One hundred BerkShares cost $95 and are available at local banks throughout the region. Participating local merchants then accept them as if they were dollars—offering their customers what amounts to a 5-percent discount for using the local money. Although it amounts to selling goods at a perpetual discount, merchants can in turn spend their local currency at other local businesses and receive the same discounted rate. Nonlocals and tourists purchase goods with dollars at full price, and those who bother to purchase items with BerkShares presumably leave town with a bit of unspent local money in their pockets.

The 5-percent local discount may seem like a huge disadvantage to take on—but only if businesses think of themselves as competing individuals. In the long term, the discount is more than compensated for by the fact that BerkShares can circulate only locally. They remain in the region and come back to the same stores again and again. Even if nonlocal stores, such as Walmart, agree to accept the local currency, they can’t deliver it up to their shareholders or trap it in static savings. The best Walmart can do is use it to pay their local workers or purchase supplies and services from local merchants.

Many other communities—Detroit, Santa Barbara, and a few places in Europe—are experimenting with variations on the BerkShare model. Most of these local currencies are still more fad than utility. In some cases, it’s because only economically conscious progressives are willing to employ them. In others, it’s because the central monetary system is still strong enough to serve a majority of people—or dominant enough to minimize the apparent viability of alternatives. Moreover, by pegging themselves to central currency, these local discount currencies can isolate themselves only so much from the chronic monetary problems of inflation, deflation, bubbles, and debt.

* * *

Unlike local discount currencies, cooperative community currencies don’t need to be pegged to the dollar at all. They are not purchased into existence but are worked into circulation. They are best thought of less like money than like exchanges.

The simplest form of cooperative currency is a favor bank, such as those founded in Greece and other parts of southern Europe during the Euro crisis. Incapable of finding work or sourcing Euros, people in many places lost the ability to transact. Even though a majority of what they needed could be produced locally, they had no cash with which to trade. So they built simple, secure trading websites—mini-eBays—where people offered their goods and services to others in return for the goods and services they needed. The sites did not record value amounts so much as keep general track of who was providing what to the community and coordinate fair exchanges. This casual, transparent solution works particularly well in a community where people already know one another and freeloaders can be pressured to contribute.