A town or city might want to print its own currency when the nation’s money is no longer available.
However, everyone needs to believe that the new money is real money.
Pseudo Currencies
Argentina
Buenos Aires
With its soaring inflation and a contracting GDP, Argentina has currency problems. At the local level, though, the national government cushioned the crisis by making up for deficits. But now, their new president is minimizing the assistance.
As a result, like 2002, local governments have begun printing their own money. During 2002, after a new currency was initially rejected, local leaders said it could be used to pay taxes. Suddenly attractive, merchants started to accept it.
In 2002, Buenos Aires issued a Bono Patacon that some said was a bond:
It all ended when local residents were able to trade their pseudo currency for the national peso. At that point, the Bono Patacon disappeared.
La Rioja province
In 2024, Argentina’s La Rioja province made up its deficit with the Bocade, a pseudo currency.
The United States
Pismo Beach, California
During 1933, President Roosevelt’s bank holiday diminished the amount of money that could circulate because the banks were closed. The local solution was scrip or more creative forms of money. Initially issued by a pharmacy in Pismo Beach, California this clamshell was a form of payment:
Ithaca, New York
Not dealing with an emergency, towns use their own currency to get people to shop local. Between 1991 and 2010, Ithaca Hours boosted local business and augmented the local money supply. It even increased the minimum wage to $10 because an Hour equaled $10 and one hour of work.
Our Bottom Line: The Characteristics of Money
Writing about the Micronesian island of Yap in 1910, an anthropologist described their monetary system. Many years before that, some Yap money–a huge stone disk–was lost at sea during its transport between islands. Although gone physically, the disk had value.
With a pole that fits in the hole, you can carry the Yap money shown below:
Similarly, we can ask whether Argentina’s pseudo currency is money. Economists might reply with the characteristics of money.
- a medium of exchange (It is widely accepted.)
- a unit of value (We have to know how much it’s worth.)
- a store of value (It should retain its value.)
So yes, money can be anything with those three characteristics.
My sources and more: Thanks to Marginal Revolution for alerting me to Argentina’s pseudo currency. From there, I found a slew of pseudo currency examples that were here, here, and here. Most interesting, the Yap story was in Milton Friedman’s Money Mischief.
Please note that most of today’s “Bottom Line” was in a past econlife post.
