Local currencies making a comeback in global recession

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With unemployment rising and retailers feeling the pinch, a handful of European towns have introduced their own currencies to help keep cash in the local economy.

Local currencies have historically been associated with small market towns but in September, Brixton launched the UK’s first urban currency and the Irish city of Kilkenny is looking to follow suit next year. 

The Brixton Pound (B£) became the fourth new currency introduced in the UK since 2007 and is now accepted by more than 60 businesses. A family-owned department store in Brixton issues the notes, which feature images of local heroes, and traders say the move has been a boost for the local economy. 

Kilkenny, a small medieval city in south-eastern Ireland, is hosting a competition to decide on the design for its putative currency, the Cat. Firm favourites to appear on the new notes will be former players and coaches of Kilkenny’s hurling teams, also known as The Cats. 

For Kilkenny, a popular tourist centre, part of the attraction is to encourage visitors to spend their money locally before leaving the city. 

As an incentive to use the currency, Kilkenny Cats can be bought for 95c but will buy €1 worth of goods in the city’s shops. This amounts to a 5% discount in local products. Brian Dillon of Future Proof Kilkenny, the community action group behind the plan, says an electronic version of the currency involving chip-and-pin cards is also being considered. 

Mayor of Kilkenny Malcolm Noonan said he hopes some tourists will keep their Cats as souvenirs rather than redeem them for euros before leaving the city. 

When the town of Lewes in southern England introduced the Lewes Pound in September 2008, it found that many of the first batch of notes were sold on online auction site Ebay for prices higher than their nominal value.

The Lewes Pound, which is worth £1 sterling, was part of an effort by local businesses to increase trade in the town. For each Lewes Pound issued, one pound sterling is taken out of circulation and kept safe in a bank so as to prevent any risk of local inflation. 

The Bavarian municipality of Prien am Chiemsee in Germany is often cited as an inspiration for modern community currencies. Their Chiemgauer currency was introduced in 2003 and grew out of a project started by a school teacher and his students. 

Other examples can be found in Belgium, France, the Netherlands, Spain, Italy and Latvia. The system has also been tried in the US, where The Berkshires region of Massachusetts has launched BerkShares, which are accepted by 370 businesses. 

In 1987, the Walt Disney company introduced Disney dollars in its theme parks. The notes resemble the US dollar but feature the image of cartoon characters rather than past US presidents. 

Local currencies are not immune from criticism, with sceptics arguing that the schemes are no more than a gift voucher scheme designed by local business owners for their own benefit. 

Traders in regions adjoining towns where local currencies are in operation complain that they are put at a disadvantage. 

Nonetheless, towns where new currencies have been introduced say the system helps create jobs while instilling a sense of local pride. 

A local currency is a voucher accepted only in a limited trading area such as a market town or small city. Businesses in the locality agree to accept the local currency in return for goods and services, although the notes are not backed by national governments and are not legal tender. 

The value of a local currency is often pegged to the national currency and is generally intended to be used as a complementary currency rather than a replacement. 

One of the most high-profile local currency experiments was introduced in the Austrian town of Wörgl in 1932 in response to the Great Depression. Local unemployment fell dramatically as trade was boosted by the availability of the new currency. 

However, the experiment was abandoned in 1933 due to opposition from the regional government and Austria's central bank. 

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