A complementary currency is a currency or medium of exchange that is not necessarily a national currency, but that is thought of as supplementing or complementing national currencies. Complementary currencies are usually not legal tender and their use is based on agreement between the parties exchanging the currency. According to Jérôme Blanc of Laboratoire d'Économie de la Firme et des Institutions, complementary currencies aim to protect, stimulate or orientate the economy. They may also be used to advance particular social, environmental, or political goals.
When speaking about complementary currencies, a number of overlapping and often interchangeable terms are in use: Local currency or community currencies are complementary currencies used within a locality or other form of community (such as business-based or online communities); regional currencies are similar to local currencies, but are used within a larger geographical region; and sectoral currencies are complementary currencies used within a single economic sector, such as education or health care. Many private currencies are complementary currencies issued by private businesses or organizations. Other terms include alternative currency, auxiliary currency, and microcurrency. Mutual credit is a form of alternative currency, and thus any form of lending that does not go through the banking system can be considered a form of alternative currency. Local Exchange Trading Systems are a special form of barter that trades points for items. One point stands for one worker-hour of work, and is thus a time-based currency.
Purposes
Current complementary currencies have often been designed intentionally to address specific issues, for example to increase financial stability. Most complementary currencies have multiple purposes and/or are intended to address multiple issues. They can be useful for communities that do not have access to financial capital, and for adjusting peoples' spending behavior. The 2006 Annual Report of the Worldwide Database of Complementary Currency Systems presented a survey of 150 complementary currency systems in which 94 respondents said that "all reasons" were selected, among cooperation, micro/small/medium enterprise development, activating the local market, reducing the need for national currency, and community development.
Aims may include:
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resocialisation and emancipation
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lifeboat currencies
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to increase financial stability
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to reduce carbon emissions, by encouraging localisation of trade and relationships
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to encouraging use of under-used resources
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to recognise the informal economy
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promote local businesses
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maintaining purchasing power, value preservation
Advantages
Alternative currencies increase in activity if the local economy slows down, and decrease in activity if the local economy goes up.
They are most successful if the currency circulates within the users, in cycles or loops, as shown in an analysis of the use of Sardex by 1,477 entities in Sardinia in 2013 and 2014.
Disadvantages
According to professor Nikolaus Läufer's theory, the use of local currencies such as
Freigeld can only increase economic activity temporarily. Lengthy use of a local currency will ultimately result in a decline in economic activity and lead to a destabilization of the economy. This is due to the increased circulation velocity of the money as the amount in circulation decreases (as currencies as Freigeld reduce in value rapidly).
Tax
There are some complementary currencies that are regional or global, such as the Community Exchange System,
WIR and Friendly Favors, Tibex in the
Lazio region in Italy or the proposed global currency terra.
A community currency is a type of complementary currency that has the explicit aim to support and build more equal, connected and sustainable societies. A community currency is designed to be used by a specific group.
List of complementary currencies
Other non-regional complementary currencies include:
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Commercial credit circuit
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Community Exchange System (CES) – global exchange network
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Digital gold currency
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Local Exchange Trading Systems (LETS) – an example of mutual credit, is a type of local currency used in a number of small communities worldwide.
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Rábaközi Tallér
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Sardex, alternative currency used in Sardinia
[ The Sardex Factor, Financial Times]
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Ven – a digital currency used in Hub Culture, a private social network
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WIR Bank – founded in 1934, oriented towards small and mid-sized corporations
See also
Further reading
External links
