This will work- can be used to pay local taxes:
‘Bristol Pound’ currency to boost independent traders
By Dave Harvey
Feb 5 (BBC) — The Euro is in trouble, the world’s financial system is in turmoil. Is this the perfect time for cities to go it alone, and print their own money?
A group of independent traders in Bristol are launching their own currency, with the backing of the council and a credit union.
The “Bristol Pound” will be printed in notes, and also traded electronically.
There are other local currencies in the UK, but this is the first which can be used to pay local business taxes.
Ciaran Mundy, the director of the Bristol Pound, explained the concept behind the currency.
“Big companies just hoover up money from a local area,” he told me.
“Money goes into their financial system and typically out into London and into the offshore sector.”
Corporate challenge
But by definition, Bristol pounds must stay in the city. Spend a tenner in a Bristol bakery, and they must use it to pay their suppliers or staff. In turn, those companies will have to use the money within the local economy.
“We’ll be driving more business to independent traders, and ensuring the diversity of our city, which is one of the things people love about Bristol,” Mr Mundy said.
Already more than 100 firms are signed up. A family bakery, the Tobacco Factory Theatre, the Ferry company, dozens of small cafes – even Thatcher’s Cider will accept Bristol pounds.
So how will it work?
They will print notes in £1, £5, £10 and £20 denominations. A Bristol pound will be worth exactly £1 sterling.
People will open an account with the Bristol Credit Union, which is administering the scheme, and for every pound sterling they deposit, they will be credited one Bristol pound.
This money can then either be cashed, or used electronically to pay bills online or even with a mobile phone.
Since the money is held by the credit union, which has FSA backing, it will have the same protection as any other deposit account. The standard government scheme guarantees up to £85,000 per person.
Bristolians are being challenged to help design the new notes. The organisers have already created a logo, and produced security features to counter forgery.
There is a silver hologram design, a gold foil strip with serial numbers embedded, and other features which are impossible to reproduce.
But whose face should be on the notes? That is down to Bristolians.
Small change?
“Bristol’s own currency should reflect the values and the lives of people who live here,” explained the designer, Adele Graham.
“We’re open to any suggestions. It could be famous people, but it can be any design at all which Bristolians feel represents their city.”
Local people can submit their ideas on the Bristol Pound’s website. The competition will run until the end of February, and the notes will be launched in May.
But will the Bristol Pound really take off?
Most local currencies have remained small. The Totnes Pound was the first to launch, in Devon in 2006, and has 70 traders involved.
Eighteen months ago Stroud, in Gloucestershire, starting printing its own currency, but to date no more than 30 firms are taking the money.
Bristol’s organisers point to two key differences: online banking, and council support.
Since the scheme is run by a bona fide financial institution, the Bristol Credit Union, traders can pay each other large amounts of money at the click of a button.
Also unique is the ability to pay local business rates in local currency. The council leader, Councillor Barbara Janke, is fully behind the scheme.
She told me: “This is a chance to demonstrate the economic resilience of the city.
“We want to make it as easy as possible for people to use the Bristol Pound.”
‘No real boost’
Paying business rates in Bristol pounds means firms need not worry about being stuck with thousands of pounds they can’t spend, if their own suppliers refuse them.
Naturally, there are sceptics. Will people find it inconvenient to carry two kinds of notes in their pockets? Will it be more than a gimmick?
Interestingly, it is the prospect of success that worries some the most.
Ben Yearsley understands money. Big money. He is an investment strategist at Hargreaves Lansdown, the Bristol finance house which looks after £22bn of people’s savings.
He points out that the scheme will do nothing to help Britain’s economic recovery.
“This won’t boost spending,” he explained. “It will merely move money from one sector to another, from national firms to local ones.”
And if the Bristol Pound really works, Mr Yearsley worries that big national firms may be put off.
“A lot of people work for the national companies, and you may actually cause an increase in unemployment. Worse, there may be a brake on investment in the city.”
But the organisers think he worries too much.
Stephen Clarke, a local lawyer who is working for the new currency for nothing, said: “This is not an attack on national chains.
“We just want to preserve our local independents, and you can see how hard it is for them at the moment.”
Whenever local shops close down, and supermarkets or chain stores open, there are complaints about “cloned high streets” and “chain store Britain”.
Well, now if people really want to support independents, they can quite literally put their money where their mouth is.
I see this as something that has been done and has really never taken off. The whole thing is nothing more than an exchange. Also I really don’t get how it will save local companies or allow them to charge more.
You need fed currency to buy them and at some point it will convert back. It will not add liquidity nor will it change how much money stays local. And the point about paying local business taxes to me that is an illusion because at the state level they are not going to keep 100 different currencies with different exchange rates for each county.
Here is an example been around since 2006 and local banks are used as an exchange. They don’t create separate currency accounts because basically that is highly inefficient for common depositors.
http://www.berkshares.org/whatareberkshares.htm
At least they understand the importance of the taxation angle, unlike bitcoin.
But how is this supposed to work when the article makes no mention of government spending this currency into circulation? It seems they plan to get it into circulation only by exchanging it pound for pound at the local credit union. If I lived in Bristol I wouldn’t do that.
@RWJ,
“If I lived in Bristol I wouldn’t do that”. Here’s a possible reason why you might “do that”.
Economies recover from recessions eventually, even absent Keynsian type stimulus. That’s what happened in the 1700s & 1800s. Recoveries occur because those who are keen to sell their wares offer extended credit to credit worthy customers. Or they resort to bills of exchange, tally sticks, barter, etc. In short, those desperate for work will accept an inferior type of money.
So if you are a buyer or you are cash rich, it will pay you to buy some “inferior money” because those desperate for work will offer you a good deal and accept the inferior money. At least that’s my theory.
@Ralph Musgrave,
The exchange rate is fixed at one-to-one. Sorry, not interested.
Under the gold standard system, gold mines run consistant deficits. So there was constant “keynesian stimulus” all the time.
@Hepionkeppi,
Yes but it was never sufficient. Deficits under such a scheme were exogenous and never responsive to the needs of the economy. In addition they were very destructive of the environment.
yes, seems there is more to it or it wouldn’t have gotten this far
@WARREN MOSLER,
Then how do you account for the euro getting this far? What was the phrase, “Meerkats can remain irrational longer than we can keep watching tv?”
@RWJ, Let’s see … the Parliament spends new GBP and distributes some of that to localities. Bristol council puts some of that in Ye Old Credit Union amd issues Bristol Pounds, hopefully with John Maynard Keynes portrait on the notes.
So, the Bristol pound is backed by the GBP. They just need some advice as to how to leverage their monetary base. Not like it’s never been done before. If Ye Old Credit Union can issue loans (say to non profits or worker cooperatives), we have our printing press.
it allows the council to spend first, then collect the taxes.
They should let the exchange rate float.
@Kristjan,
Right. I might be willing to buy it if I can get a good exchange rate. But then I would expect local merchants to reflect this in their prices.
As it is, it’s a fixed-rate currency with no fiscal component. Where have we seen that recently?
@RWJ, It is a thinly traded currency, fixed exchange rate or floating. Do you think banks will recognize it? Are they going to have a treasury to compete with the government and what sort of interest rates will they have? Nah, not going to buy into it.
@jonf, I wonder if perhaps the bureaucracy needed to effectively run a modern fiat currency is too much for a local council and is best left to a larger political entity, like say, oh I dunno, the national government of Greece?
the point would be for some local entity to be able to spend them first, then collect them in taxes whenever.
again, seems the article left that part out
in applicable here. and, again, there’s probably a bit more to it than the article states
Fixed exchange rate currency, we’ll see how this works out for them. Now if they can get the British government to take them, well that would be another game.
@jonf,
Why would the British government take them when they already have a currency of their very own?
@RWJ, I guess that’s the point, isn’t it?
@jonf, Indeed
shouldn’t matter if the brit gov takes them or not as long as they can be used for local taxes.
but, again, there’s something missing in the article regarding how they get spent into existence in the first place.
@WARREN MOSLER,
They are exchanged into existence by the Credit Union on a 1-for-1 basis.
So the Credit union issues the receipts for GBP it is holding in reserve at a near 100% ratio.
It’s exactly the same system that the Scottish banks use to back the Scottish notes in existence.
Think book tokens for Bristol.
See here: http://bristolpound.org/index.php?com=pages&page=34
This will work- can be used to pay local taxes:
Except that the good people of Bristol have all sorts of debt obligations, tax obligations and spending opportunities denominated in other currencies. So this one will be of very limited usefulness.
If the city of Bristol requires its residents to pay city taxes in Bristol pounds, that will succeed in creating a (rather annoying) need on the part of the residents to obtain some of the BPs. But if the tax obligation can still be discharged in Pounds Sterling, then there is no significant motive at all to acquire them.
These currency devolution schemes that pop up from time to time don’t last, and aren’t useful if they do last.
@Dan Kervick,
My favorite is bitcoin. I am told by believers almost daily that it’s only a matter of time before bitcoin takes off and I will be exchanging my local currency in order to go on a shopping spree for all the wonderful things bitcoin can purchase. Nevermind there’s almost nothing for sale in bitcoin just yet, and it can’t be used to pay my taxes, and it’s designed to be a form of ‘virtual gold’, i.e. fixed in supply and environmentally damaging to create (on purpose!), it’s going to be the next best thing, I’m told.
@RWJ,
Bitcoin was brought into popular culture a couple of weeks ago on an episode of “The Good Wife”. The creators of bitcoin were being brought up on charges by the Feds. Worth a watch if you can get it “on demand”.
@RWJ, My favorite are frequent shopper points. At least something productive is done before they are issued.
Looks like the issuer of their currency is that FSA-regulated credit union, not the City government, so while they will accept payment of taxes in it, it doesn’t seem (from that article at least) like they’ll be able to run a large deficit.
So when one goes to deposit 1 GBP in the Credit Union, they’ll offer to either keep 1 British pound, or 1 Bristol schmound which is functionally a ticket to a box that contains a 1 British pound note. Feels like this does nothing. Maybe they don’t have requirements on the schmound? But reserves cost 0% anyway so who cares?
They’re hoping that by locking the British pound notes in those little boxes it will prevent the money from “flowing out” of their town which is of course a silly idea…
They might create a handful of jobs to manage all the overhead required to manage this little experiment. This is of course a horrible allocation of resources but as the 7DIFs would point out: at a time of high unemployment, there is no other demand for these resources anyway..
the local council might be able to somehow spend them in to existence and be using the credit union as its agent.
@WARREN MOSLER, If they can get some local person or business to buy some service or goods from the town, then they can also ask for payment in taxes in return, right? But how do you get the general public to do it? Unless you have some powers over them?
it’s about giving the council the ability to spend first, then collect taxes, whether they know it or not
Could work to some extent but how can it help? Well, it might be advantageous to those who accept the Bristol Pound if people buy more at their places. But there both pounds trading at par there is no reason to do it. Some time ago we discussed a local currency used in some brazilian town, but in that case prices in local currency had a 10% discount. It is not clear why they didn’t lower their prices by 10% in real either.
it allows the local govt. to spend first, then collect taxes
Although I spotted it’s one step on from the Totnes/Lewis pounds, wouldn’t it be worth engaging the journalist and the scheme director to educate them?
On another note it’s quite a shame Alex Salmond doesn’t realise that Scottish Independence should mean monetary sovereignty rather than a currency union without the political one.
sounds like a scheme to inject liquidity into that particular bank.
But for the life of me I cannot see why someone would.
I see exactly one reason that people might actually trade in pounds for Bristol pounds: local vendors could offer discounts or other perks if you pay in Bristol pounds as a form of price discrimination. It would be sort of like coupons or student discounts–you can give a discount to cheap or poor locals willing to put in the effort to use the local money, while charging extra to tourists and locals who are lazy/busy/rich enough to only use regular pounds.
If a lot of stores do this, then the bargain hunters might get it into their heads that using Bristol pounds gets you a better deal, and only a sucker would pay in regular pounds. Then they spurn any store that doesn’t accept Bristol pounds (and with a discount), because the place must be a rip-off. That would tend to push them away from chain stores, unless the chain stores decide to get in on the game.
As for taxes: If the Bristol pound were floating, then the fact that taxes are payable in Bristol pounds would help a lot in making people willing to use it. However, the peg accomplishes all of that and more, so the tax issue is really irrelevant. In fact I doubt many businesses will pay for anything in Bristol pounds. Instead they will exchange them at the credit union and pay taxes with regular pounds.
@Chaz,
no one else has said the obvious, so here it is:
“it allows the local govt. to issue first, then collect taxes”
🙂 [don’t know WHERE that came from! must have been subliminal]
Man I <3 this! But from reading the comments, it's obvious it's not exactly a chartalist dream come true … yet. And there is little hope that the supply of BrP's will be allowed to grow endogenously (unrestricted) – the chancellor of the exchequer will not be "down with that". However, what is there was limited ability to do so, by say… creating a localised JG?!! Bristol would only issue BrP's to people in the JG. Such people can only spend BrP's in Bristol anyway. Perhaps, you may want to pay them via a restricted account from the Credit Union which mandates that perhaps only half of their wage amount is immediately convertible to regular pound sterling. I'd love to see some caveat that allows Bristol to actually truly create money through issuance. Great initiative. Thanks for sharing!!!
New Independent Bristol Mayour says he’ll be paid in Bristol Pounds.
http://www.bbc.co.uk/news/uk-england-bristol-20233864
Brave man?
http://www.bbc.co.uk/news/uk-england-bristol-20340154
doesn’t need the money?
😉