The penetration of local currencies, a possible solution to the financial challenges of globalization

Abstract

While the role of the once dominant national currencies is decreasing, supranational currencies like the euro and local currencies used in smaller communities are widely used. The financial crisis has weakened the monopolistic grip of economies' national currencies. As has often been the case throughout history, local communities are trying to protect themselves and their economies with their own currencies, surrogates, and special accounting systems. Following the development of economic systems, community-based currencies are changing themselves. During their creation the primary concern is not only economic interests, but also local social, cultural, and moral standards. Using these they try to connect the untapped opportunities and unmet needs, and generally improve allocation of resources. Community currencies mostly have the same value as the national currency; this why they are called parallel or complementary currency, or social money. This serves two purposes: to maintain price stability and to facilitate the use of the parallel currency. If local money is used only for local purchases, and the national currency is used for all non-local purchases, there is no direct competition between them. Of course, people are generally more confident in the national currency, but they are also very sensitive to price. If some better form of payment, payment conditions, or even form of debt is provided them, they are likely to accept and join in the use of local currency and the community accounting system. Keywords: allocation, local currency, conditions, community accounting system