report

          • Avatar Tony Comstock in reply to rj says:

            In the Netherland Antilles the Euro and the Gilder float. Not surprisingly, nearly no one uses them. In fact, over on the French side, a lot of places take Euros at par for dollars, even though when I was there the Euro was trading at about $1.34.

            Why do you suppose that is?Report

  5. Avatar Jason Kuznicki says:

    The more I re-read this thread, the sadder I get.

    As rj and I have both explained, the whole project seems based on some very doubtful banking principles. But in the event of failure, the backers seem predetermined to blame a lack of caring or of community spirit. The result will be disillusionment, not with bad financial ideas, but disillusionment with the community. A profound mistake if ever there was one.Report

    • Avatar BlaiseP in reply to Jason Kuznicki says:

      The math is sound enough. It’s exactly like a gift card, limited to purchases within a given market. Those who want to preserve the ethos of their polis will purchase these notes willingly enough and proudly present them to the merchants, demonstrating their fidelity to the proposition of their continued existence.

      Goodwill is defined as the value of an entity over and above the value of its assets. It’s an important line item in the software business: a confederation of good coders within a given firm will drive up the purchase price.

      Wheaton, Illinois threw a great deal of money into its downtown spaces, spruced up its Metra train station, made many improvements to its infrastructure, repealed its ordinances on the sale of booze in restaurants (it still doesn’t have liquor stores in the city). In response, a pricey condo development sprang up, catering to the commuter crowd working in downtown Chicago. It was immediately and fully booked, on the strength of these chi-chi amenities and the ethos of the town. In an era where real estate prices have plummeted, Wheaton Illinois remains a prestige address, its property taxes fund some of the best schools in the state.

      If you don’t believe in Community Spirit, that’s okay. Others do. Nothing happens unless someone dreamed of it first. Stone Soup: everyone throws something into the cauldron and a fine soup is thereby made, but not before someone fills the cauldron with water and lights a fire under it.

      This proposition has not failed, not yet. It’s easy to predict failure, harder to create success. And yes, many fine ideas go down in flames. Success and failure are seldom predicated on the structural soundness: more often, it’s a matter of belief and the vagaries of fate. In a battle between belief and doubt, I’ll go with belief every time. Doubt never made anything and disparaged everything.Report

      • Avatar Jason Kuznicki in reply to BlaiseP says:

        The idea that the success or failure of this project has anything to do with community spirit is simply laughable. It’s not that I don’t believe in community spirit. It’s that autarky hurts the community, and integration helps it. Baltimoreans: Folks from Philadelphia and Arlington aren’t your enemies. Don’t treat them that way.

        My prediction: If the bank is run soundly, BNotes will be a fad, driven on the upside by a desire to signal community membership, and on the downside by an inability to do large-scale transactions with out-of-town merchants. A few businesses will get burned that way, and they’ll stop taking BNotes or else limit their intake by charging differential prices. Then the consumers quietly ask for their dollars back — convinced that Baltimore just doesn’t have the proper community spirit. But all the while, spirit isn’t the problem. Convertibility is.

        These predictions are premised, of course, on the bank being run soundly in the first place. That’s a big “if,” particularly given that its directors seem to think that community spirit pays the bills.Report

        • Avatar rj in reply to Jason Kuznicki says:

          B-Notes will fail if the project is seen as an “alternative currency” because it’s basically the U.S. Dollar, but worse.

          B-Notes will succeed if they are seen as coupons for local businesses. I could see accepting a few B-Notes as change and then spending them down the block, but I’d feel the same way about any coupon. As long as everyone agrees on who eats the discount and all participating retailers are contractually obligated to accept tham, it’s all well and good. Just don’t call it currency.Report

          • Avatar Jeff Dicken in reply to rj says:

            You are so focused on “worse” when it’s not worse than the dollar, but better. Until you see the ways in which it’s better, you see nothing but yourself and your greed.

            No one eats the discount unless they need dollars and/or have too many BNotes, and even then the potential cost is minimal. Again, the system is designed to both a) give the businesses control over how many BNotes they accept, so that they don’t end up with an excess, and b) grow local sources of supply and local service networks, so that there is no incentive to convert BNotes back to dollars.Report

            • Avatar rj in reply to Jeff Dicken says:

              When I have a dollar, I can spend it anywhere I want. When I have a B-Note, I can only spend it at participating businesses, which have “control” over how many they accept. Same goes for businesses who have to pay suppliers.

              So my B-Notes are not just useless in 99% of the country, they could also be useless at the businesses that supposedly accept them.

              Tell me how that’s better.Report

              • Avatar Jeff Dicken in reply to rj says:

                You seem smart. I’m sure you can come up with at least a few reasons why it will be better, if you try. I have work to do but will check in later to see what you’ve come up with. Hint: stop thinking about the limitations and about yourself.Report

              • Avatar Jason Kuznicki in reply to Jeff Dicken says:

                My favorite form of ad hominem argument has yet to be properly named, at least to my knowledge. I suggest calling it the argument ad ass-kissem. Here’s the ideal type:

                “You are so smart. Surely this means you are able to see that my argument is correct.”Report

              • It’s an encouragement to think more openly. You do seem like a smart person. Yes, if you pick away at anyone, you can eventually take them down. Do we know everything this system will do? No. Are we doing our best to make it a sustainable and positive system? Yes.Report

        • Avatar BlaiseP in reply to Jason Kuznicki says:

          Autarky? You have manifestly predicted failure and runs on the bank, already weeping crocodile tears like some unctuous undertaker, measuring the old guy for his coffin before he’s even dead. You’ve been hanging around those Cato freaks too long. Pay a visit to the local Chamber of Commerce: surely one is to be found in your burg of record. If the BNote people have any sense, they’ll arrange for a presentation at their own Chamber of Commerce.

          This isn’t a matter of Convertibility. It’s a matter of Confederation. I’m constantly amused to see American merchants unwilling to take traveller’s checks: they don’t encounter enough of them to understand how they work. Given that the merchants who take the BNote will post a nice little sticker right next to the Visa/Mastercard logo on their front doors, the consumer will grasp the concept soon enough.Report

        • So, BlaiseP made some good points, and the Wheaton example is a good one and very apt here.

          Jason – you will always be able to find a way to shoot down or disparage this project, especially since it hasn’t even started yet. No one ever said that the success or failure rests solely on comunity spirit – again, you boil it down to one element and then use that as a straw man to take it down. We are not treating other cities as enemies. We are not sitting in flowers preaching that community love will solve our financial woes.

          We will run this system soundly, and you prediction of it being a fad may or may not come to pass. All currencies have their own lifecycles, even the dollar, and while it is in its prime, this one is designed to do some very positive local things. One of them is to slowly lessen the need for large-scale transactions with out-of-town merchants. Will these ever completely go away? No. Can we provide more of our needs locally? Yes. I don’t see businesses getting “burned” as a likely outcome, when it’s the businesses themselves that will be controlling their own intake and use of BNotes. It’s a system that will be evolving and growing as the local supply chains evolve and grow. Organically.Report

          • Avatar rj in reply to Jeff Dicken says:

            Going on and on about the Big Bad Bankers and warning about disparaging the virtuous locals doesn’t solve the contradictions inherent in the B-Note system:

            1) They’re useless outside Baltimore, and every business that accepts them buys supplies from businesses that don’t accept B-Notes and pays employees who can’t pay their student loans with B-Notes. Every business has large or out of town suppliers. Your local dry cleaner does not buy chemicals from a friendly neighborhood chemist and your local hardware store does not buy hammers from a friendly neighborhood blacksmith. Even if you’re buying “local” food, you’re paying farmers in, for example, Frederick County, money that they can’t use for seeds, farm equipment and such.

            Any more than a token amount of business done in B-Notes creates this exchange problem.

            2) There is a 10% discount on B-Notes. Someone has to eat this, somewhere down the line.

            3) “We will run this system soundly” is not an answer to anything. It’s a dodge.Report

            • Avatar Jeff Dicken in reply to rj says:

              Yes, good point about the food ecosystem. We do intend to include everything out to the farms that feed the metropolitan area.Report

              • Avatar BlaiseP in reply to Jeff Dicken says:

                Though nothing is less-wanted than unwanted advice, may I offer some anyway. Belay all this idealistic talk: your audience only wants to hear about a bottom line advantage to your scheme. These are merchants who are quite willing to take each others’ coupons and are paying close attention to rising paradigms such as GroupOn.Report

              • Avatar Boegiboe in reply to Jeff Dicken says:

                It took a long time for you to point out that you intend to include local farms, yet that is the answer to a lot of the criticism leveled at your proposed system. The Bnotes will only work as you want them to if the entire supply chain of at least a few local businesses is included, and then those suppliers can get a large portion of what they need (e.g. groceries, clothes, gadgets) back from the Bnote community. That’s at least part of what rj’s been trying to say, yet you didn’t answer him with a true understanding of his questions.

                Let me tell ya: From what I know of farmers, and I’ve got a few as kith and kin, they won’t give a good god damn about some city folk yammering about community spirit unless they’ve got some strong indication those city “neighbors” understand the farming business well enough to answer their hard questions directly. Answering the hard questions here can be good practice, if you let it.Report

              • Avatar BlaiseP in reply to Boegiboe says:

                Farmers are amazing people, amenable to innovation at many levels. These BNote guys ‘n gals can make this work, I’m sure of it. But more importantly than answering the Hard Questions, the BNoters have to solicit those hard questions from the merchants and farmers.

                It has been my lot in life to be saddled with novice consultants. I tell ’em, right off the bat, “keep asking yourself, over and over, who is my customer. It isn’t necessarily the guy signing your timesheet. You find out who your customer is and you take him to dinner, ask him how you’re supposed to be adding value to his enterprise. Then you sit there and let him talk. And he will talk. And talk. Sometimes he’ll start shouting in anger and he’ll tell you more than you ever wanted to know about how fucked up things are and how bad they got before you, the consultant, got there to solve a problem they couldn’t solve from within. And when he’s done, you tell that customer you’re going to work with him and take his advice. He will go back to work the next day and tell everyone you’re worth every penny his company will ever pay you.”Report

              • Avatar Jason Kuznicki in reply to Boegiboe says:

                As rj pointed out earlier, though, farmers will face the same problems all other economic actors face in taking the local currency. He wrote,

                Even if you’re buying “local” food, you’re paying farmers in, for example, Frederick County, money that they can’t use for seeds, farm equipment and such.

                The first question they’ll likely ask is — “You want to make harder for me to get seeds and fertilizer. That hurts my business, which hurts the community. What’s the upside?”

                I don’t think fellow-feeling with their downtown not-really-neighbors is going to cut it.

                This gets back to one of my central points in the entire discussion — I love local communities! But the way we have local communities, in today’s world, absolutely requires economic integration across the state, the country, and the world. The high standard of living we now expect is produced not by local self-sufficiency, but by massive economies of scale. And that requires, at the very least, the easy conversion of currency, if not its complete integration.Report

              • Avatar Jaybird in reply to Jason Kuznicki says:

                This is why it’s important to be able to give the government or power company the Bnote.

                Everybody owes money to the government.
                Everybody owes money to the power company.Report

              • Avatar rj in reply to Jaybird says:

                In that case, I’d get a whole bunch of B-Notes and pay my power bill, parking tickets or property tax at a 10% discount (great deal, never gonna happen), or else I’d have to recalculate my bill in B-Notes at the 22=20 exchange rate.

                And when the government gets the money, they will have no choice but to cycle that money back through the B-Note central bank, since you can’t pay firefighter in B-Notes and the City of Baltimore has very little need to procure yoga classes or artisnal candles.Report

              • Avatar Jaybird in reply to Jaybird says:

                Hey, it’d be an effective way to give a raise to Public School teachers! “Here’s an extra $50 in Bnotes in your envelope this week.”

                Give it a couple of years and Bnotes will be a Human Right.Report

              • Avatar BlaiseP in reply to Jason Kuznicki says:

                The BNote with its inherent 22/20 ratio is DOA. A BCard with a factored discount is entirely viable and achieves the same goal. If your power company doesn’t agrees to discount your power but your restaurant agrees to discount your meal, the restaurant will because it needs the marketing data and the power company has a goddamn operating monopoly.

                Massive economies of scale my ass. The BCard scheme can operate entirely within the scope of such enterprises because every franchise within Baltimore County is in trouble. People are leaving in droves. As the market thins out, the remaining businesses must understand, more than ever, how to improve service to their remaining customer base. They will cotton onto the BCard because it’s a lifeline and not everyone who accepts the BCard will make it, ultimately. These are tough times, where knowledge is power, and information drives that knowledge.

                The BNote is sketchy, a half-baked loaf, a non-starter. The BCard is not.Report

              • Avatar Jason Kuznicki in reply to BlaiseP says:

                Massive economies of scale my ass.

                In your context, they can be disregarded. Not in mine.Report

              • Avatar BlaiseP in reply to BlaiseP says:

                Says who? Ultimately, it’s a transaction between two people, regardless of whether you get some McMultinationalburger through a driveup window or a piece of sushi on a porcelain plate. The tuna in the sushi was put onto a worldwide bid/ask system run by the fishermen not ten minutes after it was caught. I have a private system running right now which trades 50 kilo lots of coffee picked on bushes in people’s yards in Guatemala which completely changed the pricing structure of high-end coffee. The previous system was points over NYMEX KT.C for high grade coffee. Now it’s a straight bid/ask, price discovery via small lots which affects the entire high end coffee market, making it congruent with high end wine. I do know what I’m talking about here. McMultinational and Economies of Scale are for McMorons and Libertarians in their ivory towers. Quality and Convenience seeks its own level and the McMultinational is nothing but a fucking impediment to progress.Report

              • Avatar Jason Kuznicki in reply to BlaiseP says:

                So… backyard steel mills are the right way to go?

                Look, for some things, you’re absolutely right. For others, I am. I’m not arguing that all goods everywhere always benefit directly from economies of scale. And I know that you’re not arguing that no goods do. Weirdly, your very own examples seem to prove the point.

                A globalized coffee market seems something we can obviously agree on, and the ability to trade in small batches is itself a product of economies of scale — in shipping and finance. Different products and services will find their own more or less optimal firm and market sizes, but the process working in one market depends on the process working in others.

                The same applies, roughly, to BNotes, except the outlook there is a lot more precarious — again, as I think we both agree.

                With a local currency, someone is eventually going to run into a supplier that doesn’t take it. This is a necessary consequence of the various scales of markets that nearly all firms or supply chains eventually must encounter. In those cases, they’d better pray they have a substitute supplier lined up, one willing to take the BNotes, and at roughly the same price. If not, they and their consumers are in big trouble. I think we agree here, don’t we?

                For a local discount card, that doesn’t happen. Again, as I think we both agree.

                But hey, I’ll call you a moron too, while I’m at it. Just because.Report

              • Avatar rj in reply to BlaiseP says:

                One of the businesses participating in the B-Note program is a small-batch roaster coffee shop. I don’t imagine that Salvadorean farmers have much use for B-Notes, Ithaca Hours or any other local currency. Everything has to go back to old fashioned greenbacks at some point. All you’re introducing is a transaction cost.Report

              • Avatar BlaiseP in reply to BlaiseP says:

                Curious you should bring up backyard steel mills, mini-mills are a going concern, one of the few profitable sectors in steel, what with governments distorting that market with subsidies. Jesus… quit condescending. You absolutely were talking about economies of scale.

                The high standard of living we now expect is produced not by local self-sufficiency, but by massive economies of scale.

                And not until I pushed back did you start backpedaling. A high standard of living starts with a high standard of service and massive economies of scale turn what was a quality product into a cruddy little knockoff commodity product produced by wage slaves in Thailand. If you let your product go down the commodity route, you lose your markup and you’re headed for oblivion. I’d rather have one customer who pays my invoice than ten thousand who pony up chump change to buy some app for a buck on the App Store. And that, Jason, is how the rich make money. The saps and the morons and the McMarketing Weasels make theirs by screwing local merchants and putting up Big Boxes which end up eaten by Bigger Boxes and we shall all drink shitty coffee out of styrofoam cups.Report

              • Avatar Jason Kuznicki in reply to BlaiseP says:

                I bring up the backyard mills because (as I understand them, anyway), they are useless for anything more than hobbyists.

                I brew my own beer, I enjoy the hell out of it, but I don’t kid myself that I could supply a city that way. Sometimes, economies of scale are indeed necessary — and sometimes, for some processes, they can be dispensed with, and we get a more personalized product.

                Still, get rid of them all, and we starve on a massive scale.

                This shouldn’t be hard to understand. Really.Report

              • Avatar BlaiseP in reply to BlaiseP says:

                The goal of the BNote, however quixotic, is to preserve the notion of the local merchant. I have urged these good folks to reconsider their scheme. As the worthy Boegiboe observes, if the goal is to expand a customer base, offer a discount based on the notion of a Pore College Kid what could really use a discount.

                Baltimore County is on hard times. The few merchants who remain are chasing fewer customers. Unemployment is at 8.2% in Baltimore County. If the remaining merchants are gonna survive this downturn, they need some scheme to enlarge their customer base and create loyalty in a landscape where there isn’t much now. The few who remain want some sense of community. Here’s a chance to create some.

                Walmart and the Big Boxes aren’t going to save Baltimore County, not if everyone leaves, like they’re leaving Detroit or St Louis. Those burgs are fucked. Their reasons for being are gone. Baltimore just might make it through this recession, but not without something intangible, something which denotes loyalty to both customer and seller. Oscar Wilde observed the cynic knows the price of everything and the value of nothing.Report

              • Avatar rj in reply to BlaiseP says:

                Not to nitpick, but Baltimore County surrounds, but does not include, Baltimore City. “The County” is suburban. The businesses participating in B-Note are in Baltimore City.

                And people aren’t really leaving in droves, or at least as fast as they used to. A lot of redevelopment has taken place and the property tax base has widened a bit, even if it is waterfront-and-Hopkins-centric. Compared to when I lived there, things are a bit less dire.Report

              • Avatar BlaiseP in reply to BlaiseP says:

                I’m looking at Baltimore County because that’s all the stats I can find. I presume the relationship between City and County is much akin to Cook County and Chicago, a situation I know much better.

                I’ve been looking around, thinking about this problem because it’s an interesting proposition. Baltimore City administration seems like a rooty-poot no-count collection of bureaucrats. They seem entirely useless. I wouldn’t count on them for anything. Half-o’-this and none-o’-that, between that gonif Sheila Dixon and that two-left-feet Stephanie Rawlings-Blake, that town couldn’t find its ass in the dark with a map and a flashlight.

                You BNoters should expand your marketing as far as you can. Dump this dumbass BNote scheme, jump straight to a BCard. I presume you’ve got commuters from even farther than Ann Arundel and Hartford Counties. I’d do publicity at every inbound MARC train stop, there are your paying customers. Hit up Johns Hopkins, everywhere there’s money in that burg.Report

              • Avatar Jeff Dicken in reply to BlaiseP says:

                Definitely exploring the BCard or something like it. Money in people’s hands first, then we’ll network it. Yes, the entire metro area.Report

              • Avatar rj in reply to BlaiseP says:

                Not really – Cook County includes Chicago, but Baltimore County does not include Baltimore City. City residents don’t vote for County offices. It’s two different counties. I believe Baltimore and St. Louis are the only places in the country with this arrangement.

                I’ll ignore your blanket insults of politicians you just looked up because they’re… well, they’re politicians. But thanks for reminding us that we’re in the comments section of a political blog.

                The BCard isn’t a bad idea, in the sense that it’s a discount card for local businesses. It’s hardly a new idea and not a “currency” in any sense of the word.Report

              • Avatar BlaiseP in reply to BlaiseP says:

                My residence is in Elgin IL, within Cook County. Each has its own bureaucracies. Both are hugely corrupt. Baltimore City is a mess, there’s absolutely no denying it’s been mismanaged from top to bottom for decades. I am not encouraged by what I read about Stephanie Rawlings-Blake and her dodgy dealings with Johns Hopkins. I stand by my assertions. Baltimore, like Chicago, is as crooked as a dog’s hind leg.

                According to BlaiseP’s Law of Refugees, you may tell who is the good guy in any given fight by looking at the footprints of the refugees: they run away from the Bad Guy. Baltimore is emptying out where it isn’t gentrifying and this scheme will only gain traction where it’s gentrifying.Report

              • Avatar rj in reply to BlaiseP says:

                Containerization, advances in steel manufacturing, massive redlining (Baltimore is famous for its residential segregation ordinance, struck down by the Supreme Court) and a bunch of other economic factors led to Baltimore’s decline. It’s not Baltimore-specific either. All of the old industrial cities have suffered similar fates and many are trying to revitalize, to varying degrees of success. With a great location and a great university, Baltimore is better-positioned than most.

                Blaming politicians is easy because you can always agitate to throw the bums out. You can’t just insult people into opening businesses in your city. It’s a cop-out.

                Why don’t you admit that you don’t know the first thing about Baltimore and using a bunch of made-up “laws” to make yourself sound smart about something you are completely ignorant about?Report

              • Avatar BlaiseP in reply to BlaiseP says:

                This much I know about Baltimore and its problems: as you point out, they are essentially the same as those of St Louis, a city I know vastly better. I fly in and out of Baltimore for a gig in Bethesda. I’m a great fan of architecture, I photograph a lot of it and I’ve spend maybe ten weekends in Baltimore, enough to know that city is very seriously fucked up except for where it’s gentrifying, say along Fort Avenue, Federal Hill south area, but it has some excellent historic buildings elsewhere.

                Now St Louis is reduced to Soulard, Central West End, a few federal buildings downtown and U City. The surrounding burbs created by white flight are also on hard times. East St Louis is a horror story.

                St Louis had a gentrification program in Soulard. You could buy an old brick mansion for a dollar on the promise of living in it for five years. A strange industry grew up, crews of tuckpointers, painters, woodworkers, plumbers, roofers, all residents who specialized. The whole area has been brought up to historical preservation standards.

                It’s true, I don’t know anything about Baltimore other than the usual crap one hears in coffee shops here and there about Baltimore’s struggles with gentrification and its extremely limited progress. I started thinking about this when this BNote issue arrived here. I’ve put up an idea I think is much sounder, the BCard, one which has the practical advantage of not presenting some watered-down currency to the few remaining merchants. As Jason pointed out below, you are improving nothing by cutting one end off the carpet and sewing it onto the other. I am a merchant myself, I’ve been a restauranteur, a coffee dealer, a software contractor, I haven’t gotten a regular paycheck from any outfit since I was in the Army. All the good will in the world will not save a corporation.

                Baltimore could gentrify, as my old haunts in Old Town and Lincoln Park in Chicago did, as Soulard did, as Boy’s Town (the original Skid Row ) did, as Belleville Illinois did, as a dozen other neighbourhoods I’ve lived in did.

                When I say a government is corrupt, it is, and you may know it by this sign: that gentrification stalls. It’s a force of nature. Put a microbial culture in a petri dish: it forms rings. The original ring moves out, an empty spot forms, a new ring arises in the center. The same phenomenon is seen in cities everywhere in the world, unless slumlords are tolerated. Baltimore has a problem with slumlords. Its government may be getting somewhat better, but as far as I can see, it is not.

                Want to know what saves cities? The guys who have the money to buy the lovely, half-ruined old Queen Anne homes and find and pay the contractors to restore them and put some sweat equity folks in them, we’re the people who save these places and even in the heart of this Great Recession, that market continues to do well. People like me. Merchants come and go, they spring up like mushrooms on horse turds. Don’t you worry about the merchants. They’re doing well enough, exploiting their market spaces. If you want a better sort of merchant, you will encourage a better customer to patronize his establishment.Report

              • Avatar rj in reply to BlaiseP says:

                You’ve spent a bit of time in south/SW Baltimore. There are portions of the city that have always been well-maintained (Roland Park/Guilford, Mt. Vernon, up NW along Reicherstown Rd/ Park Hts Ave.) and some working class areas that are rather stable (Hampden comes to mind). But houses and industrial spaces are being rehabbed in Fells’ Point, Canton, Highlandtown and even north of Patterson Park, which was inconcievable a decade ago. Charles Village is sprouting condos left and right and run-down student-occupied rowhouses are getting rehabbed as well. Down by Hopkins’ medical campus, they’re planning a big biotech park.

                If gentrification is your sign of a healthy city, then Baltimore is mighty healthy.
                But there’s a lot more to it.Report

              • Avatar Boegiboe in reply to Jason Kuznicki says:

                I don’t think the farmers are going to see much of their revenue stream in Bnotes. If they can turn the x% of their revenue that does come in Bnotes into non-farm-specific goods (like the groceries, clothes, etc I mentioned), and the 100-x% that they get in FRNs can cover their supplies, then that’s a good deal.

                So, they could start by taking only, say up to 1000 Bnotes their first Bnote-friendly growing season, and insisting on FRNs after that. Whatever of those 1000 Bnotes they find leftover after buying the things they need, they turn in for cash. If they see that stabilize over a few seasons, they can increase to 2000 Bnotes per season, or more.

                As long as the Bnotes are a small percentage of anyone’s revenue stream, and as long as they can mostly or all be converted to needed goods by most or all participant, they may be viable. And, if they ARE viable, Jeff and his cohort will have achieved the community-economy reintegration they’re aiming at.

                So, I see the possibilities. I just feel like, if I or others here are having to step up to the plate to describe how it might really work, it’s going to be a hard sell to those who really stand to lose something over it.Report

              • Avatar Jeff Dicken in reply to Boegiboe says:

                Yes, the farmers and anyone else being able to have control over their acceptance and use of BNotes is key. They expand their use as they have more to pay for with them. I am unable to post every detail of the system here – please see our website. Yes, tax is the same – nothing changes with any of that, and it’s still paid out of the dollar part of revenue.

                We’re not going for the people for whom it’s a hard sell right now in this first iteration. The system’s success will be its own proof, however limited or expansive.

                “As long as the Bnotes are a small percentage of anyone’s revenue stream, and as long as they can mostly or all be converted to needed goods by most or all participant, they may be viable.” This. And there have been plenty of actual ideas on this page – getting into and defending every detail of the dynamics is just not possible here, given the other demands on my time. I do appreciate your thoughts.Report

            • Avatar BlaiseP in reply to rj says:

              Heh. You head down to the Chamber of Commerce and you will learn differently. Local merchants do cooperate behind the scenes, intensely, and often in ways you might find disturbingly akin to restraint of trade.Report

          • Avatar BlaiseP in reply to Jeff Dicken says:

            May I urge you to contact the Eau Claire WI Chamber of Commerce. They had a bad go-round with an outside outfit which tried to implement a scheme called Chamber Bucks. You will want to learn from their experience.

            Obviously, your greatest ally in this scheme will be your local Chamber of Commerce. If you haven’t done so already, arrange to make a presentation to them and solicit their opinions.Report

            • Avatar Jeff Dicken in reply to BlaiseP says:

              Ok, I’ll get in touch with them – thanks. We’re working with local merchants’ associations, and expect to make more official headway once we’re in circulation.Report

              • Avatar Zach in reply to Jeff Dicken says:

                Dunno if I think this is a good idea or not. There’s probably a good chance you could get all or part of ArtScape (say, the local-crafts section) to accept and/or offer to give change in BNotes; especially if you agree to convert on site after the event or something.Report

          • Avatar Jason Kuznicki in reply to Jeff Dicken says:

            Jeff yesterday:

            [T]he comments focusing on exchanges are pretty much missing the point. This currency project is about people and the value that they create in their communities for each other,

            Jeff today:

            No one ever said that the success or failure rests solely on comunity [sic] spirit

            I’m confused. Yes, there’s some wiggle room between those two, but I’m still confused. There are problems on the merely-money-and-exchange side, as rj and I have pointed out. Gesturing at community spirit as part of an integrated, “organic” whole doesn’t explain how you will solve these problems. It suggests that you have no solution for them, only buzzwords.

            We are not treating other cities as enemies.

            Erecting trade barriers is part of what one does to one’s enemies.Report

            • Avatar rj in reply to Jason Kuznicki says:

              Baltimore exists because of trade – the B&O Railroad, the Sparrow’s Point steel works, the port, factories producing everything from McCormick to American Can. All of these businesses were happy to take money from outside the city.

              A lot of those business have gone away because of larger changes in the world economy, but the fact still remains that Baltimore is in the center of one of the largest agglomerations of wealth and knowledge the world has ever known. Retreating into autarky under the banner of “community” can only hurt it.Report

              • Avatar Jeff Dicken in reply to rj says:

                “A lot of those business have gone away because of larger changes in the world economy”

                Corporations focusing on profits at the expense of people sends our jobs and industries overseas. Good argument right there for a localization effort. It’s not autarky – far from it. It’s a necessary balance.Report

              • Avatar rj in reply to Jeff Dicken says:

                Businesses that don’t focus on profits are businesses that go under. What is true of American Can is true of a cafe in Hampden.Report

              • Avatar Jeff Dicken in reply to rj says:

                Yes, that’s true, but I also said “at the expense of people” – you’re ignoring the people in this dynamic, and they are an integral part. There’s a bigger picture here.Report

            • Community is important, and it’s one of the main focus areas. It’s not the only dynamic here. We are not here to solve all of the city’s problems. We are providing a mechanism for people to open their minds, support their communities, build out the supply chains, and start to address through their actions some of the issues that we’re facing.Report

          • Avatar Heideggger in reply to Jeff Dicken says:

            Sorry, I think this is doomed. People, for the most part, do not like change, and when you start messing around with something as vital and central to their lives as-MONEY–you’d better have many, many good reasons for them to do so. This has, “New Coke” and “Esperanto” written all over it. If they really want to help their local communities why should they resort to currency gimmicks? It’s like travelers checks only being accepted at only a few stores in Baltimore. Sorry to be so negative, but I’m just at a complete loss at how this scheme could ever be helpful or persuasive enough to so radically change people’s relationship with their cold hard cash. Marginally, perhaps but it’s a very, very hard sell, especially after the bank meltdown and bailouts and people stuffing all their money into mattresses. And the stench of the Bernie Madoff pyramid scheme is still very much in the air. They better see Washington, Lincoln, Hamilton and Jackson on their bucks or this isn’t going anywhere. And what happens if this new currency goes belly-up? Does the FDIC insure this money and bail out yet another financial institution? I hope my misgivings prove to be wrong and you’re wildly successful. In any case, good luck!Report

            • Avatar BlaiseP in reply to Heideggger says:

              Um, people just loves dem some changes, specially when dey gits dem some Value. They carry around their little barcoded loyalty cards and pony them up all day long so they can get those discounts. Helps the store know all ’bout what they like, even what time of day they buy things. It’s the Holy Grail of marketing, identifying a customer.

              Look at your Sunday newspaper, look at all those coupons falling out of there. Coupons work, but they only go so far, because it’s a one-way proposition, they’re just scattered seeds. Some will grow, most will get thrown away. Google up GroupOn, it’s so hot retail outlets have to brace themselves for the flood of demand created by putting something on there. And the retailers absolutely hate GroupOn and Yelp. Hurts their brand, lets people say ugly things about them, doesn’t encourage return business but they feel they have to participate. But the retailers love Facebook, because it’s a human thing. They love loyalty programs because it encourages repeat business and that, Heidegger, is how you make money in bad times like now.Report

  6. Avatar Zach says:

    Mentioned this to a co-worker here in Baltimore who hadn’t heard of this but was familiar with a successful local currency in Ithaca: http://www.ithacahours.com/

    The value of their $10 bill is pegged to the minimum hourly wage, apparently.Report

    • Avatar rj in reply to Zach says:

      Not to be snarky, but does this program still exist? There is nothing on that site referencing any year past 2001.Report

      • Avatar Rufus F. in reply to rj says:

        Yeah, Ithaca Hours still exist. I think the idea was based on Josiah Warren’s time-share notes. My understanding of it is that you can spend them on labor and earn them for labor, and the idea was to facilitate higher employment.Report

        • Avatar rj in reply to Rufus F. says:

          Well then they should spend some Ithace Hours to get some labor to update the website.

          Since it’s not just dollar-lite like the B-Note, it poses more interesting questions. One would imagine that a college town like Ithaca would have a lot of student casual labor available.Report

      • Avatar Zach in reply to rj says:

        I had the same thought and had to look elsewhere to confirm it… I guess that not having it backed by $USD means it can outlast the efforts of its creators.Report

  7. Avatar lilredleaf says:

    There are a lot of good points being brought up here, but I think one of the key philosophical differences that I have with many folks who offer criticism is that I see these critiques and challenges as what they are- critiques and challenges- and not as “evidence” that the system can’t work. ALL challenges can be met with sufficient thoughtfulness, creativity, and ingenuity, and can often produce truly original, brilliant, and beneficial new systems and ideas. As far as I know, nothing truly original has EVER emerged from proceeding along paths that were well established, presented no difficulties, were guaranteed to succeed, and that everyone agreed were the “right” ones.Report

    • Avatar lilredleaf in reply to lilredleaf says:

      I guess a more succinct way of expressing the same thing would be: “Lighten up!”Report

    • Avatar rj in reply to lilredleaf says:

      So then propose some solutions! And no, repeating the words “community” and “local” and “people” does not count.

      What I object to is the brushing away of real problems by being accused of negativity. One of the main issues discussed here is localism – how it interacts with the larger world, whether it’s still possible and to what extent it is desirable. These things have to be worked out. Questions have to be answered. “Just plug in thoughtfullness, creativity and ingenuity” is a dodge.Report

      • Avatar Boegiboe in reply to rj says:

        Totally agreed. I was more enthusiastic about the idea of Bnotes before I saw Jeff Dicken’s comments here. There’s no doubt this Bnote program is going to happen in some form or another. But if it doesn’t get off on the right foot, with the hard problems having been realistically addressed, then it is more likely to fail. And if it fails, even people with a better understanding of how to make it work will never be able to convince Baltimore to give it a second go.

        Another concrete idea (in addition to the one I offered at #141) is that retailers should be encouraged to accept Bnotes for small purchases, but it should also be pointed out that bulk purchases may be provided by wh0lesalers on a ratio basis: say, up to 25% can be paid in Bnotes. Or 10%. Or 5%. Whatever the wholesaler can manage and not risk having to turn in too many Bnotes for cash.

        Because that is the death of this idea. Anyone who has to turn in a too many Bnotes for cash even one time, because they couldn’t get enough of their suppliers to take them, will stop taking Bnotes.

        Maybe this idea is already part of the plan. If so, there’ve been plenty of admonitions in this thread to think positively and be less greedy that could have been replaced with actual ideas.Report

  8. Avatar Boegiboe says:

    Question: Will you have to pay sales tax when you buy Bnotes? What about income tax when you redeem them?Report

  9. Avatar lilredleaf says:

    @ RJ
    I hear you, and regardless of how it probably came across, I was not trying to be glib or brush away real problems. Many of these issues have been the subject of countless hours over countless months of conversation and brainstorming. This project is a huge one, and completely volunteer-run by people who have full time jobs and families and are spending thousands of hours of their own time. What I would suggest to you to consider is that just because an organizer does not have all day to respond in a way that satisfies you to every single one of your criticisms does not mean that they are being “brushed away”. ALL criticisms are taken very seriously. It would be really productive if folks who have concerns could come out to some of our events and engage us in person so that we could have a real dialogue. Email exchanges lose so much in translation. With that, I have to get back to work!Report

  10. Avatar Michael Tew says:

    As rj rightly points out, someone has to eat the 10% discount when they exchange B-notes for FRN. This is a deliberate incentive to users to figure out how they can spend those notes at a local business. I believe this is the most important aspect of the whole program. While there are obvious advantages to a B-card in terms of ease of use and data gathering, it does not provide the same incentive to find a way to spend locally.

    If this works, then all of the vendors participating in the program will enjoy an uptick in turnover, because people will choose where they spend their money based on who takes the B-note. The receiving business, in turn, will be faced with the same question, and this happens with every B-note transaction. Although the 10% discount only occurs when the person who makes the original exchange spends the B-notes, there is a virtual 10% savings every time a business owner spends the B-note, rather than exchanging it for FRN.

    In this economy, everybody is hurting, and it seems likely to me that imports will become more expensive, and that transportation costs will rise. There is a whole Transition Towns movement built on this premise, and within that movement there is no question that local currency is an important tool in re-localizing an economy.

    If you happen to share the sentiment that has thousands of people working to re-localize, then the B-note will make sense to you. If you don’t care about such things, and prefer to buy cheap Chinese products at Walmart, no-one is going to stop you.

    The B-note is an experiment. If the end result is positive for Baltimore business, then it may well become possible to negotiate a favorable relationship with the city such that some fees or taxes can be paid in B-notes. This has been the case with other convertible currencies such as the Brixton Pound in London. In any event, it’s too early to call the experiment a failure, the project hasn’t even been launched yet. The volunteers working to make this happen are committed, creative people who have already invested a great deal of time, and quite a bit of money. I used to be one of them when I lived in Baltimore and I am confident they will surprise all the nay-sayers.Report

    • Avatar Jason Kuznicki in reply to Michael Tew says:

      It’s also an incentive to spend more money when really serious inflation sets in. Not that it’s necessarily good monetary policy to have anything more than modest inflation. Destroying local value is destroying local value, and the fact that people will work extra hard to get it back doesn’t mean that you’ve created anything on net.

      On your more substantive point, I really don’t understand at all why people seem think that I have something against localism — merely because I see a local project I happen to think is unwise and likely to fail.

      If I cared about my community, I’d advise against the project, and I’d warn my neighbors not to participate. And that’s exactly what I’m doing.Report

  11. Avatar Michael Tew says:

    You lost me on the inflation thing – I thought spending trumped saving in periods of high inflation – the B-note exchange rate is fixed, so what is your point?

    The b-note creates a discount to encourage local purchases and increase the velocity of circulation. Not a red cent leaves the community. More turnover equals higher profits. If you really think that is “destroying local value” then I will have to revise my good opinion of the Cato institute.

    I suppose if you want to disparage the efforts of volunteers working hard to benefit their community by warning your neighbors not to participate in a project yet to be launched, and which you clearly do not understand, then go to it. If you turn out to be correct, then you helped to create the failure, and if you are wrong you will be thought a fool. In neither case do you have anything to be proud of.Report

    • Avatar Jason Kuznicki in reply to Michael Tew says:

      Sorry if I confused. I’ll explain the inflation analogy, which I now see was difficult to follow. It’ll take a bit of recap though.

      The BNote creates an incentive to shop locally — but only, as I’ve said for this entire thread, by destroying value.

      The value destroyed comes in two forms — first, there’s the option value of being able to spend your money anywhere, which is gone until you trade the notes back in. Second, and more seriously, there’s the discount rate, which if it’s enforced strenuously, is going to burn someone, somewhere along the flow of the currency: Lots of people get a little tiny incentive, and one local business goes kablooey.

      So yes, you will create an incentive, but only by destroying something of value in the process.

      Inflation is a good analogy here, not because I anticipate any inflation (I have no idea whether there will be any), but because during times of inflation, consumers similarly have an incentive to spend their money — if they don’t spend now, the same nominal amount will buy a lot less later.

      While inflation stimulates consumer spending, it isn’t necessarily good for the economy. And while the BNote may stimulate local spending, that local spending isn’t necessarily good for the local economy either.Report

  12. Avatar Michael Tew says:

    Ok. I accept that the person who exchanges dollars for B-notes gives up something of value – the ability to spend their currency in lots of different ways – and in return they get a 10% discount. Now some might think that’s a reasonable trade, some won’t, but value hasn’t been destroyed, an exchange has taken place.

    Some business owners will trade a discount on the purchase price for the benefit they get from accepting the b-note in the form of marketing and promotion – again, no value has been destroyed, an exchange has taken place. Some businesses, in return for additional work in sourcing purchase with other businesses who accept the b-note, will not even have to fork over the 10% – they get marketing and promotion in return for a little work. A bargain either way.

    Unlike FRN, no business is ever obliged to accept B-notes, all such trades are entirely voluntary, so your expectation of some business going kablooey seems to be an exaggerated danger. Worst case scenario is the business has to eat the 10% on some portion of B-note purchases, which is not likely to be significant in any event.

    This I don’t understand – “And while the BNote may stimulate local spending, that local spending isn’t necessarily good for the local economy either.” How can local spending be bad for the local economy?Report

    • Avatar Jason Kuznicki in reply to Michael Tew says:

      I think that a lot of what you say above is reasonable, but I remain concerned about the risk to small businesses.

      While consumers might find it both a discount and a good way to show their community spirit when they convert some of their disposable income to BNotes, merchants don’t necessarily have the same incentives or the same wiggle room, and they have a lot fewer choices in how they spend their revenue. Too many BNotes can become a problem for them, and I predict that it will eventually become a problem for some.

      Consider a block entirely full of locally owned, BNote-taking businesses — grocery, hardware, shoes, and a restaurant (I imagine there may be relevant laws about liquor and pharmacy; the BNote folks may want to look into them). Anyway, the owners rent their space from a landlord. He’s also local. When the rent comes due, the tenants all offer to pay the landlord in BNotes.

      The landlord now has an unenviable choice — either take the BNotes, which he’d prefer not to have in such quantity (he personally could only use a few of them!) — or evict them. No matter what he chooses, it’s bad for the local economy. If he evicts, four local businesses die. If he takes the notes, he may have to delay repairs or raise the rent.

      I’ve simplified a lot, but the point here is that somewhere, the BNotes are going to concentrate. Most likely it will be among those businesses with a winning — make that a losing! — combination of local spirit and relatively demanding cash flow requirements. These are businesses that we ought to want to help, so I can only wonder — why do the BNote folks want to damage their community so much?

      As to you last paragraph, if doing the spending elsewhere would have been more efficient, then local resources have been put to sub-optimal uses. The result is a loss, one that can indeed be felt by the local economy.Report

  13. Avatar Michael Tew says:

    You are clutching at straws now Jason. The situation you describe is so highly improbable it’s hardly worth thinking about. The landlord is under no obligation to accept B-notes for payment of rent and if the businesses have a surplus of B-notes they can exchange them for FRN and write off the discount as the cost of the advertising they received.

    The B-note folks are working hard to help their community, which is more than can be said for those who sit on the sidelines performing cynical mental contortions.

    What you call efficiency is the reason for the decline in living standards for an ever-growing cohort of increasingly marginalized people. Your “efficiency” assigns no cost to the destruction of quality of life for your community and that is willful ignorance.

    Have a nice day.Report

    • Avatar Jason Kuznicki in reply to Michael Tew says:

      You are clutching at straws now Jason. The situation you describe is so highly improbable it’s hardly worth thinking about.

      I disagree entirely. I don’t think the crunch will necessarily hit landlords, but it’ll necessarily hit someone.

      The landlord is under no obligation to accept B-notes for payment of rent and if the businesses have a surplus of B-notes they can exchange them for FRN and write off the discount as the cost of the advertising they received.

      Those could be some pretty big write-offs, then. And if not for them, then for someone else. The discount given to consumers gets absorbed by someone else. You don’t make a carpet bigger by cutting off one end and sewing it onto the other.

      And I am astounded, not at my cynicism, but at yours. Here you are, proposing a scheme that will help you — a consumer (and of a particular mindset) — while hurting local businesses. And you dare pass it off as helping the community! You, not me, are the enemy of the local community here.Report

      • So we hurt local business by increasing their customer base and their turnover.

        Your argument is in tatters like your efficiently trimmed carpet, but you are just too stubborn to admit you are wrong. No point in me wasting any more time with you.Report

        • Avatar rj in reply to Michael Tew says:

          No, it’s not, and here’s why: The B-Note creates 10% of value out of thin air. I give you $20, you give me back $22, POOF!

          If that was possible, every city and town in the country would be minting their own money. The problem is that at some point, every business will have to convert that back to USD and take a 10% hit.

          This isn’t an issue if you have extremely low volume of B-Note use, since it’s not hard to find a place to spend a little bit of it. But when B-Note revenue is needed for things like rent and supplies, you have two choices: convert to USD and take the hit or hope they take B-Notes and are willing to find someone else to accept them and take the hit. You’re literally always passing the buck.

          Currency is not a magic trick – you cannot create $22 out of $20 without someone ponying up the money somewhere.Report

          • Avatar Jason Kuznicki in reply to rj says:


            • Avatar rj in reply to Jason Kuznicki says:

              These guys, though they mean well, clearly don’t know what they’re talking about. Since the notes look cool and will probably never be a big percentage of anyone’s revenue, it won’t be a failure per se, just not a success, much less a revolution in how we think about money. That’s because it’s not a new currency, it’s a regular ol’ dollar, just less useful.

              What would be more interesting as an intellectual exercise is a local currency that actually floats. It could be “backed” by something of local value that would rise and fall based on the health of the community.

              Maybe a group could pool together some money to buy a few abandoned lots and then print money backed by the value of the lots. An appraiser comes by every year and the property-backed money fluctuates in purchasing power accordingly. A “fed” elected by participating businesses would decide when to sell and could keep the money from property sales (and a small reserve) in trust for when bills are redeemed.

              Transaction costs would be tough to handle and you wouldn’t be able to “cash out” unless you could find a USD buyer for your property-backed notes or if an entire lot was sold. Still, it’s something different!Report

              • Avatar Jaybird in reply to rj says:

                Maybe they’ll hope for 8% of the bills to never, ever be spent.

                That’s certainly a possibility for the first year given the novelty factor.

                Hey, and if only a small percentage of local businesses accept them, that number could skyrocket into the 50’s and 60’s!Report

          • Avatar Scott in reply to rj says:


            It makes perfect sense to do so, but only if you love your community.Report

            • Avatar Jason Kuznicki in reply to Scott says:

              Hey, I’ve got an idea. Let’s do this for the United States!

              Everyone can trade in their old dollars for SuperDollars at a 10% bonus. Now everyone’s 10% wealthier, as long as they buy American.

              Surely you can see why this wouldn’t work, right? The businesses that trade with foreign firms would all face severe hardship. Many of them would fail. That failure wouldn’t be contained to them, either. It would cost Americans their jobs. With fewer Americans working, even purely American-supplied businesses would feel the pinch, because consumer spending would be hurt.

              Now take all those facts, which ought to be obvious, and translate them to Baltimore. Either BNotes remain very small-scale, or they really hurt some well-meaning, value-producing local firms.

              You can’t get something for nothing. Not personally, not nationally, and not even locally.Report

  14. Avatar Michael Tew says:

    Wow. For a project doomed to failure you are all predicting unprecedented success far beyond anything the currency association aspires to. If the city were to accept B-notes for payment of property taxes, as happened in Wogl, Austria, a few decades ago, then maybe the fabulous amounts of B-note transactions you seem so confident are bound to occur, might be possible. But if that were the case, it would not create the problems you seem so worried about. You cannot have it both ways folks. At this point you are just being cynical for the sake of it.Report

    • Avatar Jason Kuznicki in reply to Michael Tew says:

      I don’t think the project is necessarily doomed to failure.

      It’s doomed to failure if it gets big. Otherwise, it’s doomed to irrelevance.

      If I had to bet, I’d bet on the latter. And I’ll repeat: It saddens me that the failure and/or irrelevance will be blamed on lack of community spirit, when basic monetary economics offers a perfectly sufficient explanation.Report

      • Well, now we are getting somewhere. Its irrelevant to help a few Baltimore businesses keep the doors open, save a few jobs, keep a few families off the street. Sweet.Report

        • Avatar Jaybird in reply to Michael Tew says:

          If you could get hospitals to accept Bnotes, maybe you could save the lives of infants.

          You should look into that.

          Unless, of course, you don’t care if children die.Report

        • Avatar rj in reply to Michael Tew says:

          But it keeps nobody off the street! It’s an accounting parlor trick. If you have an actual business that you need to keep open (and keep your employees off the street), you will maybe take a few notes and write off the 10% as a discount.

          However, you can’t run a permanent sale without jacking up USD prices (and hurting your neighbors – see, I’m speaking your language now!) or hitting your bottom line.Report

        • Avatar Jason Kuznicki in reply to Michael Tew says:

          Well, now we are getting somewhere. Its irrelevant to help a few Baltimore businesses keep the doors open, save a few jobs, keep a few families off the street.

          You are presuming the very thing you ought to be demonstrating — namely, that the program actually will “help a few Baltimore businesses keep the doors open, save a few jobs, keep a few families off the street.”Report

  15. Avatar Michael Tew says:

    And now the B-note has to be able to save babies from hospital expenses or it’s not worthwhile. Having conceded that a modest improvement in profitability for local business is the probable result of the b-note, you search for ways to make that positive result into a negative. You refuse to acknowledge that the discount is balanced by the marketing and promotion of local businesses, you fail to recognize at all the benefits of faster circulation. You stick to your economic theory likes it’s a religion.

    “presuming the very thing I ought to be demonstrating” Er, Jason, I am the one with the project here, you are the one who has nothing but a theoretical argument.Report

    • Avatar rj in reply to Michael Tew says:

      How does it increase profitability while making businesses charge less? Volume, I guess. But if you get enough volume to make up for the implicit discount, you have too many B-Notes to spend!

      Unless you can magically turn $20 into $22, the system is broken. Not broken enough to fail catastrophically in a limited demonstration run, but broken enough to not be viable in any way that could change the economy.Report

    • Avatar BlaiseP in reply to Michael Tew says:

      Look, here it is in basic economics terms. You can have a full-price sale or a discounted sale. If a BNote was equal to one dollar, everyone would readily accept them. While this 22/20 proposition is still alive, (and it will not survive a reality check), you ought to tell us how you propose to price your BNote before you say anything else.Report

    • Avatar Jason Kuznicki in reply to Michael Tew says:

      Having conceded that a modest improvement in profitability for local business is the probable result of the b-note,

      I have conceded no such thing. The most I expect is a modest savings for some consumers, and a modest hardship for some small businesses. Given hard economic times, a modest additional hardship makes me a bit more worried than it ordinarily would.

      If the project gets bigger, I expect it will create bigger hardships.

      Er, Jason, I am the one with the project here, you are the one who has nothing but a theoretical argument.

      If you’re the one with the project, then the burden of proof is on you, and it’s your responsibility to answer criticism. I remain unconvinced that you’ve done so, at least for the way the project is now envisioned. Several people, including BlaiseP and boegiboe, have offered plausible amendments, ones that I think would help. I don’t see that you have bothered to give them much consideration.Report

      • Avatar BlaiseP in reply to Jason Kuznicki says:

        There’s also the inevitable and perennial problems with forgery and inflation every time such a scheme arises. The history of paper money is replete with them.

        Long before the American Revolution, the need for and supply of paper money had been a constant problem. Furthermore, each of the colonies was issuing paper money, a serious impediment to interstate trade. We see echoes of this problem in Article 1 Section 8 of the US Constitution.

        While the British occupied New York and Philadelphia during the Revolutionary War, they brought in vast sums of forged Continental Dollars. It was economic warfare: the expression “Not worth a Continental” would survive long enough to appear in Mark Twain.

        Paper money is the single greatest invention, ever. Once its principles had been established, it never changed. This BNote will fail because the merchant who takes both dollars and BNotes will immediately establish two prices.Report

    • Avatar Jaybird in reply to Michael Tew says:

      I’m not saying that it has to save babies, I’m just asking if you care about babies.

      Do you care about babies?Report

  16. Avatar Michael Tew says:

    I didn’t mean to ignore the suggestions, I was just busy dealing with your arguments, Jason. The currency association is venue for discussion of these ideas, and other ideas like microfinance, electronic currency, timebanks and so on. The b-note is just our first project. We believe it is a good idea to get an experiment underway because you can only go so far with theories. Among other things we expect the b-note to widen the discussion and bring more ideas to the table. The practical experience and the ongoing discussion will, we hope, refine the process and keep us moving towards making the city a better place.

    Thank you everyone for your contributions to the discussion, I am sure we will all be more competent as a result.Report

    • Avatar Boegiboe in reply to Michael Tew says:

      Another suggestion, in a different vein: You should offer seminars for local merchants interested in the B-note. The seminars could provide deeper understanding of your group’s ideas going into the project, give merchants ideas for how to market to B-note holding customers, and make suggestions for how to manage the two separate cash streams.

      The biggest bonus from these seminars, though, would be when you have everyone introduce themselves, their business and location, and what they’re hoping to sell and with B-notes. Everyone exchanges business cards (remind people to bring them), and hopefully a few buyer-supplier connections are made. Knowing there are others participating that they can directly do business with will make them more likely to try the B-notes out.Report