Comfort Dollars

Here's a great example of what we could easily call a "local currency" - that doesn't involve any of the bloody, anti-corporate revolution that detractors of this idea seem to think will attend any such effort.

A great, tiny organic cafe in my town, Comfort, decided to expand to a second, larger location last year. The owner, John Halko, has been renovating the new space for a year, and - thanks to the credit crisis - has been unable to raise the cash required to finish and finally open. With currency unavailable from traditional, centralized money-lending banks, Halko has turned instead to his community - to us - for support.

Granted, this is a small town. Pretty much everybody goes to Comfort - the only restaurant of its kind on the small strip - and we all have a stake in its success. Any extension of Comfort would bring more activity, vitality, and commerce to a tiny downtown (commercially devastated in the 1970s by the chain stores and strip malls of automobile-friendly Central Avenue).

So Halko's idea is to sell VIP cards. For every dollar a customer spends on a card, they receive the equivalent of $1.20 worth of credit at either restaurant. If I buy a thousand dollar card, I get twelve hundred dollars worth of food: a 20% rate of return on the investment of dollars. Halko gets the cash infusion he needs to build the new restaurant - and since he's paying for it in 20% tab adjustments, it just comes out of profits. He gets the money a lot cheaper than if he were borrowing it from the bank, paying back in cash over time. Meanwhile, customers get more food for less money.

But wait, there's more: the entire scheme refocuses a community's energy and cash on itself. Because our money goes further at our own restaurant than a restaurant somewhere else, we are biased towards eating locally. Since we have a stake in the success (and the non-failure) of the restaurant in whose food we have invested, we'll also be more likely to promote it to our friends. And since we have already spent a big chunk of money on Comfort's food, we're more likely go get food there than dish out more cash for a meal somewhere else.

When it gets really interesting is when other businesses begin to accept Comfort's VIP card and dollars for their services as well. But even in its current, limited incarnation, it's easy to see how the math of an extremely simple alternative currency works, why its existence gets cheaper money into the hands of people who need it, and how it circumvents centralized control over commerce.

Admittedly, this isn't a Boingworthy phenomenon in itself. It's simply not "scalable" the way Internet and tech things are. It's a local activity. But it can be modeled by other communities, and the Internet is a great way to share these experiments in social hacking, measure their results, and mutate them further.


  1. I like it, it’s like do it yourself micro-credit. You’d need a wide network for it to work; and the “investor’s” downside is basically that the investment may go out of business and they’ll lose the tab; but overall a good solution for a well connected small retail business.

  2. Universal, top-down projects designed to work anywhere may not scale in a carbon-limited, climate-variability hedged society. In the medium future, heavily localized business may be the only thing that *does* scale. Many locations, many solutions.

    I think this is fabulous.

  3. Isn’t there a risk that the rate at which he pays these loans back is totally out of his control?

    Lets say that it’s a grand success, he sells $10,000 of VIP cards and uses the money to build the new place. When the new place opens, everyone who bought cards will come along to eat… and suddenly he isn’t getting any income from his restaurant, while running costs are as high as ever.

    It’s a good idea, but without some limit on how much of his income will go to paying back the loan during any given month, it’s a hell of a risk.

    I hope it does work though; please keep us updated, I’d love to know how well this works out!

  4. That’s really a great idea. In a way it reminds me of how a CSA (Community Supported Agriculture) share works. Both are investments that should return you more than your money’s worth in product.

    In his case, his restaurant must be good to begin with…otherwise I couldn’t see people getting involved.

  5. When it gets really interesting is when other businesses begin to accept Comfort’s VIP card and dollars for their services as well. But even in its current, limited incarnation…

    I’m not clear on what you’re saying here. Are other businesses actually planning to accept Comfort’s VIP card? Or is this just an idea of yours?

    Also, why would others give out goods or services for credit that had been purchased from Comfort?

  6. It’s certainly an interesting idea, but not an original one — obviously, airlines have been doing this for years! This is essentially a prepaid frequent flyer program.

    It’s certainly a unique way to get cash flow, but not without cost — the owner of the restaurant has essentially become a central banker for his own currency. For instance, he can deflate the value of the dollars – let’s say to make up the 20% free food, he starts using cheaper ingredients. And, as an earlier post points out, unlike a loan he can’t control the redemption rate.

    I can’t imagine he would want to clear transactions for other businesses — now he’d be a central bank and a credit card company!


    Local farmers have been doing it for some time now, especially the small-scale organic farmers.

    You could call it pre-production sales, with a discount for buying sight-unseen. You could call it community farming, which is what the government calls it. You could call it grass-roots capitalism, which is essentially what it is.

    And @ #8 Scolbath, you’re right. The owner could also raise prices, wiping out the ‘discount’ for advance purchases. But it would be long-term dumb, since not many would fall for it twice.

  8. The real issue here, assuming that the owner still makes a touch of profit even with a 20% discount (and that’s a safe bet), is that this is too local, too smart, and too easy. We need economic impact statements! We need a phone poll! We need a petition! For Pete’s sake, where is the middleman!!

    Thank goodness the old school idea of rolling up your sleeves and coming up with solutions is still alive. It gives me hope.

  9. @8:

    Of course he can control the redemption rate. By assuming it is 100%. All the owner of the cafe did, was to ask people to eat out 20 times at once, so can use the profit now (instead of later) to built up the new place and get more profit later on, but earlier than he would without the scheme.

    Don’t try this at home though, at least if “home” is a place crowded with cafes with sufficient density that not all will turn in a profit. This strategy is for supplying empty markets only. Period.

  10. Many towns in the UK have Local Exchange Trading Schemes (LETS) available. The interesting thing abot these schemes is that it lets people sell things to each other, buy in services or items they wouldn’t otherwise be able to afford and pay back in whatever skills or time they have available. Credit is free.

    This doesn’t seem that different to me…

    I have been thinking about the nature of economic systems and how ludicrous it is to behave as though financial systems have a lie of their own and are not under our control. I’m particularly interested by who benefits and who loses by the current currency exchange system, which means at the moment that people from some countries might have to save for a month in order to buy a beer in London. Would setting a rate exchange which gives one-for-one be such a bad thing? Who would it affect?

    Local trading schemes let people set their own hourly rates, decide how much value things have for them, and what they are prepared to exchange for services.

  11. This is very similar to the Ithaca Hours system, which applies a similar principle on a citywide scale. It’s apparently very successful, since it’s been operating since 1991.

  12. I think it /is/ scalable.

    This kind of simple accounting – adding and subtracting entries on a balance sheet – is the kind of thing that can be done by any CPA, easily – not even beginning to test his/her skills.

    There’s no technical hurdle to jump in the accounting part. Even a single employee, with appropriate software tools, on a desktop machine, working full-time, could handle the accounting from thirty or forty entities using this VIP card. If you’ve got a hundred entities, two employees. A thousand, five – and a decent set of servers.

    Appropriate public-key encryption for transactions and a complete lack of client-side processing, along with complete, immediate, and transparent accounting reconciliation (this is where the appropriate software tools come in, as well as publishing the formulas used so that entities can perform due diligence for their own accounting) upholds the principles of modern finance and accounting.

    The hurdles are entirely regulatory – certification, licensing, approval, permits, etc – in nature.

  13. Meant to add that for a period in the 18th century, a lot of shops and local businesses issued their own tokens in the UK.

    It would be very interesting to see what happens if coinage goes out of circulation due to the introduction of plastic cards which can handle small increments… would people resort to making their own coinage today? Would it be legal?

  14. What is needed is more parties. Are their other local businesses willing to offer a similar card? What would be ideal is the local hardware store, if you have one. Once they get on, get another business in, and so on.

    In the end, you could be light years ahead of the rest of us, who before long might end up struggling to buy a loaf of bread with a million useless US dollars.

  15. Not a bOINGworthy phenomenon? IMO, this is the essence of bOINGbOINGyness, crafty self-reliant interdependent communities.

  16. The important part here is he already has a successful business. This works because he has already proven his credit worthiness.

  17. @FoetusNail (17):

    I dunno. This may be the essence of HappyMutantness, but I’m not sure it’s the essence of BoingBoingness.

    Not to say it’s not a cool idea; I’m questioning this perception that I’ve seen growing lately that BoingBoing is a haven? resource? for “crafty self-reliant interdependent communities”. It may be; I just always thought it was directory of all cool things, rather.

  18. #14: You are kidding, right? This guy is a restauranteur – you know that’s a 6 day a week/10h day job…

  19. Years ago, when “organic food” was something only hippies ate, a local poet had started baking bread for himself, then for his friends too. Through word of mouth, and because his bread really was fantastic, this little hobby grew and grew, until he was baking bread all night. Every morning, there would be dozens of people waiting in line in front of his house, even in the middle of winter.

    Often, the people who got in line too late would go home empty-handed, for there was simply no way to bake enough bread for everybody out of his home. That’s when he decided it was time to move into bigger locations. With two ovens, he could bake enough bread for everyone. He also had the idea of turning his bakery into a school, teaching the art of baking to his helpers, who would eventually start their own bakeries.

    He asked his friends to help him prepare a business plan. Together, they went to the bank and asked for a loan. He needed $40,000. All the banks turned him down. Who lends money to a poet? Starting an bakery doesn’t make business sense. And organic food was just a fad anyway.

    So he started his own bank. Well, it was not really a bank, but no one had ever heard of “micro-loans” so he called it “The Utopia Bank”. You’d pay $100 and receive a little certificate good for $125 worth of bread. All he had to do was find 400 people who believed in him. I was number 271.

    The bakery still exists today, although the poet moved on several years ago, selling it to one of his pupils. Its bread is as good as it was in the first days. And the baking school idea worked: after learning how to bake bread there, many men and women opened small bakeries throughout the city.

  20. #4, sure, the people who bought cards will come to eat. But I guarantee you not everyone bought cards. The thing about restaurants is you generally don’t go by yourself, you bring some other people, who probably don’t have cards.

    Granted, the people with cards will probably be picking up the tab for that first meal, but getting new people in the door of your restaurant is probably even more valuable than getting income off those who already support you. And, considering the whole operation is based around opening a new location, I’m sure there will be plenty of locals who are just discovering the place for the first time.

  21. Bugs @4, one of the factors limiting the rate of his payback is how much and how fast people can eat.

    This is a cafe serving a small local clientele. Most VIP credit will be held by people who’ve eaten there repeatedly. If, over time, a person accumulate eight dinners’ worth of VIP-card credit, the only way they could liquidate the entire debt would be by eating eight dinners at once. Nobody’s going to do that. A few people are going to cash out their accumulated VIP-card credits by buying dinner for multiple guests at one time, but that should be manageable.

  22. Sometimes two completely different sites come to points of synchronicity in my Google Reader. Last month I was marveling at some of the details of this photo posted at from a drug store circa 1921.

    Note the sign in the foreground:

    Special ToDay – Soda Books Containing 24 5 cent Soda Checks – $1

    Similar concept, sort of. And there is the added advantage (to the store owner) in these types of strategies that the coupon book or gift card gets put in a drawer and forgotten.

  23. There’s no plan for other businesses on the currency, yet. I was only mentioning that as a development that would make the phenomenon even more interesting to me. I’d think at that point he’d want to turn the administration of the currency over to the people who run the farmer’s market, the CPA in town, or some other trusted community organization.

  24. FOETUSNAIL @17 and CJ @20, I actually think it’s a Boing Boing post *because* it’s anomalous!

  25. Sounds like a great idea…however, the extra 20% you’ll be getting is considered taxable income by the IRS. You have been warned.

  26. @6 MaximusNYC,

    Also, why would others give out goods or services for credit that had been purchased from Comfort?

    They would do that if they could use the credit themselves, or trade it in turn for something they need.

    For example, shops and bars in Toronto occasionally accept Canadian Tire ‘money’ at par with Canadian dollars. They can afford to do so (aside from the novelty fun and PR benefit of seeming folksy and local) if they can turn around and use those coupons themselves. Presumably the owners of these shops and bars need car parts / hardware / kitchenware / garden implements / sports equipment / lousy customer service / anything else Can Tire is flogging often enough that they have no trouble using up the incoming coupons.

    So, if the proprietors of some other businesses are themselves customers of the Comfort cafe then accepting Comfort dollars gets them 20% more food on their lunch break. Further (and this is the interesting part), if they don’t eat at Comfort and instead trade Comfort dollars for goods or services from someone who does, then I don’t see how Comfort dollars differ from “real” currency any more.

    Back to Toronto, the Toronto Dollar is an interesting charitable project (I almost said “was” since I’d forgotten about it in the 10 years since they launched but the website is recently updated. I’ll have to check for “Toronto dollars” signs next time I’m in those neighbourhoods), a sort of currency with built in taxation. However (and maybe this is why I found it so forgettable) I don’t see why I wouldn’t just use Canadian dollars and make whatever charitable donations I see fit on the side.

  27. There was a feature on our local Michigan NPR affiliate last summer about a virtually identical micro-finance project here in Grand Rapids, MI.

    The Meanwhile Money (NPR link) as a way to raise cash without bank borrowing. They sold $10 gift certificates before the bar opened that were redeemable for $12 in drinks after the place opened.

  28. I’m probably overlooking some obvious economic law of the universe, but can I just ask, why do so many businesses feel the need to expand beyond the business they are currently operating? If the first restaurant is profitable, why can’t the owner offer investments for other local business people who want to get started? Feed the local commerce and get some synergy going. One restaurant is great on a small strip like that, but instead of expanding to another restaurant on a different street, why not invest that money in a sister company on the same street doing something besides food, so that after you go to eat you could stroll into a craft or a comic or a book store. How about a yarn store? A toy store… whatever.

  29. Wolfiesma (41)

    If one restaurant is making a good profit, presumably two will make twice as much profit (assuming you don’t end up competing with each other), and allow better bulk deals, staff sharing etc.

    I suspect people stay in the same business because it’s what they know. I’d imagine that running a successful restaurant is very different from running a book shop, requiring different skills, understanding of a different market, different business contacts… Quite apart from just having the headspace to run two completely separate businesses, it will double the amount of time you need to dedicate to research, networking etc. It seems much simpler to just stick with a formula you understand already and that you know has already worked once.

  30. Yes, Bugs, but I’m not saying the restaurant owner should run the other business. Someone else should run that restaurant.

    Let me rephrase: It does not make sense to me that a successful business owner should want to take a loan so that they can risk making twice as much. It may be what they know, but to me it sounds like just another form of real estate speculating. I hope in the new economy people are motivated not so much by increasing their personal profits, but sharing the wealth… in such a way that it will end up increasing the profit.

    What I am suggesting, and I acknowledge it is none of my business, but just for the sake of argument, what if the successful restaurant owner made a micro-loan to nearby business offering a service that complements the restaurant. Then we have some synergy and the restaurant might become so profitable as to be able to expand their business with cash instead of credit.

  31. Given that these cards can be redeemed only at this one (and eventually two) restaurants they are basically gift cards like those for iTunes or Barnes and Noble. The reason why this would not work for a lot of businesses (especially restaurants) for the purposes of raising capital is that the card buyers are basically unsecured creditors. If the business fails, for whatever reason, the cards have no value of any kind.

    Similarly, the restaurant owner may well be paying a large premium on the money raised. The economics of cards like this are complicated at best, so it may well be that the amount of people forgetting or losing their cards, or carrying balances for long periods may well outweigh that hefty 20% bonus on the cards. That’s an analysis left for the business owner. That said, given how hard it is to raise money right now, and how especially hard it is to find investors in a restaurant in any fiscal climate, this seems like it might be a good model for this application. I’d hesitate to draw any but the narrowest of lessons from it though.

  32. Let’s see, give the entity, in which all citizens have a vested interest,the money needed to bail it out of it’s financial straits….

    …this sounds familiar to me somehow…but where…?

  33. If the new investment fails, and this guy goes out of business, these “investors” are out their money without all of that pesky banking regulation and bankruptcy laws/court overhead to protect them.

    There’s a reason we don’t run investments like the wild west anymore. The only reason to want to go back to that is because you’re too busy being outraged about the present to pay attention to history.

  34. #45, #47: It would work for a restaurant with enough loyalty behind it. I know of such places that could easily convince a few people to buy credit from them, and one such place that is also expanding to a second location. If the credit crunch is torpedoing that second location, this post might have come just in time.

  35. This is a great idea — if Comfort can find enough suckers to buy into it — but hardly novel. These “comfort dollars” are essentially unrated bonds (not that the ratings agencies have proven themselves to be entirely reliable) that are only minimally fungible because they have absolutely no inherent value…

    First, as stated in previous posts, one’s “investment” in comfort dollars is completely lost of the restaurant fails. Second, as another post pointed out, Comfort can unilaterally devalue all outstanding Comfort Dollars whenever they’d like by lowering the quality of its food or, more simply, raising prices by 20% or even more. In fact, this is almost certain to happen to at least some degree, unless the Comfort owner’s are not at all driven by profit motive.

    I appreciate the innate appeal of the “community” aspect of this plan, but frankly a traditional co-op structure, in which investing community members retain an equity interest in the enterprise, makes more sense on every level (to the community members at least — again Comfort will make out like bandits if they can pull the wool over enough people’s eyes)

  36. My question is, and no I am not a scholar of business history, but why are we wedded to the notion that we must make any investments at all? Why isn’t enough to make just enough to buy just enough basics to survive. You make money, you save money. Maybe someday you don’t have to work.

    Can’t businesses start very small (especially at the local level) and grow slowly and acquire wealth slowly and choose to invest or save?

    I have a problem with the fact that stock in the company is valued because of its growth potential. Even if a company grows, just because it doesn’t grow fast enough, stock holders will yank their money out…. the system rewards greed.

    It isn’t good enough for a company to be profitable? It has to be constantly and rapaciously expanding and growing. It is not sustainable for the earth nor the economy.

  37. Wolfiesma — your posts #43 and #50 seem to blatantly contradict each other: first you ask why the restaurant doesn’t invest its profits in another business, then you question the basic concept of an investment, as well as the fact that “the system rewards greed.”

    As to that last point, this is a common complaint from market critics. The only problem is that “greed” as a concept is exceptionally ill-defined: when does ambition, or simple self-interest, turn into “greed?” Am I greedy if I leave my employer to take a better-paying job? Am I greedy if I use that money to buy a computer rather than just keep enough money to supply the “basics to survive”? How about an two-bedroom apartment rather than a tin shack, etc.?

    As post #47 implies, its easy to attack the current financial system (which is certainly imperfect) if one doesn’t think critically about any of the alternatives, let alone reflect upon why the market economy has become so effective and popular. Ironically, the “system” you seem to propose (in which we don’t invest money based on growth potential, or try to agressively grow successful businesses) makes it exceptionally difficult for enterprising, talented, creative individuals without easy access to capital (i.e. a rich family) to utilize their talents for their own benefit, and for the benefit of society as a whole. While you may be correct that unchecked expansion is “not sustainable for the earth nor the economy,” the main problem here is externalities, or the fact that the system does not correctly impose costs on actors for the value they derive from expending or despoiling natural resources that I (and you, I can only assume) believe should be considered common assets for all the earth’s inhabitants.

  38. IF the restaurant goes under, then each of these cards – bonds, if you will – becomes worthless only /monetarially/ and only with respect to that restaurant. There may be an after-market for them, or a side-market. They have value as a momento.

    I helped two or three artists buy out their contracts from recording studio conglomerates. I got back one or two CD’s from each artist. I know at least two of these have become collector’s items, trading at well-over a nominal “retail”.

    If Comfort lowers the quality of his food or raises the prices, then he has ensured that each of the people with outstanding balances have become active voices denouncing any attempt to repeat the funds-raising.

    Short-term profit at the expense of investors only works when there is no transparency and few people know one another personally – in such a situation as the one described here, human nature works for the benefit of all, because everyone knows whom they are working with.

    If it were to expand beyond a community, it would face the challenges mentioned: temptation to devalue, temptation to cut and run.

  39. If a person is in this for the money, or using the corporatist, balance-sheet model to make the decision, I’m sure it makes no sense.

    It turns out that many people make decisions – and really good ones – for reasons other than money. Some people are not looking at this as a way to participate in an un-rated bond offering. Instead, they are trying to make it so their town has a better restaurant.

    We like John, and know how hard he’s been working on his new place. We think it sucks that he can’t get money to do it through normal channels. And we enjoy helping him out.

    We understand the risk is that the second place will go out of business, and that we might have to use our Comfort dollars at the first location. What if the cost of the second one fails and brings the first one near bankruptcy? We’d probably do a fundraiser for him.

    It’s very hard to explain what motivates people to do things that might on some level appear to be against their financial interests. But I don’t think it’s naive or silly to do so in many circumstances. And I think bucking the logic that tells us our decisions must be dictated purely by self interest is part of what will allow us to rebuild a society in our own image instead of a corporation’s.

  40. I guess what I am getting at is that businesses, as well as people who support them ought to live within their means. I am questioning the notion of borrowing money to make money. It is a gamble.

    I’ll just throw out an example of a local business I think took a sensible approach to raising capital.

    There is a local gym whose owners would like to make improvements. What they did was offer people a year long membership for 100 dollars. The owners were hoping to raise 100K, and they thought this would be a good way to do it. Now, they could have taken a loan, but they did this instead. They found a way to make their business raise the money, in this case by making a very inexpensive offer to customers, and using that money to make small improvements as the extra money came in.

    They aren’t stuck holding the bag and their “investors” aren’t stuck with anything but a 100 dollar gym membership they may or may not use.

    Many microinvestments in the local economy, reduces risk and enriches the community. Nobody is getting rich, rich, rich. But many small business owners are supporting themselves, their families, and providing useful goods and services to the community.

  41. America is facing near-term hyperinflation: by the time #2 is open for business, the investors may well be at break-even in regards to total amount of food possible to be purchased. However, it is obvious to anyone that the practical limitations of time, convenience, etc. make this NOT an “investment” in the finance capitalism sense — only in the community improvement sense.

  42. @ 52, First, the idea that these Comfort dollars could have any significant value as a novelty is incredibly speculative — there’s no reason to think that pieces of paper given by a since-defunct local restaurant will have any more value than any other pieces of paper.

    Second, while you correctly point out that the restaurant could face unhappy investors if it runs away with the profits or raises prices, the Comfort dollar system ensures that these investors have no reliable avenue to act on that unhappiness. They can, as any other customer, vote with their feet and stop patronizing Comfort, but in so doing would de facto forfeit
    any value remaining in Comfort dollars they have purchased. As my previous post pointed out, a traditional cooperative structure, or an equity offering of another kind, would actually allow the investors to have a voice in the operation of the restaurant — which only seems fair given that its the investors hard-earned (in some cases, at least) money that allowed for the expansion.

    @53 – of course people make all kinds of decisions that are not based upon (monetary) self-interest. What makes no sense is participating in or advocating a system in which one contributes to another’s “corporatist” for-profit business without protecting their own interests. I’m sure John’s a great guy, but he’d certainly seem a lot more reasonable to me if he didn’t propose a system through which he can pass on the potential downside of his expansion on his community-minded friends and neighbors.

    Not to sound like a broken record, but please explain why you find this system morally, ethically or financially superior to one in which Comfort allows its investors to share in the upside and downside of a business through setting up the very commonly and successfully used cooperative model, or through the selling of equity “shares” of the restaurant, which could include, for example, a “dividend” of a 20% discount when dining at the restaurant, in addition to some type of legal right if through incompetence, greed, or simply bad luck, the expansion doesn’t work. All of the incentives and community-building postitives you mention would exist under this model, and in fact be even more important.

  43. California Rollin in Rochester did a membership drive when they opened to get the startup capital. Having one of their VIP cards now is very elite, because they don’t sell them anymore. My hubby has one and even now, 9 years later, we still get the 10% discount whenever we go in. And the waitresses know who he is too!

  44. I agree that its a cool idea, but it seems his cost of capital is high assuming all the people spend their cards. In better times an unsecured loan from a bank could be had for a lower rate. Even credit card financing would be cheaper using a balance transfer or one of the checks they send.

  45. For those criticizing this because the coupons can become worthless, do keep in mind that this isn’t meant to be a substitute for a bank. This is meant to be a form of investment and loan.

    When I buy stocks, I’m making an investment, and I could lose the entire thing. When a venture capitalist invests in an entrepreneur, he could lose the entire investment.

    So it seems that this is an excellent, small-scale alternative to borrowing from banks, but not a good place to look for a store of value, a function it was never meant to serve.

    I would also venture a guess that if this becomes widespread, no one will invest all their savings in a single enterprise. They’d more likely diversify their investments, just like we diversify stocks now. Except you’re contributing directly to local business in this case.

    If these coupons became money (which I find highly dubious), someone might open a business to store your coupons. That would be a bank, and then we can talk about whether forming something like the FDIC is a good idea.

  46. And is there a form of local justice to go along with the local credit in case the restauranteur walks away with the up-front money, or increases his prices 20%, or sells the business to someone who won’t honor the discounts?

  47. there’s a great discussion of the limitations of growth as an economic principle as well as how local currencies can work and what it would take to make them catch on in Bill McKibben’s latest book. Might prove useful to happy mutants looking to enact something like this in their own communities.

  48. Great post, exciting idea, and I especially love #23’s bread story… That one made me feel warm inside. Like fresh bread.

  49. I live in the town that Rushkoff is writing about, and thanks to this post I’m going to go support Comfort (though I might look for another household to share the grand with me; the food is great but I’m not quite that big an eater-outer).

  50. @Wolfiesma:

    You really do need a certain amount of start-up capital to open a business. Even a second business. While you can make improvements piecemeal later, there’s a certain base amount of equipment or material you need to even get started, and it’s often a pretty serious chunk of change. What’s more, with those big equipment purchases, you really want to do it right the first time – it’s cheaper overall to buy the $5000 oven now and have it installed for $500, than to buy the $500 ovenand have it installed for $500, buy the $1000 oven in three months and have it installed for $500 – while shutting down the restaurant because you have no oven for three days – buy the $3000 oven and do another install and shutdown in another 6 months, and so forth; meanwhile you’re working with a less effective tool the whole time. Plus there’s the location itself, which you CAN’T do piecemeal – even if you rent, there’s going to be a month or three setting the place up where money is going into the place but it’s not making money yet.

    Only if you have a manufacturing hobby (baking, sewing) that becomes a business can you get around this, and even then you’ll likely need that small business loan when the business can no longer be run out of your house. It doesn’t have to be big – often a few thousand dollars will do it – but you do reach a point where your facility caps your profit, but you can’t afford to expand, and you’ll be able to pay a loan back more quickly at the new facility than you’ll be able to amass cash at your old one.

  51. I actually felt vindicated reading this; I have a vaguely similar credit system for my hobby shop, with each dollar spent on a kind of coupon which gives equal credit in munchies, and in select merchandise. Customers get $2 of stuff for $1, and I get to rotate what items the select merchandise includes, letting me avoid the dreaded “sale” items, which customers often assume is somehow less desirable…

    The idea of alternate “local currency” has always fascinated me. As a kid I have vague memories of a theme park that worked like that, with park “dollars”.

  52. Meyer Amschel Rothschild, the man who founded the Rothschild empire, once said very memorably, “Give me control of a nation’s currency and I care not who makes the laws.” Control the currency and you control the country. And what we’re talking about here is actually taking back control of the units of exchange. If we can’t get control immediately of the units of exchange that are being used to manipulate us, then let’s create our own and let’s step out of this system as best we can. *


  53. NOt exactly OT, but the problem can also be attacked from the other end: reducing the minimum levels of capitalization required for market entry, so that there is less overhead and less need to depend on high volume push distribution to minimize unit costs.

    One of the ways that so-called “health” and “safety” codes, and occupational licensing, enforce Illich’s “radical monopoly” and create barriers to cheap and comfortable subsistence, is by preventing people from using idle capacity (or “spare cycles”) of what they already own anyway, and thereby transforming them into capital goods for productive use.

    Consider, for example, the process of running a small, informal brew pub or restaurant out of your home, under a genuine free market regime. Buying a brewing vat and a few small fermenters for your basement, using a few tables in an extra room as a public restaurant area, etc., would maybe require a small bank loan for at most a few thousand dollars. And with that capital outlay, you could probably make payments on the debt with the margin from one customer a day. A few customers evenings and weekends, most of whom probably could be found mainly among your existing circle of acquaintances, would enable you to initially shift some of your working hours from wage labor to work in the restaurant, with the possibility of gradually phasing out wage labor altogether or scaling back to part time, as you built up a small customer base.

    In this and many other lines of business (for example a part-time gypsy cab service using a car you own anyway), the minimal entry costs and capital outlay mean that the minimum level of custom required to stay in business would be quite modest, and even a low level of turnover would be sufficient to pay the overhead. In that case, a lot more people would be able to start small businesses for supplementary income and just scale back their wage labor a bit, maybe gradually shift to complete self employment, all with minimal risk or sunk costs. The low capitalization requirements would reduce overhead to a minimum, and mean that any turnover above an absolute bare minimum would be free income. This would reduce the incentive to push distribution, and enable the entrepreneur to operate on a much more relaxed basis.

    But that’s illegal. For a restaurant, you have to buy an extremely expensive liquor license, as well as having an industrial size and strength stove, dishwasher, etc. And that level of capital outlay can only be paid off with a large dining room and a large kitchen-waiting staff, which means you have to keep the place filled or the overhead costs will eat you alive–IOW, Chapter Eleven.

    These high entry costs and the enormous overhead are the reason you can’t afford to start out really small and cheap, and the reason restaurants have such a high failure rate. It’s illegal to use the surplus capacity of the ordinary household items we have to own anyway but remain idle most of the time. RFID chip requirements and bans on unpasteurized milk make it illegal to trade the small surpluses generated by ordinary household subsistence production. High fees for organic certification make it prohibitive to sell a few hundred dollars worth of surplus organic produce at a temporary roadside stand. You can’t do just a few hundred or a few thousand dollars worth of business a year, because the state mandates capital equipment on the scale required for a large-scale business if you engage in the business at all.

    So it’s employers, as well as big competitors, who have a vested interest in keeping these entry costs so high. It’s a way of erecting an enormous toll gate between you and the possibility of self-employment, without a boss cracking the whip over you.

  54. “He gets the money a lot cheaper than if he were borrowing it from the bank, paying back in cash over time.”

    Actually, no. A bank would be much cheaper generally. 20% interest is a high rate to pay for a commercial loan.

    The only way the numbers work out is if a) people lose their cards or decide not to use them or b) they use their cards several years later so the interest can be divided over several years (3 or more years to make it cheaper than a bank loan at 9%).

    The former case essentially says that you hope that certain of your customers lose money, so you get a good interest rate; the latter case relies on your customers either not visiting you (eg: no business), forgetting about or losing their cards (which reduces to the former case), or making a conscious decision to forgo using their card until a later date (hard to ensure en masse). The first case is unfair; the second case may be unfair, and is too variable to rely on.

    Furthermore, the idea that restaurants have plenty of profit so paying 20% interest is easy is misguided. A typical restaurant makes a 5% profit margin. Just to break even on 20% interest, they need to make 4x the amount of the loan in revenue. And that doesn’t count paying the principal back.

    In the end, it all depends on the specific numbers, but there are lots of pitfalls with this approach. It may work for a specific business, but there would be definite problems if every business decided to raise money this way.

    [BTW, “commercial paper” is essentially a similar way of raising money, but through the organized financial system. It has fewer pitfalls because of regulation (which you would see demand for with the Comfort Dollar system if it was adopted on a wide scale). Unfortunately, commercial paper is only available to larger businesses. Maybe a better approach would be a way to have community-oriented commercial paper financial markets?]

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