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Author Topic: Local Currencies?  (Read 633 times)
take5
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April 13, 2012, 01:59:56 AM
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Since this little community here is so obsessed with conscious of money and alternative currencies I'm sure many of you have read about some of the different local currencies that have sprung up throughout the world. They have always been most popular during recessions and interest in them has definitely piqued in the past few years.

Many of these local currencies that are currently being used are pegged to the dollar, or whatever the local currency is, as opposed to letting it's value float. While a pegged currency allows for stability, it may not have the independence of a floating currency. And isn't independence the whole point of having an independent currency. Perhaps some of these currencies have the intention of altering their exchange rate if hyper inflation occurs, but then they're still vulnerable to gradual inflation.

Are their merits to both approaches or is one better than the other?
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Garr255
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April 13, 2012, 03:30:16 AM
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From the little that I know about currency, I think both methods of valuing a currency are viable, depending on the circumstances.

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April 13, 2012, 03:41:43 AM
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Both methods have advantages.  Bitcoin, for instance, is not pegged to any other currency.  This introduces exchange volatility in the short term.  But in the long term it will be much better off being independent.  Pegged currencies are very stable, which promotes economic growth.  China is a good example.  But ultimately pegs become destructive and cannot be maintained.

At one point I was working on a proof-of-concept local currency backed by Bitcoin to promote stability:  https://bitcointalk.org/index.php?topic=10970.0
(Ironically, the reverse of most currency pegging schemes)

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herzmeister
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April 13, 2012, 04:08:08 PM
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In an ideal world, both commodity-based (i.e. pegged, e.g. gold, Bitcoin) and credit-based (i.e. Ripple, scribs, self-issued receipts and "promises") currencies exist in an economy at the same time (and without being centrally controlled).

The latter would balance out liquidity shortages of the former. Thus they would complement each other beautifully.

I don't see how such a system would not solve most of today's economic problems.

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