Monday, August 3, 2009

“The Berkshare”: anachronistic or wave of the future?

The U.S. is a single-currency nation, and the Fed has the sole authority to print the national currency, the U.S. dollar. It wasn't always that way, though. The National Banking Act established an effective national currency, but it would still be another 50 years until the birth of the Federal Reserve System (The Fed lists a snapshot of its history and the US dollar) to monitor the health of the banking system and regulate the money supply.

Anachronistic: I think of the mid 1800's when chartered banks were issuing their own notes when I see this video report of a region in Western Mass. that issues its own currency for trade, the "Berkshare".



Rebecca Wilder

2 comments:

  1. Interesting concept and, as they said, not all that unusual. The sense of community is a key component, I think. One which is hard to come by in urban areas. Even the Phoenix one is very localized within that area of the city. Thanks for an interesting news story.

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  2. The real questions here are fundamental which reveal the social nature of money:

    1. What is the consideration required to acquire a Berkshare to begin with?

    2. What mechanism is in place that prevents the issuers of Berkshares to not create more than the original consideration given? Ultimately, counterfeiting by any party will lead to inflation.

    3. Ultimately, the challenge in any paper based system is the effort to create the notes does not reflect the intensity of the labor required to bring it into existence. Notes usually come into existence for money substitutes for the real hard asset that can't be easily replicated. Hence, the desire to counterfeit is always present. I suspect it is backed by the promises of the issuers and that it is only as good as they have something hard to offer for its exchange. So in this respect, it is probably doomed unless people outside the community would see that the notes are good for something they care about. It gets us back to real reason we had depository institutions; we had to trust that the notes could be substituted for something hard. But then fractional reserve lending produce another form of counterfeiting...

    It's good to see this challenged but the mood of the video is entertainment versus serious discourse.

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