David Boyle - Funny Money

Interview with Paul Glover
Ithaca Hours

I wanted to know what the challenges had been to the system as it grew, but this was the wrong question to ask. 'Well, first of all, nothing goes wrong.' [Paul Glover] said. 'Economics is 85 per cent psychology, therefore the newspaper is about promotion. There is no bad news in it. It is an entirely self-fulfilling prophecy. When there were ninety people who agreed to take this money and three stores, the money was presented as being powerful, totally solid and totally wonderful. And by insisting on that for four and a half years, it has gradually come to be perceived as reliable -- so that people will hold on to it -- so desirable that people will prefer to be paid in it. It is a cultural process.'

This is all undoubtedly true. But isn't it interesting that, no matter how radical you are -- from local money promoter to Chancellor of the Exchequer -- you find yourself talking up the economy. Clearly Paul Glover is more successful at it than, say, Norman Lamont -- who famously tried to talk up the pound as it sank inexorably through the floor on Black Wednesday 1992.

But there is another side to all this. If you want people to copy you, and carry on setting up hours systems around the world, you need to tell them the truth, don't you? Don't you need to look the mistakes full in the face? I asked.

But Paul was having another go at the academics. 'The academic is going to dissect this like a living cadaver, and is going to extrapolate -- to pin it down like a bug on a specimen sheet,' he said, his chin jutting out. 'Part of my aggravation with the academics is that they pile on to this as a phenomenon, a novelty, something they can study, write papers about, pass the papers back and forth to each other, getting comfortable salaries. And I'm here up to my neck in it day to day, translating what I learn into actual programmes - not as a lifelong incubator to protect myself from a coarse and hostile world.'

I didn't like to think of myself as escaping from a coarse and hostile world, so I pressed him about the difficulties. These are urgent issues, I said, and people needed to be able to try the same as he has. 'Ha!' he said. But rather to my surprise, this meant he agreed with me.

Luckily for Paul, there are other things to worry about. Like inflation. 'Everyone knows that if the government prints too much money -- or people distrust the currency -- the value starts drifting down. Of course there is no chance of the kind of wheelbarrow hyper-inflation which we have all seen pictures of: not enough Ithaca Hours have been printed. But if people stop trusting its exchange value, they would end up accumulating it or refusing it.'

So how do Ithaca Hours control their money supply? For someone who wants to change the world, Paul Glover turns out to be enjoyably conservative in his monetary policy. Apart from keeping detailed figures -- 50.5 per cent of the first issue notes from 1991 have been returned, he told me -- the real work is keeping his ear to the ground, pedalling around on his bike, making sure the notes are not accumulating anywhere. As a result, there is a demand for hours which he likes to keep unsatisfied until the system has grown a little more.

'There is now generally a far greater demand for the money than supply. And hours are issued far more conservatively than are dollars. The original big notes are now worth anything up to twice their face value as collector's items. I have myself been offered one and a half times its value for one of the first ones. Hours are issued at a reasonable relation to the rate of expansion and the diversification of the list.'

'What is reasonable?' I asked, growing a little bolder as the conversation went on.

'Reasonable is that it works,' he said. Gut instinct counts in Ithaca.

Their phone survey showed that about $60,000 in hours is being traded in Ithaca every month, which makes it the largest local currency system in the world. Every note is moving once or one and a half times a month. Paul does his own survey, rather like an ornithologist tagging swans. Whenever he gets paid with an hour, he writes the date on it. Some have been back seven or eight times, and they are speeding up now they are being printed wallet-sized. 'I encourage other people to write on them what they have bought with them,' he told me. 'Not that many people have done that, though some of the regulars do. I think it's a tribute to the maturity of the money that it doesn't pile up in the retail sector. Most of it transacts among people who call each other up.'

Which brought us to the big question -- what underpins Ithaca Hours? It obviously isn't gold. Nor, like dollars, is it debt. Hours are backed by the belief of the local community. 'I think the US money is backed by the US marines more than anything else,' he said with determination. 'We have enourmous military power, so we can enforce access to raw materials. If the Japs became too powerful applying the rules of the game, this country would just step in and say we're changing the rules of the game now. That's all. Dollars are issued at a rate of $830,000 additional national debt every minute. We regard US money as funny money, underpinned no longer by gold and silver but by less than nothing -- by the trillion dollar national debt. Ant Ithaca Hours, by contrast, are backed by a specific market basket of good and services.'

'Do you have any economics qualifications?' I asked.

'I'm a community economist,' said Paul bullishly.

'Does that mean self-appointed?'

'Yup . . . that's where all authority comes from -- from assertion. So I'm a community economist, with all the rights and privileges associated therewith.'

Of course, he said, as I wandered down the steps to find my way home, even community backing can be vulnerable. 'All it takes is for Henry Kissinger to pronounce that this threatens the integrity of the dollar on which we all depend, and that's that,' he said. He made a squidging movement with his foot, on the top step, as if disposing of a snail.