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| In [[economics]], a '''local currency''', in its common usage, is a [[currency]] not backed by a national government (and not necessarily [[legal tender]]), and intended to trade only in a small area. As a tool of [[fiscal localism]], local moneys can raise awareness of the state of the [[local economy]], especially among those who may be unfamiliar or uncomfortable with traditional bartering. These currencies are also referred to as '''community currency''', and are a form of [[alternative currency]] or [[complementary currency]]. They encompass a wide range of forms, both physically and financially, and often are associated with a particular economic discourse.
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| == History ==
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| [[Free banking]] provides the economic prototype of local currencies. In the modern era, the most recognizable local currencies were [[company scrip]] issued in certain industries to pay workers, and [[token coin]]s issued by some businesses to encourage consumer loyalty. In the nineteenth and early twentieth century, the failures of national banks during crises often created acute demands for cash, which were met by businesses creating [[emergency currency]]. These scrips were usually issued with the intention of redemption in national currency at some later date.
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| A few such currencies, however, developed into monetary systems in their own right. The idea of using free banking to produce an alternative, community-level currency dates back at least as far as the German Credit Unions in the 1800s. The oldest local currencies known to be in continuous use are the [[WIR]] in Switzerland, and the Labor Banks in Japan.
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| [[Complementary currency]] is a [[hypernym]] to '''local currency''', but the terms are often used as synonyms. The term "local currency" does not refer to national currency that happens to be used only in a local area.
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| Advocates of local currency, such as [[Jane Jacobs]], argue that this enables an economically cool, yet depressed region to pull itself up by giving the people living there a medium of exchange that they can use to exchange services and locally-produced goods. In a broader sense, this is the original purpose of all [[money]]. Local currencies also tend to operate in relatively small geographic regions and encourage recycling and reducing the amount of carbon emissions from the transportation and manufacture of goods. As a result, they are part of the economic strategy of many green and sustainable-living groups such as the [[Green Party of England and Wales]].
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| Local currencies can come into being also when there is economic turmoil involving the national currency. An example of this is the [[Argentine economic crisis of 2002]] in which small denomination, interest-free provincial bond [[IOU (debt)|IOU]]s issued by local governments quickly took on some of the characteristics of local currencies successfully.
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| Opponents of this concept argue that local currency creates a barrier which can interfere with [[economy of scale|economies of scale]] and [[comparative advantage]], and that in some cases they can serve, like traditional national currencies, as a means of [[tax evasion]].
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| Use of local currencies to boost local economies is strongly advocated by the [[Netherlands]]-based [[Instrodi]] Institute.
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| == Historical local currencies ==
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| The [[Wörgl]] experiment that was conducted from July 1932 to November 1933 is a classic example of the potential efficacy of local currencies. Wörgl, a small town in Austria with 4000 inhabitants, introduced a local scrip during the Great Depression. By 1932 unemployment in Wörgl had risen to 30%. The local government had amassed debts of 1.3 million [[Austrian schilling]]s (AS) against cash reserves of 40,000 AS. Local construction and civic maintenance had come to a standstill. On the initiative of the town's mayor, Michael Unterguggenberger, the local government printed 32,000 in labor certificates which carried a negative 1% monthly interest rate and could be converted into schillings at 98% of face value. An equivalent amount in schillings was deposited in the local bank as cover for the certificates in case of mass redemption and earned interest for the government. The certificates circulated so rapidly that only 12,000 were ever actually put into circulation. According to reports by the mayor and economists of the day who studied the experiment, the scrip was readily accepted by local merchants and the local population. It utilized the scrip to carry out 100,000 AS in public works projects involving construction and repair of roads, bridges, tanks, drainage systems, factories, and buildings. The scrip was also accepted as legal tender for payment of local taxes. In the one year that the currency was in circulation, it circulated 13 times faster than the official shilling and served as a catalyst to the local economy. The heavy arrears in local tax collection declined dramatically. Local government revenue rose from 2,400 AS in 1931 to 20,400 in 1932. Unemployment was eliminated, while it remained very high throughout the rest of the country. No increase in prices was observed. Based on the dramatic success of the Wörgl experiment, several other communities introduced similar scrips.
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| In spite of the tangible benefits of the program, it met with stiff opposition from the regional socialist party and from the Austrian central bank, which opposed the local currency as an infringement on its powers over the currency. As a result the program was suspended, unemployment rose, and the local economy soon degenerated to the level of other communities in the country.[http://www.reinventingmoney.com/worglExperiment.php] Wörgl Experiment with Depreciating Money[http://www.mkeever.com/kent.html] Mckeever Institute
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| of Economic policy Analysis
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| Other well-documented historical examples include:
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| *[[Joshua A. Norton|Emperor Norton I]]'s own currency
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| *[[Prosperity Certificate]]
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| *[[Wära|Wära (Currency)]] (Germany, made illegal in October 1931)
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| *[[Amphoe Kut Chum|Bia Kut Chum]], issued in 2000 by a Thai community, since replaced by a [[barter]] [[coupon]] called [[Merit (Buddhism)|Boon]] Kut Chum.[http://www.angkor.com/2bangkok/2bangkok/forum/archive/index.php/t-2224.html A Boon to Kut Chum archive]
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| ==Characteristics==
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| ===Theory===
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| Local currency is based on a local form of [[monetarism]] and [[mercantilism]]:
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| it establishes an internal [[trade barrier]], as the local currency cannot be used externally, and allows the area to have a different (presumably lower) [[interest rate]] than the national currency's — in the Wörgl experiment, a negative interest rate, known as [[Demurrage (currency)|demurrage]]. Advocacy and criticism of local currencies is based partly on general attitudes towards monetarism and mercantilism, and partly on opinions of the desirability of having internal variations in currency and trade.
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| Advocates of local currency in effect argue that, in certain circumstances, an entire country is not an [[optimum currency area]], and that various regions should have different currencies. Compare with the [[Eurozone]] in Europe.
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| ===Benefits===
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| The Wörgl experiment dramatically illustrates some of the common characteristics and major benefits of local currencies.[[Lietaer, Bernard]], '''[[The Future of Money]]''', Century, 2002.
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| # Local currencies tend to circulate much more rapidly than national currencies. The same amount of currency in circulation is employed more times and results in far greater overall economic activity. It produces greater benefit per unit. The higher velocity of money is a result of the negative interest rate which encourages people to spend the money more quickly.
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| # Local currencies enable the community to more fully utilize its existing productive resources, especially unemployed labor, which has a catalytic effect on the rest of the local economy. They are based on the premise that the community is not fully utilizing its productive capacities, because of a lack of local purchasing power. The alternative currency is utilized to increase demand, resulting in a greater exploitation of productive resources. So long as the local economy is functioning at less than full capacity, the introduction of local currency need not be inflationary, even when it results in a significant increase in total money supply and total economic activity.
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| # Since local currencies are only accepted within the community, their usage encourages the purchase of locally-produced and locally-available goods and services. Thus, for any given level of economic activity, more of the benefit accrues to the local community and less drains out to other parts of the country or the world. For instance, construction work undertaken with local currencies employs local labor and utilizes as far as possible local materials. The enhanced local effect becomes an incentive for the local population to accept and utilize the scrips.
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| # Some forms of complementary currency can promote fuller utilization of resources over a much wider geographic area and help bridge the barriers imposed by distance. The [[Fureai kippu]] system in Japan issues credits in exchange for assistance to senior citizens. Family members living far from their parents can earn credits by offering assistance to the elderly in their local community. The credits can then be transferred to their parents and redeemed by them for local assistance. Airline frequent flyer miles are a form of complementary currency that promotes customer-loyalty in exchange for free travel. The airlines offer most of the coupons for seats on less heavily sold flights where some seats normally go empty, thus providing a benefit to customers at relatively low cost to the airline.
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| # While most of these currencies are restricted to a small geographic area or a country, through the Internet electronic forms of complementary currency can be used to stimulate transactions on a global basis. In China, Tencent's QQ coins are a virtual form of currency that has gained wide circulation. QQ coins can be purchased for Renminbi and used to purchase virtual products and services such as ringtones and on-line video game time. They are also obtainable through on-line exchange for goods and services at about twice the Renminbi price, by which additional 'money' is being directly created. Though virtual currencies are not 'local' in the tradition sense, they do cater to the specific needs of a particular community, a virtual community. Once in circulation, they add to the total effective purchasing power of the on-line population as in the case of local currencies. The Chinese government has begun to tax the coins as they are exchanged from virtual currency to actual hard currency.[http://www.kerryonworld.com/taxing-chinese-virtual-online-players] Chinese government taxes QQ coins
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| Society utilizes only a small portion of its resources and opportunities. Almost everyone has underutilized knowledge, skills and time that can be engaged productively. Most manufacturers and services have underutilized machinery or capacity. Complementary currencies are a creative means to enhance this untapped social potential.
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| ===Difficulties and criticisms===
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| Local currencies and the Transition Towns movement in the UK have received criticism for a failure to address the needs of the wider population, especially lower socio-economic groups.[http://www.guardian.co.uk/money/2008/nov/01/consumeraffairs-communities Report from The Guardian on the Lewes Pound] Such local currency initiatives have been more widely criticized in light of limited success stimulating new spending in local economies and as an unrealistic strategy to reduce carbon emissions.[http://www.slate.com/id/2190116/ The Undercover Economist on Local Currency][http://johnmcgowanarchive.blogspot.com/2009/02/first-article-on-lewes-pound.html A critique of the Lewes Pound and of local currencies more generally] Successful Local Currencies such as the Wörgl experiment attract hostility from the Central Governments, as they reduce the bureaucracy's control over an important power centre.
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| == Modern local currencies ==
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| There has been a tremendous surge in the use of local currencies over the past two decades. Today there are over 2,500 different local currency systems operating in countries throughout the world.
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| Since 2002 there has been an upsurge in local currency experiments particularly payment voucher-based systems that are exchangeable with the national currency. Such currencies aim to raise the resilience of local economies by encouraging re-localisation of buying and food production. The drive for this change has arisen from a range of community-based initiatives and social movements. The [[Transition Towns]] movement originating in the UK has utilised local currencies for re-localisation in the face of energy descent from [[peak oil]] and [[climate change]]. Other drives include movements against [[Clone town]]{{cite web|url=http://www.publicnet.co.uk/news/2009/04/15/measures-aim-to-tackle-problem-of-empty-shops/ |title=Measures Aim To Tackle Problem Of Empty Shops |publisher=Publicnet.co.uk |date=2009-04-15 |accessdate=2010-08-14}}[http://www.neweconomics.org/gen/12345news_clonetownbritainresults.aspx ]{{dead link|date=August 2010}} and [[Big-box]] trends.
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| Previously, one of the most prominent systems was LETS, [[Local Exchange Trading System]], a trading network supported by its own internal currency. Originally started in Vancouver, Canada, there are presently more than 30 LETS systems operating in Canada and over 400 in the United Kingdom. Australia, France, New Zealand, and Switzerland have similar systems. Time dollars, [[Ithaca Hours]], and PEN exchange are among the most successful systems in the USA.
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| *[http://www.complementarycurrency.org/ccDatabase/les_public.html Worldwide Database of Complementary Currency Systems]
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| *[http://www.complementarycurrency.org/gallery.php Gallery of Images and Samples of Notes from Complementary Currency Systems]
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| *'''Africa'''
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| **Kenya
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| ***[http://www.ecoethics-kenya.org/projects/eco-pesa.html Eco-Pesa]
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| **South Africa
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| ***[[Community Exchange System]] (CES)
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| ***[[Ora (currency)|Ora]]
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| *'''Australasia'''
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| **Australia
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| ***The Maleny "Bunya"
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| ***[[Baroon Dollar]]
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| ***The Maia Maia Project[http://themaiamaiaproject.blogspot.com/]
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| ***The Fremantle "Share"
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| ***South East Metro (Perth) Doodad
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| ***Swan Hills LETsystem
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| ***Armadale-Thornlie LETSystem
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| *'''South America'''
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| **Argentina
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| ***[[Argentine argentino|Argentino]]
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| ***[[Crédito]]
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| ***[[LECOP]]
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| ***[[Patacón (bond)|Patacón]]
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| **Brazil
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| ***[[Banco Palmas]]
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| ***[[Curitiba Bonus]]
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| ***[[Sabre (local currency)|Sabre]]
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| **Spanish-Speaking Latin America
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| *'''North America'''
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| **[[List of Canadian community currencies|Canada]]
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| **[[List of community currencies in the United States|United States]]
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| *'''Asia'''
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| **Japan
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| ***[[Fureai kippu]]
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| ***[[Eco-Money]]
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| ***[[WAT System]]
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| **Hong Kong
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| ***[[Community Oriented Mutual Economy|COME]]
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| **Indonesia
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| **[http://www.appropriate-economics.org/asia/asia.html#indo Yogyakarta System, Indonesia]
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| **[[Malaysia]]
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| ***[[Kedahan dinar]]
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| ***[[Kelantanese dinar]]
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| *'''Europe'''
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| **Belgium
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| ***[[Lietaer]]
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| **Denmark
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| ***[[Løn]]
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| ***[[Artmoney]]
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| **France
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| ***[[SEL]] - Système d’Echange Local
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| ***[[SOL Project]]
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| ***[[Troc de Services]]
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| ***[[Abeille (local currency)|Abeille]]
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| ***[[Occitan (local currency)|Occitan]]
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| **Germany
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| ***Berliner
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| ***[[Chiemgauer]]
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| ***Joytopia
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| ***Tauschring
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| ***[[Urstromtaler]]
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| ***Zschopautaler
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| ***Palzer
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| ***Nahgold
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| ***Hallertauler
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| ***Kirschblute
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| ***Landmark
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| ***KannWas
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| ***Sterntaler
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| **Greece
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| ***[http://www.ovolos.gr/ Ovolos]
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| **Netherlands
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| ***[[Gelre]]
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| ***[[RAAM]]
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| **Spain
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| ***Axarco (in [[Axarquía]], Málaga)
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| **Switzerland
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| ***[[WIR]]
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| **United Kingdom
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| ***Approximately 400 [[Local Exchange Trading Systems]] (LETS)
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| ***Approximately 75 [[Time-based currency#Time banks|time banks]]
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| ***Calderdale Green Currency [http://www.localcurrency.org.uk/]
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| ***[[Totnes pound]]<ref name="autogenerated1"/>{{cite news| url=http://news.bbc.co.uk/1/hi/magazine/8245276.stm | work=BBC News | title=No money? Then make your own | date=2009-09-17 | accessdate=2010-05-11}}
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| ***[[Lewes pound]]
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| ***[[Brixton pound]]<ref name="autogenerated1"/>
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| ***[[Stroud Pound]]{{cite news|author=Jamie Doward and Naomi Loomes |url=http://www.guardian.co.uk/business/2008/aug/17/currencies.britishidentity |title=Lewes, the proud town that is printing its own money | Business | The Observer |publisher=Guardian |date= 2008-08-17|accessdate=2010-08-14 | location=London}}
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| **Italy
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| ***[[Banca del Tempo]]
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| ***[[EcoAspromonte]]
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| ***[[Ecoroma]]
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| ***[[REL (currency)|REL]] Rete di Economia Locale
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| ***[[SCEC (currency)|SCEC]]
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| ***[[Simec]]
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| ***[[Sistema di Reciprocità Indiretta]]
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| **Latvia
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| ***[[Pilsetas Nauda]]
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| **Lithuania
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| ***[[Litas]]
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| **Russia
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| ***[[Billex]] (credit system based on gold bills, Tomsk)
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| *'''International'''
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| **[[Community Exchange System]] (CES)
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| *'''Unclassified'''
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| **[[Ven]] by [[Hub Culture]]
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| **[[Flash Cash]]
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| **[[Green dollar]]
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| **[[Time-based currency#The IOU of Lovely|Interdependent Occupational Unit]]
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| **[[Interser]]
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| **[[Ndajem-Wecco]]
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| **[[Red Global del Trueque|RGT]] - Red Global del Trueque
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| **[[Robust Complementary Community Currency System|ROCS]] - Robust Complementary Community Currency System
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| **[[RERS]] - Réseaux d'Echange Réciproque de Savoirs
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| **[[Rumihuaico]]
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| **[[Salta Creditos]]
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| **[[Systèmes d’Echanges Communitares]]
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| **[[Thay Gerh]]
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| **[[Tianguis Tlaloc]]
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| **[[Toctiuco]]
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| **[[Tontines]]
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| **[[Eco-money]]
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| == See also ==
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| *[[Bitcoin]]
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| *[[Fiscal localism]]
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| *[[Barter]]
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| *[[Buy local]]
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| *[[Informal sector]] (of the economy)
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| *[[Local Exchange Trading Systems]]
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| *[[JAK members bank]] A Swedish interest-free bank
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| *[[Ripple monetary system]]
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| *[[Complementary currency]]
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| *[[List of economics topics]]
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| *[[Money]]
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| *[[Private currency]]
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| *[[Freigeld]]
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| *[[Time-based currency]]
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| *[[Time Banking]]
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| *[[EcoCommunalism]]
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| ==References==
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| {{reflist|2}}
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| == External links ==
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| * [http://www.bigboxtoolkit.com/ Resources for rebuilding local businesses and countering mega-retailers]
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| * [http://www.neweconomics.org/gen/ New Economics Foundation]
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| *[http://www.baroondollar.org Baroon Dollar] An Australian local currency system.
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| * [http://www.curomuto.com/barter-software Barter and Trade Software] Web service for independent trade networks.
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| * [http://www.kroonos.com/ Kroonos.com] Online social networking and time bank
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| * [http://www.smallisbeautiful.org E. F. Schumacher Society] large collection of information on local economies including local currencies
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| * [http://www.ormita.com/history-of-barter.html History of Barter and Local Currencies] large collection of information about the history of barter and local currencies
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| * [http://www.localcurrency.org.uk Calderdale Green Currency 2000-2003]
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| * [http://www.bundesbank.de/download/volkswirtschaft/dkp/2006/200643dkp_en.pdf Regional currencies in Germany - local competition for the euro? Deutsche Bundesbank (ed.)]
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| * [http://openmoney.info open money]
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| * [https://github.com/FellowTraveler/Open-Transactions/wiki Open Transactions] open source software
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| * [http://www.transaction.net/money/lets/ LETS]
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| * [http://www.community-exchange.org/ Community Exchange System (CES)] global complementary currency system
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| * [http://www.communitycurrency.org/resources.html Community Currency Resources]
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| * [http://www.communitycurrency.org Community Currency]
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| * [http://www.complementarycurrency.org/ccPedia ccPedia] (a wiki of related topics)
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| * [http://www.transaction.net/money/community/ Complementary Community Currency Systems]
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| * [http://www.newciv.org/ncn/moneyteam.html Alternative Money Systems]
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| * [http://www.smallisbeautiful.org/local_currencies/currency_groups.html Local Currency Directory for USA & Canada]
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| * [http://ccit.wji.com ccSyndicator] Collaborative IT Committee for Complementary Currencies
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| * [http://www.strohalm.net/en/site.php Social Trade Organization, Netherlands]
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| * [http://www.margritkennedy.de/index.php?modus=HOM&inc=HOM&lang=EN Margrit Kennedy]
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| * [http://www.regiogeld.de/ Network of German local currencies]
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| * [http://www.olccjp.net/ Online Laboratory on Complementary Currencies JAPAN]
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| *[http://www.appropriate-economics.org/asia/asia.html Parallel Currency Systems in Asia]
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| *[http://www.complementarycurrency.org Complementary Currency Resource Center]
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| *[http://www.seek2know.net/money2.html Transforming Money: From Debt to Empowerment] by Susmita Barua from Buddhist perspective
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| *[http://www.yootles.com Yootles] A complementary currency being developed at Yahoo!
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| *[http://www.ithacahours.org Ithaca Hours] An example of a local currency system functioning in the US.
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| *[http://www.ithacahours.com Ithaca Hours] HOUR founder's site consulting with new currencies.
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| *[http://www.art-money.org/255 Bank of International Art Money] A global alternative money based on currency created by artists.
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| *[http://www.redimoney.org REDI-the Regional Economic Development Initiative] A local currency system being developed for Colorado.
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| * [http://www.infography.com/content/507632641358.html Infography about Community Currencies]
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| * [http://cromalternativemoney.org Crom Alternative Exchange Association]
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| * [http://www.joshuazeidner.com/2008/03/in-we-we-trust-prospect-of-local.html In We We Trust: The Prospect Of Local Currencies]
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| * [http://project.cyclos.org/ Cyclos, Open Source Complementary Currency Software]
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| * [http://www.hughbarnard.org/content/alternative-currency-software Cclite, Open Source Currency Software in Perl/Mysql]
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| * [http://www.ccmag.net/ Community Currency Magazine]
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| * [http://theplenty.org/ The Plenty] A local currency revitalized by the publication of ''Small is Possible'' by [[Lyle Estill]]
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| *[http://www.npr.org/templates/story/story.php?storyId=128462416 From Stalwart To Skeptic, Germany Rethinks EU Role] on the development of microcurrencies in Germany.
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| * [http://www.knu.edu.tw/lecture/%E6%95%99%E5%AD%B8%E8%B3%87%E6%96%99/Mitsuo%20Gen%202009%20-%20Intelligent%20and%20Evolutionary%20Systems/Ch3.pdf Fuzzy Local Currency Based on Social Network Analysis for Promoting Community Businesses].
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| {{DEFAULTSORT:Local Currency}}
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| [[Category:Community currencies| ]]
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| [[Category:Free economy]]
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| [[cs:Doplňková měna]]
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| [[fr:Monnaie locale]]
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| [[ja:地域通貨]]
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| [[pt:Moeda social]]
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| [[zh:区域货币]]
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