Hoard Stuff, Use It To Back Currency Of Your Creation

Printing your own ersatz currency is legal, so long as you don’t counterfeit government notes, which explains Disney Dollars, Microsoft Points, Linden Dollars and the like. Matthew McDermott of the environmentalist blog TreeHugger points to localities and business that run successful operations that use their own currency, including Ithaca Hours in Ithaca, NY and BerkShares in Massachusetts:

Launched in the fall of 2006, BerkShares circulate in the Berkshire region of Western Massachusetts. By some estimates BerkShares is largest circulating local currency in the world, with two million Berkshares issued to date. Bills are issued in denominations of 1, 5, 10, 20 and 50. Currently some 350 businesses accept the currency and 5 different banks offer exchange services at 12 locations. BerkShare checking accounts, ATMs and loans are planned.

Most micro-monetary systems base their currency on the goodwill of businesses or locales, but you can also back your bills with more tangible things. The post got Motley Fool blogger Chris Graley, an avowed precious metal hoarder, to speculate on printing up his own guaranteed currency on a lark. Graley said his money would be more desirable than the dollar in times of high inflation:

Here’s what I would have to do. First I would need to create my own exchange rate. I would need a program that other people could regularly see on my website that updates itself. I would need notes that are payable in the US dollar value of grams of metals. Platinum, Gold, Silver, Palladium and even Copper and Steel. I don’t currently invest in copper or steel, but I would have to do this during inflation or I wouldn’t be able to buy small ticket items. (Probably wouldn’t be many small ticket items during inflation anyway.) I would also convert directly to the underlying metal for a fee. This has to be a fee that would give me a profit. I would need a guarantee, but along with a couple of banks, I deal with a local credit union and I know the president of the CU pretty well. I’m pretty sure that I can get him to give me a letter that he would honor my currency up to the total amount of the accounts I have with him.

Now I do business with enough people that I’m sure a few of them would take my currency today. As inflation sets in, I’m sure a lot more will take it. Of course, I’m gonna play up the inflation aspect and explain the advantage of having an inflation hedge. I can avoid the costs aspects, of liquidating metals early, by maintaining a higher cash percentage before inflation skyrockets. Once I’ve generated confidence, a unique thing will happen. First the people that have my currency will want to hold onto it. That means that my metals are still in my possession. I’ve essentially bought things on credit with zero interest. That will compound as people realize that my cash is better than the government’s. I can buy things at a profit if people want to convert to metals.

Which gives me the idea to establish Phil Pesos guaranteed by my stacks of hoarded shoeboxes of 1990 Donruss baseball cards. Any takers?

How to Print Your Own Money, Build Community & Not Get Arrested by the Feds [TreeHugger, via The Motley Fool]