“The government isn’t the only entity allowed to issue money. Private citizens and businesses can too, and throughout U.S. history, they often have.” — U.S. Federal Reserve Bank, Cleveland

Complementary currencies are exactly what the name implies – forms of money that complement national currencies and work alongside them.

They have a long history reaching back to ancient Egypt. Today there are around 5,000 in use around the world. Among the most well-known are the Bristol and Brixton pounds in England, the Chiemgauer in Germany and BerkShares in Massachussets. The most successful complementary currency is the WIR in Switzerland, used within a nationwide business network. In 2017, the WIR bank held assets equivalent to more than $5.6 billion USD.

The Benefits

Also known as alternative or local currencies, complementary currencies help to keep wealth circulating locally since their use is confined by design to particular towns or regions.  In this way they support local small businesses which then recirculate that money within the community. Complementary currencies also buffer local economies from large-scale volatility at times when the national currency is scarce, and allow for local employment in local projects at any time. An enhanced sense of shared community is a beneficial side-effect.  

Building Shock-Resistance 

Whether local or global, all economies rely on money. Yet our financial system has created monetary monocultures. These are inherently unstable, vulnerable to shocks and boom-and-bust cycles. As with any natural system, there is strength in diversity. Complementary currencies provide this resilience, helping to smooth out the shocks that monocultures inevitably deliver.

In situations where the complementary currency can be obtained without having to buy it with national currency, such as when it is granted or earned, it provides buying power to segments of the community that have low levels of national currency.

Debt-Free Money

These systems have historically been the most successful, as they inject debt-free money into the economy. A whopping 97 percent of the U.S. money supply is created by private banks when they make loans, and this money-as-debt paradigm is the norm worldwide. Because the banks only the principal on their loans but still demand interest, there is never enough money to pay off all the debt. Scarcity, bankruptcies and expansion-contraction cycles are built into the system. By providing debt-free money, complementary currencies mitigate the effects of these features.

“Examples of private money arose to serve purposes that were not well served by government-provided money. These purposes include having a currency suited for making small purchases, having a medium of exchange in remote locations, and having a means of exchange during financial panics.” — U.S. Federal Reserve Bank, Cleveland

 Writing about the use of “stamp scrip” a kind of complementary currency used during the Great Depression, the Cleveland Federal Reserve noted that,“Stamp scrip was issued by municipalities, civic organizations, business organizations, and individuals. Municipalities issued stamp scrip as a source of revenue. The Great Depression caused an erosion in taxpayer income, an increase in taxpayer delinquency rates, and even tax strikes in some communities. All of these took their toll on municipal revenues.

Municipalities could make up the shortfall by making purchases and paying workers with stamp scrip. Civic organizations issued scrip to promote employment and various civic projects.”

Abundance is Possible

Too many communities throughout the country today find themselves similarly short of national currency. Roads remain unrepaired, schools are underfunded, ambulances break down, libraries close, community centers shutter. Complementary currencies can not only soften the pain of austerity, but can usher in a new era of prosperity and local empowerment.

See the Money section for a more in-depth exploration of money and the role of complementary currencies.