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  • Writer's pictureElizabeth Vleeskens

Alternative Money

What exactly is wooden currency? Why should we consider it?

“Sometimes, money. Just. Stops” said Warren Buffet, billionaire investor, in May 2020 at the Berkshire Hathaway Annual Shareholders meeting. The phrase “money stopping” refers to when people stop trading money for goods and services. Effectively the flow of money dries up, much like water in a drought. This is what happens in recessions and depressions of the economy. Money. Just. Stops.

In 2020, the pandemic plunged nations around the world into recession — but recessions hit some cities and regions harder than others (Day and Jenner 2020). In countries like Australia and the United States, small towns can be most affected (Lawrence 1982). I should know, I grew up in a small country town in Australia during the 1990s recession.

With many people out of work, residents stop spending — putting pressure on local businesses which forces them to close (Fishback, Haines, and Kantor 2007 cited in Fishback 2012). Local businesses are crucial for employment in a small town, especially relatively isolated towns (Lawrence 1982). Consumer spending is a vital part of our economy, typically making up about 55% of the total economy in Australia and 60% in the United States (CEIC Data 2020). If consumers don’t spend — businesses close — end of story.

During the Great Depression the federal governments in Australia and the US offered federal relief schemes (Fishback 2012), but relief can be difficult for some local governments to access. What if there was something we could do to prevent “money stopping”? In the onset of a recession or depression — could a town just print its own money? During the Great Depression of the 1930s, one town in the United States did exactly that. That town was Tenino, Washington: estimated population of 1865 (United States Census Bureau 2020). Small towns like Tenino cannot issue federal currency, that is they can’t issue United States Dollars — but there is nothing legally stopping them from issuing their own local currency — and so, in 1931 the “Wooden Dollar” was born.

Photo: One printed Tenino “wooden” W$25 dollars exchangeable for $25 US (City of Tenino).

According to the Mayor Wayne Fournier (interviewed on Bloomberg’s Odd Lots 2020) when the 2020 pandemic hit, for about 3 months, people, cars, and traffic disappeared from the local streets. Shops in town closed their doors, and there was almost no economic activity in the town other than the local supermarket.

Ingeniously, the mayor decided to bring back the wooden dollar to inject a flow of money into the town. Wooden dollars (W$) were circulated by the local government, who gave W$300 to negatively affected town residents. Wooden dollars can only be used as currency in participating local businesses, so the benefit of the extra cash stays in the town. If the local government had just given US $300 to citizens, much of it might have been spent online, not helping the local economy. Restrictions on the Tenino dollar mean it can’t be used to pay for alcohol, gambling, cannabis, or lottery tickets.

The residents of Tenino have taken up the wooden dollar enthusiastically (Fournier 2020). The mayor believes that there may be a future for Tenino dollars in the town post COVID-19 (Fournier 2020). The city of Tenino is liable for the wooden dollars it prints; however, it will not pay more than US $1 for a wooden dollar (Fournier 2020). A peg on the exchange rate of the Tenino dollar for US dollars limits the liability and risk on the local authority.

Since the Great depression, various forms of wooden dollar have been used around the world both in good times such as the ‘Ithaca Hour’ in New York (Meckley 2015, Rietz 2019), and in times of crisis, such as Argentina in 2001 – 2002 (Colacelli and Blackburn 2009). My hometown of Maleny created its own local currency called ‘Bunyas’ in 1987. Community Exchange System (2020) stated there are a total of 38 local exchange groups operating in Australia. Exchange trading systems are particularly useful for people who are unemployed, underemployed, self-employed, or retired (Sunshine Coast LETS n.d.).

Australian politician Peter Baldwin, Keating Government Social Security minister, encouraged the use of exchange systems like ‘wooden’ dollars because they allow unemployed people to borrow to make purchases or to start their own businesses (Wilson 2015). In Argentina, alternative currency use was found to increase monthly income by over 15% (Colacelli and Blackburn 2009). Just like conventional income, taxes apply to income earned through exchange systems (Australian Taxation Office 2020). As Milton Friedman says, there is no such thing as a free lunch.

By Elizabeth Vleeskens - Masters of Economics


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