Guide to Stroud Local Currency

I've been meaning to cover more re the Stroud currency on this blog for a while - the official name and note design are to be announced soon.

Photo: Russ cartoon to get the debate going about the design and name - I even had a query indirectly from The Independent on Sunday earlier this week about using this version - I noted we are still awaiting confirmation and that this was not a serious option.

Below I include the guide put together earlier this year to answer questions - some of the issues are still to be confirmed but it gives an idea. See more on a previous blog of mine here. I was also left a comment by Australia's 'Baroon Dollar' on a previous post - it is worth seeing their website here as they also have a blog about what is happening elsewhere in the world - good on them - a very useful resource.

A Guide to Stroud Local Currency

What’s it all about?
We are lucky that in Stroud there are many flourishing local businesses and a very successful food economy. We want to build on this foundation and help the local community thrive and become more resilient, especially in a recession. Transition Town Stroud is working towards launching a local currency in Stroud in the spring/summer of 2009, following the successful example of the German Chiemgauer.

What’s it for?
The Stroud local currency is an initiative to support and stimulate the local economy by emphasising the availability and quality of locally produced goods and locally owned businesses. Our main aim is to reconnect people to their local economy for employment, goods and services.

We are planning to base the working method for our currency on the Chiemgauer—a highly successful local currency in Germany. Christian Gelleri, founder and manager of the Chiemgauer currency, visited Stroud in January and offered much advice and encouragement for a similar scheme in Stroud.

How will the currency work?
You will be able to buy Stroud pounds in exchange for pounds Sterling (1 Stroud Pound =1 Pound Sterling);

- You can then spend Stroud Pounds in local participating shops and businesses;

- Traders can similarly spend Stroud Pounds with other participating traders or use them as change to participating customers;

- The notes will lose 2% of their value every three months, known as ‘demurrage’. They will have to be stamped to restore their full value: this process will cost 2 pence per pound. Monies raised by this ‘demurrage charge’ will go to support local charities or social enterprise projects;

- If you want to exchange Stroud pounds back into Sterling, you will only receive 95 pence for each Stroud pound: a 5% ‘redemption charge’; of this redemption charge, 2% is to pay for the administration of the scheme and 3% to fund local charities or social enterprise projects;

- Traders and businesses will be asked to pay a membership fee of £5 a month to be part of the scheme;

- Traders and businesses will receive only 90 pence for every Stroud pound exchanged back into Sterling: a 10% ‘redemption charge’ (a higher charge than for consumers);

- Shoppers and consumers do not pay to partake in the scheme – except through redemption and demurrage fees;

- Stroud pound notes will have a limited life. New ones will be printed each year;

- Currency holders will naturally try to spend their notes. When businesses receive and wish to redeem them for pounds, they have fourteen days to do so at the standard 5% charge. After this the 2% charge also becomes due. (???)

So, why do we need a local currency?
The money we usually use for most of our transactions, the pound Sterling, is tied up with a system of global transactions and processes that does not serve people in Stroud particularly well. A sizeable proportion of each pound Sterling spent goes to service debts in the global economy and in the process drains resources from the local economy. The current turbulence in the financial markets also suggests that global currencies may not be a secure basis upon which to organize our economic life. In 2007 98.8% of all money worldwide was used for investments, leaving only 1.2% for circulation.

Why will the Stroud currency lose its value? What is demurrrage?
Demurrage or ‘negative interest’ is the special feature of the Stroud local currency. It works very successfully in Chiemgau, Germany, and it will be the first local currency scheme in the UK to feature this device. The currency will lose 2% of its value every three months. This is to encourage people to spend the money more quickly than pounds Sterling, and to discourage hoarding. The notes will have to be stamped to restore their full value: this process will cost 2 pence per pound. Monies raised from this 2% demurrage charge will go to local charities or social enterprise projects.

The device is designed to increase the circulation of money. To create a healthy economy, money needs to circulate frequently. It can be likened to the human body which needs blood to circulate well. If the circulation slows down it gets ill or dies. Stroud pounds will circulate more quickly than Sterling to the benefit of participating local traders and businesses. Stroud pounds will support and stimulate local trade instead of leaking out to the global economy.

How will the currency be brought into circulation? Where can you get the money?
- A finite amount of notes will be printed;
- The money will be available in various denominations.
- There will be special launch to promote the currency;
- People can buy the currency, and redeem it, at named distribution point(s) in Stroud.

Where can I spend the money?
You can spend the money in participating outlets that will be listed in a user guide and the Transition Town Stroud website. Outlets may identify themselves with ‘Stroud pounds accepted here’ stickers. The money can also be used for any payments within the Stroud community if the recipient is willing to accept them. The money is legal as a voucher but it is not legal tender. This means that there is no obligation to accept it. The Stroud pound is complementary currency, not an alternative currency, and is not intended to replace Sterling.

What are the benefits for shoppers and consumers?
- Support for local businesses and enterprises;
- Funding for local projects via the scheme’s redemption and demurrage fees;
- Showing commitment to each other and to a secure and sustainable future;
- Stroud pounds encourage loyalty to local shops and businesses;
- Local businesses will see increased trade;
- Expressing concern about the misuse of global money;

Why does a business have to pay to join?
Businesses must join the Association (?) to take part in the scheme. Cost of membership is £5 per month payable by standing order. This will help with administration and advertising costs e.g. catalogue of participating businesses, website and other promotion. This charge is comparable to the fees paid to, for example, credit card companies (?) and will be well compensated by the benefits that the scheme will bring to your business.

Why do businesses pay a higher redemption fee than consumers?
Businesses will have to pay a redemption fee of 10% if exchanging Stroud pounds back to Sterling, of which 4% will go to administration and 6% to local projects/enterprises. This charge, higher than the 5% fee for consumers, is to discourage businesses from early redemption of the currency which would take money out of circulation and undermine the scheme. In effect, we hope that businesses will find it more beneficial to circulate the currency through exchange with consumers and other traders than to redeem it.

What benefits will my business gain from joining the scheme?
The aim of the scheme is to emphasise the availability and quality of locally produced goods and locally owned businesses and to encourage the use of local shops and businesses. In particular:
- The local currency operates as a kind of loyalty scheme and businesses that accept it in exchange for goods will be attracting customers that might otherwise spend money in another town or non-participating shop;
- Each member business will be listed in a local catalogue and on the currency website thus helping to bring in more customers;
- Opportunities for local promotion;
- Demonstration of support for the wider local community;
- Chains and businesses not currently supporting a sustainable future will have an incentive to participate and source more of their requirements locally – all helping to encourage a more local and sustainable economy.

As a business, how much of the money should I accept?
You can choose how much or how little of the Stroud pounds you deal with. For example, you could take only a limited percentage of the value of what you sell in this local money, perhaps 20%. Or you could accept Stroud money up to a certain limited value every week. You can, of course, also offer Stroud pounds to your customers in their change to encourage the money to spread and to support your local economy. From a tax perspective, anything paid for in Stroud pounds is accounted for in the same way as a pound sterling.

What about change?
The notes will be in several denominations (probably 1,2,5.10,20,50) and change will be available in the usual way from the distribution point. Where change of less than £1 is needed, ordinary sterling coins will be used.

Which local projects and social enterprises will benefit from the scheme?
One of the most important outcomes of the scheme will be support for the local not-for-profit sector. All members of the scheme will be able to dedicate a proportion of their redemption and demurrage charges to a charity or social enterprise of their choice (so long as it is also a member of the scheme).

Can I lose money?
Since every local pound is backed by a pound sterling held in an account, the local money can never be any less secure than the national currency. You can trade back to Sterling (less 5% redemption charge/10% for businesses) at any time but we don’t encourage this as the main aim is to keep the money circulating and supporting the local economy.

Could it be forged?
The notes have been designed on high security paper with security features to combat fraud. As comparatively few notes will be issued, it is unlikely to be worth the expense of forgery.

What about the recession?
The recession means that we are all facing difficult economic times, but history teaches that when a community works together it can flourish even in the harshest conditions. The new local currency is one way that we can show our commitment to each other and to a secure and sustainable future. The recession means that we are all facing difficult economic times, but history teaches that when a community works together it can flourish even in the harshest conditions.

Who will be operating the scheme?
The scheme will be operated by the Lifestyles and Livelihoods working of Transition Town Stroud. Transition Towns are working in their local communities to support people in their move towards a low-carbon future. Several other Transition communities have created local currencies e.g. Totnes and Lewes, and there are hundreds of these working successfully across the world, especially in Germany and Japan.

When will the currency come into operation?
The aim is to launch the currency with a special event in late spring or early summer 2009.