The prime benefit of local currencies is that they are only accepted locally. The wealth that is represented by a local currency continues to circulate locally; it never leaves the community that accepts it. They promote local economic sustainability by preventing capital flight.

Besides enabling us to prevent flight of accumulated capital, local currencies also allow us to grow our economy without first exporting local wealth. Currently, in order to grow an economy, we must first export local resources, either people’s time or their physical resources, in exchange for the US dollars that we use to do our local spending! This is an amazing fact. A community often has work to be done and people with time and skills to do the work, but in a modern economy that work can’t happen until the community first has a medium of exchange to account for that work—i.e. money. But why should a community have to purchase the medium of exchange? A medium of exchange is simply a measurement of who is owed something by the community; it is just information. This is like saying that carpenters have to buy inches before they can measure!

Our Federal Reserve banking system responds to needs of the overall national economy at best, and the political needs of who’s in office at worst. Further, policies are much more likely to be made for the benefit of cities and urban areas than small towns and agricultural areas.
Local currencies with local issuing mechanisms can be put in place to take into account local conditions. For example, if the economy of the nation as a whole is booming because of hot manufacturing or hi-tech sectors, the economy of a rural agricultural community may still be quite depressed. If it has a local currency to rely on, credit in that local currency need not be tight even if the Federal Reserve Board keeps raising US dollar interest rates nationally.

Local currencies also increase local decision-making power. Banks tend to prioritize home mortgage loans over business development loans because the government requires a lesser capital reserve rate on mortgage loans. Such regulations harm our local economy: they increase the barrier for credit-worthy individuals and businesses to obtain the credit that they deserve. This means that our local economy loses much needed business.

Local currencies, by definition, return financial decision making to local bodies. Loans in local currency can be issued on the basis of character; communities can fund local production by issuing currencies; and the list goes on. By having such mechanisms in place, communities become truly empowered to take on sustainable local economic development, and thereby contribute to a vibrant national economy as well.