In the storm of economic crisis, all the arguments about the benefits of friendship, cooperation and integration get forgotten. As evident from the Western experience, only thriving together can be a good thing. When the dark days come, everyone tries to keep their stuff separate. The principle "every man for himself" becomes more popular, and people are ready to erect fences around each village.
It is one thing when France and Germany are making tremendous efforts to prevent the collapse of the still young euro area. It is quite a different story when the germs of centrifugal tendencies appear in a well-established country like the United States. Meanwhile, the state of Wyoming in all seriousness began preparations for autonomous navigation. The freedom-loving mountaineers nearly passed a bill providing for procedures in case of the collapse of the federal government. The State House of Representatives was short of just three votes to pass the bill.
The bill includes the introduction of domestic currency, creating its own army and even the possibility of acquiring an aircraft carrier. It was assumed that the final set of measures needed to start an independent life would be developed by a special parliamentary commission. However, according to the main initiators, the last two points about the army and navy were inserted in the bill by its secret enemies. Before considering these ideas in the House the ideas were crossed out along with the proposition of the state's own currency.
These lawmakers might have not thought it through as all sorts of regional currencies have proven quite effective in combating the financial crisis even during the Great Depression. Even today, this ersatz money is used successfully in some cities of Europe and the United States, and in many other parts of the world. Such regional currency is issued, as a rule, by local municipalities, is linked to the main currency of the country (euro or dollar) and sold to the population at a discount of 5-10 percent. Within the city or urban conglomerate they can pay for goods and services of local producers.
The point of the regional currencies is to support local business. The money cannot be spent in a local McDonald's or Wall Mart. Customers would have to go to a neighborhood store, and if there is no right product there to another one, even further away. The shopkeeper, in turn, will give the money to a local farmer; the farmer will spend it in a bar, at a barber, or would pay for municipal services.
For example, in the United States, in Ithaca New York, the local currency - hours - has been around for a long time. According to "Rossiyskaya Gazeta", the reason for its introduction was the observation that the residents of this agricultural region spend their money in supermarket chains, while the stores do not buy from local producers. With the introduction of "hours", a unit equated to labor per hour, the depressed region has received significant impetus for the development. The economist Friedrich Hayek in his time won the Nobel Prize, including for the theoretical basis of the effectiveness of such a system.
Hayek, who represented the ultra-liberal trend in the economy, offered to go further and abolish issuance of money by the state, giving this function to private corporations. In his view, the competition between different currencies, as well as goods, would lead eventually to a more stable and reliable payment too;s. From the outside it looks great: regions and companies are exempt from the dictatorship of big corporations sucking the money out of them; are insured against the risk of mistakes by the federal financial management system; the municipalities receive funds for social programs based on the level of local economic development, and the small businesses thrive.
Local ersatz money is indeed good, but only on condition that it remains the only exotic currency used in compliance with a large number of strict rules and only when and where it is vitally important. If all regions of the country start recklessly printing their own money, as pointed out in "Rossiyskaya Gazeta" by president of the Moscow International Currency Association Alexey Mamontov, this would lead to their actual separation. At least, when Argentina tried to make the most of the ideas of Hayek, it was found that this only deepens the economic crisis, creating national economic risks. The Argentine experiment ended in 2001 with unprecedented social upheavals.
It looks like the mountain state will have to survive the economic storm in the same boat with other regions of the United States.
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