Paul Glover, the founder of the Ithaca HOUR community currency system.
PHOTOS: MARIO RUIZ
Tough times, it seems, have been with us for years. Many of us have been hit pretty hard. That's why Paul Glover, a resident of Ithaca, New York, decided to do something about it. Two years ago he came up with a supplemental currency called HOURS, and here's how it works. Each HOUR is equivalent to one hour of time, or $10, which is the local county's average hourly wage. Also available are 1/4 HOURS ($2.50), 1/2 HOURS ($5), and 2 HOURS ($20), all printed from a small shop in town. You can buy all the goods and services you need just like you can with the U.S. dollar. You can even use HOURS to go to the movies or to enjoy some fine dining.
The best news and worst news about Paul's HOURS is the fact that they are worthless outside of Ithaca. As a result, they circulate within the community, improving the city's economic flow and encouraging participants to put their faith in each other rather than the almighty dollar. As the Ithaca HOUR plainly states, "In Ithaca We Trust."
Anyone can participate. For one dollar, residents become members and receive four HOURS automatically. Ithaca Money , the local newspaper established and published by Paul, lists all of the members, their phone numbers, and the services or goods they are either offering or seeking. If, say, Ellen needs a carpenter and sees John's carpentry listing, she'll call him and they'll negotiate the amount of HOURS he'll be paid.
When John's done, he may take his hard-earned HOURS and purchase a few evenings of baby-sitting time from Susan. With over 700 goods and services to choose from, there are few necessities that members won't find.
Excited to see it for ourselves, MOTHER staffers headed up to Ithaca to witness the exchange system firsthand. After just one weekend we found that, although some kinks still need to be worked out, the currency is quite impressive overall. We saw, for example, a hotel manager take in six HOURS from a couple, which he in turn used to pay a landscaper. We watched a restaurateur use the HOURS he earned from customers on Friday night to purchase fresh produce at Saturday's Farmer's Market. We even whiled away the HOURS ourselves, using the four HOURS Paul sold us to negotiate for three loaves of fresh bread, honey, cider, and a beautifully handcrafted wooden cutting board. Mostly what we saw in Ithaca were dozens of community members who addressed each other by first name, joked around, and negotiated for each other's goods and skills. Not a bad weekend.
So, after gathering a book's worth of information, we decided the best way to show you how it works is to have Paul address the questions most frequently asked about HOURS. We also provide a guide for setting up a new currency and comments by Ithaca's biggest financial resource—the community members who are making it happen.
Time Is Money: Paul's Q&A
What gives the HOUR its value?
The HOUR is backed by real people, real skills, real tools, and real time and goods. It's a steady base for barter negotiation, and its value increases as the list of traders willing to accept it grows—and as the variety of goods and services grows. Every note is a promise to accept HOURS or represents goods and services traded.
Who can benefit from Ithaca HOURS?
Everyone who needs more spending power and has extra time. Basically, this includes: full-time employees who want a second job on their own schedule, part-time employees, underemployed workers who seek income from their skill, the unemployed, seniors, kids ages 14 and up, business people who want more customers, those who need to pay debts faster, all who want to save up dollars, and anyone who wants to develop a part-time or full-time business.
How many HOURS have been issued and how are they circulating?
By June 1, 1993, 2,000 HOURS had been issued. Some of the most popular stores and services have earned up to 60 HOURS each. Circulation surges when they spend again. The largest purchase we know of so far has been an 18-HOUR carpentry job.
How do community members get Ithaca HOURS?
They receive four HOURS when they sign up and agree to accept them for goods and labor. Everyone starts with the same number. Then they mail the coupon on the back cover of the newspaper or sign up at one of the Barter Potlucks, which are announced in the paper.
These bimonthly potluck dinners are prepared by and for members, so they can sit together and discuss the direction they'd like to see the currency go. You can earn more HOURS by calling someone on the list who needs what you offer, by agreeing to a request for your labor or goods, or by providing goods or services to Ithaca organizations that have received HOUR grants.
Can members spend HOURS with someone who is not signed up to barter?
Sure, if they'll accept them.
What happens if someone's time or product is so popular that they accumulate more HOURS than they can use?
People should spend them as they get them, so they don't pile up. We ask that you keep them moving and let others use them.
Is everyone's HOUR worth the same?
We have been taught to think that teachers should be paid less than bankers, that psychiatrists should be paid more than shoe-store clerks, that muscle work is valued less than mental work, and that male work is valued more than female work. But we all need each other to make Ithaca function. Everyone's honest hour of labor has the same dignity.
Usually one hour of labor is worth one HOUR, but some people have rare skills and might want anywhere from one and a half to five HOUR for their hour of work. Eventually, the Ithaca HOUR list may bring so many skills into the local market that rare skills become less rare, and more affordable.
Even so, a dentist must collect several HOURS for each work hour because the dentist and receptionist and assistant are working together, using equipment and materials that they must pay for with dollars. Someone might want more than an HOUR for one hour of tough ditch digging. Baby sitters getting $2/hour would do better to accept a 1/4 HOUR, though tending children is a big responsibility and perhaps worth more. Ask for what you think you deserve and give good service.
Can dollars and HOURSbe used together?
Yes. For example a clock selling for $15 might be offered for 1 HOUR plus $5. For an hour of rare labor one might offer 2 HOURS plus $2.50. And so on.
What prevents HOURinflation?
There are many more trading opportunities than HOURS issued. The Barter Potluck plans to watch demand grow and will distribute HOURS gradually.
How many HOURSwere printed?
In October 1991, 1,500 1 HOUR notes and 1,500 1/2 HOUR notes were printed. Then 6,750 1/4 HOURS were printed in March 1992. That's a total of 3,937.5 HOURS, with a face value of $39,375. Each note has a serial number.
Who prints and issuesHOURS?
Decisions to print and issue HOURS are made by those who attend Barter Potlucks. Anyone who advertises their willingness to accept HOURS may vote. They decide how many HOURS will be sold at $10 each to obtain dollars for printing HOURS. They decide which denominations will be printed. They decide how many HOURS will be paid to new sign-ups and for renewals, and they make HOUR grants.
HOUR notes are signed by Patrice Jennings, a member service representative at Ithaca's Alternative Federal Credit Union, and are also signed by Victoria Romanoff, a local historic preservationist. Our intention is to stimulate the creation of jobs and to expand Ithaca's economy, paying special attention to ecology and social justice.
What prevents counterfeiting?
HOURS are printed on heavy colored recycled paper, with a second color overlay. Also, red serial numbers are stamped deeply and can be felt.
Since the HOUR is $10, won't it sink if the dollar goes down?
Our plan is to gradually develop a catalog of HOUR prices, which will eventually allow the HOUR to serve independently of dollar values.
Is barter income taxable?
Exchanges of nonprofessional goods and services are not taxable. Exchanges of business goods and services, however, are taxable. The "fair market value" of goods and services received is calculated by the barterers. I should mention that Ithaca HOURS does not record transactions, so barter value must be reported by the barterers.
Are Ithaca HOURSlegal?
They are a form of scrip often issued during money shortages. They are not illegal; the government's main concern is tax collection.
Meet Community HOOKS Users:
Dave Wharton, Professor of Economics at Cornell University
When Paul was in the early planning stages of setting up the HOURS system, he came up to Cornell looking for someone to talk to about it. So he and I sat down and started talking about the philosophy and logistics of the system, as well as some of the economics.
I think that to a certain extent, Ithaca HOURS extends the economy to people who are marginally or fully on the fringe of society—people without money to disperse. I'm not quite sure why you can't sell your services for dollars if you can sell them for HOURS, but for some reason there are people who seem to get left out of the dollar network. Most important, HOURS help develop a sense of awareness and trading among community members.
In a sense, increasing the multiplier in a local economy—encouraging spending of any form in a local economy—encourages money to stay within the community.
Dollars vs HOURS
Ultimately, there's some kind of insulation that a local trading mechanism can provide. If our entire banking system collapsed, there would still be this mechanism, and we wouldn't have to resort to pure barter. So there's that protection. But right now the HOUR is tied both implicitly and explicitly to the dollar. If we have gradual inflation of the dollar, and everyone keeps taking an HOUR for $10 worth of work, there will be the same kind of inflation for the HOUR. So eventually I would hope that it' could stand on it's own, but I think it takes a long time for that faith in the system to occur.
One of our concerns right now is how quickly we should let the supply of HOURS grow. The constraint on that is similar to an inflationary. We're just beginning to monitor the volume of the transactions, and we don't have a formal network to measure our analogous figures and data. We know that we must increase the money supply over time to facilitate transactions, and we do that through grants and loans. So, there are similar functions to what our regular government would do. We also have the same constraints—we can't increase the money supply too fast or inflation will happen. People will get just too many of these things and they'll have to raise the price.
I doubt most HOURS participants are worrying about an inflation right now. I don't think we've issued too many yet so there's no sense of pressure really in the consciousness of the people. But then, I don't think this relationship is in the consciousness of Americans in regard to the overall economy either.
In general, for this system to collapse it would take major businesses that accept HOURS to back out suddenly. For instance, if you no longer have the Farmer's Market or movie theaters taking them, then I could see a collapse occurring. While it's nice to know that you can get sailing lessons or rototill your garden with local currency, I think the mainstay of the system right now is the fact that you can use it at a good number of businesses. I must say I'm impressed and surprised at how well the HOURS system has worked so far, and that Paul's start-up model seems like a very good one.
Bill Myers, Bank Manager
Let me first start with some background on the Alternative Federal Credit Union. We are a community development credit union with the function of making sure that the community's resources are reinvested back into the community. So while we provide financial services, our core function is to gather the money in the community and then lend it back to the community. The three main groups we focus on are small businesses, low-income people, and nonprofit organizations.
Create a Local Currency in Your Community
By Paul Glover
Although local currency is lots of fun, it's also lots of work and responsibility. Here's a step-by-step summary of how we got started in Ithaca and how we're expanding.
1 . Design the money. By law, your cash must be obviously different from a dollar, and of a different size.
2. Sign up participants. Show prototypes of your money to people who might be willing to appear in the first published list. Tell them this will be real money, backed by real people, real tune, real skills and goods. They'll each get the same quantity of local currency as advance payment for being willing to accept it.
Tell businesses that local money stimulates spending by those otherwise too poor to purchase, promotes locally owned small businesses, and keeps wealth in the local economy. Tell everyone they're in total control of how much they accept. Popular retailers should set a rate of acceptance (per purchase) within what they expect they can re-spend, then gradually increase acceptance of HOURS as the list grows. Collect a small sign-up fee from everyone in order to print the money.
3 . Design your fast barter newspaper. Type up the stories and listings (Computer database programs, such as Filemaker Pro for the Macintosh will alphabetize entries automatically for you). Include a coupon inviting more participation, and leave spaces in your layout for display ads.
4. Sell display ads by showing sample pages of your newspaper to businesses. We now accept local currency for nearly the full price of ads.
5 . Print the money. Use colors. Our 2 HOUR note ($20) is printed on locally made 100% cattail paper with a watermark, and we use soy ink. Our printer accepts up to 30% of the price for printing in money that he himself prints. Serial numbers convert the paper into money.
6. Print the first newspaper and mail them with the agreed local currency payment to each pioneer participant. Every note disbursed is recorded by serial number, name of recipient, and date. Accurate records are essential to accountability and credibility, and these records are open to any participant on demand.
7 . Distribute the newspaper to the public. You might publish the list as an insert to a Pennysaver-like newspaper.
8. Issue a press release to introduce the list and money to the larger audiences of TV, radio, and other newspapers. Invite more people to swap their skills and goods and combine the meeting with Barter Potluck suppers to discuss how things are going. Be sure to remind people that barter income is taxable.
9 . Keep in touch, especially with those likeliest to earn the most money. Retail participants, to the extent of their popularity and visibility, give special credibility to the currency. We therefore help people with a big HOUR income to focus on ways of spending them—say, by reading them the list, noting their selections, or providing them with personalized Ithaca HOUR Shopping Lists for easy reference. When they want to spend their HOURS for something not yet on the list, we try to find what they seek.
Many of our business participants have become enthusiastic HOUR spenders. They've even spent hundreds of HOURS with people not yet listed, by offering HOURS as payment and then showing the newspaper.
10 . Call everyone on the list periodically to make sure phone numbers and listings are accurate. I pay people an HOUR per hour for this work.
11 . Collect success stories when trading begins, and publish these. (See samples of these stories on page 66.) Economics is 95% psychology, so success stories prompt more success stories, and an ever-widening acceptance of trading with HOURS.
Owner Michael Turback swears that he can practically hear people smiling over the phone when he tells them that he accepts Ithaca HOURS for payment at his restaurant.
As for my personal background, I'm not really a banker by training. My background is in small business, and I got involved in the credit union because I saw that the financing opportunities I wanted as a small business person weren't available. We had a group in the area called the Alternative Fund, which gave out grants and small loans to businesses, and this group basically started the credit union in order to say "Listen, we're businesses that are making deposits to the bank. So why can't we get any of our own money back?" The credit union was started to recycle that money back into the community.
We feel we'll be successful to the extent that we can make the businesses we work with successful. If you think of a larger economic model and the way a community works—for instance, a community that imports more than it exports—it's eventually going to bleed itself to death. The imports that arrive from outside the community require capital to move out of the county. To the extent that we can allow those businesses to maintain capital inside the community, we can strengthen the community, and I think the beauty of Ithaca HOURS is they cannot be used any other way except within our community.
More About HOURS
The percentage of total transactions that include Ithaca HOURS is relatively small because we don't accept Ithaca HOURS as deposits or in exchange for dollars. Depository dollars are close to $17,000,000 and the Ithaca HOURS system is only $5,000 or $6,000 in it's entire capital. It's also difficult to measure how quickly they flow around the community.
We do think about having a collapse or how the system could fail every time that we take hedging positions in investments. And with Ithaca HOURS, we try to find the balance of protecting ourself from the exposure while still engaging the community. So our banking board has said we are going to set a total dollar limit of HOURS that we can hold on hand at one time.
We accept Ithaca HOURS based on certain designated, fee-based services. Our credit union starts out by saying that some people are dollars rich and other people are time rich. Time-rich people have accessed Ithaca HOURS through the use of their skills and time. These people may have overdressed their checking account because they don't have the cash there. So we've allowed Ithaca HOURS to cover transaction fees that time-rich people wouldn't necessarily have the dollars to pay for. These include fees for mortgage applications, business loans, overdrafts, and membership.
As for the the HOURS we take in, we use them to pay for services at the bank. The printer accepts them and so do the people who do repairs on the building and who mow the lawn. We also use them to register for advertising events and we try to encourage others to accept them. One of the most popular uses for HOURS is offering them as bonuses. There's something different about giving an employee a $50 bill versus a 1 HOUR note. When you put an extra $50 in someone's paycheck, they often use it to pay off a bill. When you give someone extra HOURS, they do something special with it.
The best thing I can say about the HOURS is that they really empower people. My little daughter saw me using an Ithaca HOUR and said "Daddy, didn't you just print this thing out? How can it work?" The fact is, somebody simply prints out federal dollars too, but nobody ever thinks about that. Dollars are so much a part of our psyche that we don't ever question it. What could be more empowering than printing your own money?
Anna Steinkraus, Littletree Orchards
I've been bartering since Paul started up the HOURS system in 1991, and I accept HOURS for my apples and cider down at the Farmer's Market every weekend. The clientele who use HOURS is small right now—about 2% of my customersc—but it's definitely building.
At first I was skeptical of both accepting them and using HOURS. I didn't know how others would respond to them, but it's definitely been positive for us and a good promotion for our business. I also think the more ways we make our goods available to people at the market, the better. I've gotten to know a whole bunch of nice people I never would have met if it hadn't been for HOURS.
The only problem that I see with the HOURS is that there is still some confusion right now. For instance the HOURS are based on certain increments. So sometimes you have to give change back but there's nothing small enough in HOURS. If they don't have dollars or change, it can get confusing. Also, too many people right now are nervous that the bottom will just fall from under the system and they'll be left with nothing. At this point, people just need to be shown that they can trust HOURS—they must have faith in the currency. I would like to believe that it'll grow and have a strong local impact.
Linda Blossom, reading/math tutor
I think the HOURS system works very well. You've got a lot of old hippies here in Ithaca, as well as many young new hippies. There are so many countercultures in every age group, plus cross cultures with all of the universities here. What the system has to do now is come out of the alternative community a little more.
I think it's starting to—I looked the other day and saw a listing in Ithaca Money of a lawyer that I know, as well as a dentist. The system is definitely starting to get more mainstream. It was also especially hard in the beginning when people didn't have a lot of HOURS and none of us wanted to let go of them. But as long as people have a way to go around and use the HOURS for necessities after accepting them, then the currency will make sense and it'll work.
In Ithaca you have so many people working for themselves, doing everything from massage to painting to auto repair. This was probably the best community to try it out in. In Ithaca people are making money with their own skills and their own wits. We've got a lot of people who are self-employed here. When you're working for yourself, you look for any way you can to save money. Even by just using HOURS, you're saving money because you usually don't go out and spend the HOURS frivolously.
Michael Turbacks, Owner of Turback's Restaurant
Our restaurant is successful and we've always had a wide range of customers, from the president of Cornell University to the local folks in town. What attracted us to the Ithaca HOURS was the fact that we could bring in a whole new group of people—those with an alternative lifestyle. When we started a year ago, we were in a recessionary time, and this was a good way to help build up our business. We've also gotten to show people that we're not a special occasion restaurant—we're an everyday restaurant.
Right now, I'd say that at least one customer a night pays with HOURS, and we've taken in several thousands so far. It's a fun way to do business. When people call and find out we accept HOURS, you can practically hear them smile over the phone. Plus, when I look in the register at night, an HOUR seems far more attractive to me than a $10 bill. It's a real honest money.
Along with the list of goods and services offered, Paul also publishes several of the members' success stories in each issue of Ithaca Money. Below are some actual samples.
Eileen has received HOURS as donation for wildlife rehabilitation. When looking for a baby-sitter on the list she "met the most wonderful person. She does child care in exchange for house and garden work." This allowed Eileen to pursue her college degree. "Without Ithaca Money, 1992 would have been much more difficult. Being able to trade makes life easier, and it's fun. I've given away 1/4 HOURS to friends who are fascinated with the idea. I've even bought Girl Scout cookies with HOURS, from a scout who needed them for music lessons."
Toni provides health-club memberships. She has bought gifts, food, movies, and fertilizer, has given bonuses to employees, and intends to hire painting, carpentry, and electrical work. "I've enjoyed Ithaca HOURS; it's a great system. There are a lot of people who could not join a health club without the HOURS they're earning. They're very grateful for the opportunity, and it's opened up a whole new market for me."
Debbie sells used books and has spent HOURS for a watch, a massage, and computer time. "Ithaca Money enables people to rely on each other and creates a sense of community. It's opened up a lot of avenues and been a real guide for me. I've talked with others who've said they've bought things they needed and wanted that they didn't have the dollars to get. The HOURS' potential is unlimited."
Neal sells organic food at the Farmer's Market and has spent HOURS for movies, bread, his son's play group, and food. "I'm really excited about HOURS and feel good about taking them. I always carry some in my pocket." He says he intends to hire farm help with HOURS this spring. As a farmer, he believes HOURS help support local agriculture. "Every community needs to grow as much local food as possible. It's absurd when more calories are used to transport food than the food contains." He adds, "I visit friends elsewhere and show them Ithaca's barter newspaper. I show them our money that says, `In Ithaca We Trust.' That's the bottom line, right?"