Andy’s Notes: The four requirements of any money are intrinsic value, a unit of account, a store of wealth, and a medium of exchange. These new minted ‘bills’ are able to be used locally, but the holders cannot compel any business or individual to accept them as legal tender. The US has legal tender laws that specify what may be used as legal tender. Does this make it a bad idea? Not necessarily. The USDollar doesn’t meet the ‘store of wealth’ requirement because of inflation and it is still accepted everywhere in the US. The Dollar also has little or no intrinsic value. The Tenino bills lack intrinsic value as well, but meet the other three requirements as long as everyone in the cohort is willing to accept them as legal tender and – this is a biggie – the bills are backed in such manner that whoever runs the printing press can’t print themselves a nice pile and go out and buy real goods with them.
The last sentence above is key to why banking systems fail over time. The temptation for the printers of money to run off currency beyond the backing is too much. This is why the banks of the 1800s failed so often. They’d over-issue silver certificates beyond the silver stored. The people would get wise to it and run the bank demanding silver and the banks would run out and have to close.
Since we no longer have redeemability on US currency, it makes over-issuance a real problem, especially in the digital age. Will the ‘wooden dollar’ experiment work? Time will tell. If nothing else, this is yet another signpost on the trek to the end of the road for the used and abused USPetrodollar.
Sutton/Mehl
TENINO, United States, July 9 (Thomson Reuters Foundation) – Tucked away under lock and key in a former railroad depot turned small-town museum in the U.S. state of Washington, a wooden printing press cranked back to life to mint currency after nearly 90 dormant years.
The end product: $25 wooden bills bearing the town’s name – Tenino – with the words “COVID Relief” superimposed on the image of a bat and the Latin phrase “Habemus autem sub potestate” (We have it under control) printed in cursive.
With the coronavirus pandemic plunging the United States into a recession, decimating small businesses and causing job losses across the country, some local governments are looking for innovative ways to help residents weather the storm.
For Tenino, the answer was the revival of the local currency that had bolstered the town’s economy in 1931 in the wake of the Great Depression.
“It was kind of an epiphany: Why don’t we do that again?” Mayor Wayne Fournier told the Thomson Reuters Foundation. “It only made sense.”
Tenino, a town of less than 2,000 people located about 60 miles (95km) southwest of Seattle, started printing the local banknotes in April, five weeks into Washington state’s lockdown.
Anyone with a documented loss of income as a result of the pandemic is eligible for up to $300 a month of the local currency.
Businesses up and down the town’s quaint Main Street accept the wooden note for everything except alcohol, tobacco, cannabis and lottery tickets.
Tenino’s city government backs the local currency, which merchants can exchange for U.S. dollars at city hall at a 1:1 rate.
Susan Witt, executive director of the Schumacher Center for a New Economics, a Massachusetts-based think tank, said alternative currencies like Tenino’s banknote are better than direct cash payments at boosting local economies.
“The City of Barcelona gave donations (in 2017/18) to sports teams and cultural groups as well as social programs (then) watched these donations go to big box stores,” she said in emailed comments.
“So, it created a local currency so that these ‘discretionary’ funds in its budget would circle back to support locally-owned businesses.”
‘WOVEN INTO OUR DNA’
Mayor Fournier noted that, for long-time Tenino residents, the wooden notes are nothing new.
The tiny town founded around a sandstone quarry achieved national prominence in 1931 when civic leaders printed a wooden local currency to restore consumer confidence after the town’s bank failed during the Great Depression.
“This is woven into the DNA of the community,” Fournier said. “My great aunt Erlene has the family collection all stashed away.”
The mayor brought the idea of resurrecting the town’s legacy project to the city council as a way to provide economic relief to businesses and residents suffering as a result of lockdown measures to slow the spread of COVID-19.
In April councillors approved the proposal to issue up to $10,000 in local scrip.
So far, 13 residents have successfully applied for the funds and some $2,500 worth of wooden bills have been issued, Fournier said, with donations upping the total funds available to $16,000.