What a community currency is actually for
Complementary currencies have a ninety-year record. What that record shows is that they succeed by doing one job well and refusing the others — and that the ones which promised to be an investment are the ones that failed.
Hassan Asgharian4 min read
Every argument about a community currency eventually collapses into the same confusion: people use one word, money, for three different jobs. Economists have separated them since at least Jevons — a unit of account that lets you compare unlike things, a medium of exchange that lets you settle a debt without barter, and a store of value that carries purchasing power into the future.
The three are usually bundled because national currencies do all three at once. They are not, however, the same job, and a currency built for a community has to decide which of them it is for. That decision turns out to be the difference between the schemes that lasted and the schemes that did not.
The record is longer than people assume
The Swiss WIR, founded in 1934 by sixteen businesses shut out of bank credit during the Depression, is still operating ninety years later. It is not a curiosity: the most recent published figures put its annual turnover at roughly 1.35 billion Swiss francs among small and medium enterprises, down from a peak near 2.5 billion in the mid-1990s.
What makes WIR interesting is not that it survived but when it grows. Jim Stodder's analysis of decades of WIR data found the network expanding when the Swiss franc economy contracted and shrinking when it recovered — a countercyclical pattern he argues contributes to macroeconomic stability rather than merely riding it out. When ordinary credit tightens, firms that still want to trade with each other reach for a system that does not depend on that credit.
Sardex, launched in Sardinia in 2009, repeated the shape in a different decade. Sartori and Dini's study of it describes a mutual credit circuit that grew from a regional experiment into something closer to an institution, with brokers who actively match members rather than leaving trade to chance. A later network analysis in Nature Human Behaviour found the transaction graph full of cyclic motifs — A pays B pays C pays A — which is exactly the structure a mutual credit system needs and a barter market cannot produce.
What they have in common
Neither WIR nor Sardex is a store of value. You cannot accumulate WIR francs as savings in any meaningful sense; the unit exists to clear trades between members. Both are denominated against the national currency, which removes the exchange-rate question entirely. Both are bounded — you are in the circuit or you are not.
That boundedness is usually described as a limitation. It is closer to the mechanism. A currency that only works inside a network of people who have agreed to accept it is a currency whose value rests on that agreement rather than on speculation about what someone else might pay for it later. There is nothing to speculate on.
The schemes that failed tend to have failed in the other direction. Local currencies launched as investments, or with a floating rate against the national currency, acquire holders whose interest is in the price rather than in the trade. Once that happens the unit stops circulating — and a medium of exchange that does not circulate is not one.
What this means for a unit like NODA's
The NODA unit is an internal credit. It is issued against work done inside the community and redeemed against work available inside it. It is not, and is not represented as, a security, a deposit, a guaranteed value, or a claim on anything outside the network. Those are not disclaimers bolted on for legal comfort; they are a description of what the thing is.
Three consequences follow, and they are worth stating plainly because they are the trade-off rather than the sales pitch:
The unit is only as useful as the range of things you can get with it. A community currency's real exchange rate is the depth of its own marketplace, which is why building the supply side is the whole task and issuing the unit is the easy part.
It does not appreciate. Someone holding units and waiting is not being rewarded for patience; they are holding a claim that does nothing until it is spent. This is a feature of the design, and a community that expects otherwise has been told the wrong story.
Its integrity rests entirely on the ledger being honest. Which is a smaller technical problem than it sounds and a larger governance one — the subject of a separate piece.
The question worth asking
The useful question about any community currency is not "what is it worth?" It is: what can I do with it this month, and who decided that? The first half is a question about the marketplace. The second is a question about governance. Neither is answered by the exchange rate, because for this kind of money there is not supposed to be one.
References
- Stodder, J. (2009). "Complementary credit networks and macroeconomic stability: Switzerland's Wirtschaftsring." Journal of Economic Behavior & Organization, 72(1).
- Stodder, J. & Lietaer, B. (2016). "The Macro-Stability of Swiss WIR-Bank Credits: Balance, Velocity, and Leverage." Comparative Economic Studies, 58(4).
- Sartori, L. & Dini, P. (2016). "From complementary currency to institution: a micro-macro study of the Sardex mutual credit system." Stato e Mercato, 107.
- Iosifidis, G. et al. (2018). "Cyclic motifs in the Sardex monetary network." Nature Human Behaviour, 2.