Continuing from the last post . . .
How can money be earned into existence?
According to Doug, businesses need to deal in local currencies. “If you go into a town with a depressed economy, the people in the town will invest in your success there,” he says.
In Hasting-On-Hudson, NY, where Doug lives, The Comfort Restaurant was in danger of going into bankruptcy. They offered local people “Comfort Dollars” – 120 for 100 US dollars.
People got an immediate 20% return on their investment. They knew the restaurant's credit was good, and they ate at the restaurant anyway.
In return, restaurant could stay in business because it borrowed money at a lower rate from the community than they could from the bank.
Furthermore, Doug says, "There's a sense that local establishments give value to the town. Franchises take value. The best that people can hope for from a franchise is that their kids will get jobs there"
Where Did Comfort Come From?
Doug talks about the Late Middle Ages as the beginning of the end of local currency with the establishment of chartered corporations and centralized economic control. But he notes that the practice has been on its way back globally, particularly since the 1990s. Local currencies appeared during the economic crashes of Japan and Argentina. The practice continues to gain traction -- and even receives government support -- in an impressive number of countries.
There is not nearly enough space in one blog post to cover the history – or even recent history – of the global effects of local currency.
But it's worth checking out if you're a CFO and want to grow your business.
More from Doug in the next post.