Milwaukee Bucks...

Not the Michael Redd kind, the money kind. Straight out of the great depression a small enclave in Milwaukee is set to begin minting a special currency for use by their residents. This all in an effort to jumpstart local businesses by keeping dollars local. Check it out, I continue after the jump.

It's an attractive idea when times are tight. Communities print what look like ordinary bills with serial numbers, anti-counterfeiting details and images of local landmarks (the Milwaukee River, for instance) instead of presidential portraits. Residents benefit through an exchange system: 10 traditional dollars, for instance, nets them $20 worth of local currency.

According to the Newseek article it's all legal, but I'm not sure how effective it will be. In theory as long as merchants keep the dollar price of goods at 1/2 that of the 'milwaukee buck' price and the "community treasury" maintains 1:2 dollar capital reserves it will work...it will just be a glorified dollar but it will work. But this is where things get screwy.

And when businesses agree to value the funny money like real greenbacks, they also get a free stack to kick-start spending.

As soon as you introduce a set of 'milwaukee bucks' that aren't backed by a real dollar things get out of whack pretty quickly:

-Pam exchanges $20 for 40 milwaukee buck (mb) a 2:1 mb/$ exchange rate

-The "community treasury" now has $20 on reserve as Pam is the only person using mb's so far

-The local restaurant charges Pam 40mb ($20) for dinner. If they were to charge less in mb's than the dollar exchange rate they would be losing money.

-The "community treasury" issues the business an additional 20mb for participating in the program

-The local restaurant has to pay their supplier from New York who doesn't accept mb's

-The restaurant goes to exchange their 60mb's for dollars

-The "community treasury" gives them the only $20 they have on reserve at a 3:1 exchange rate

I guess if the "community treasury" restricted the exchange of non dollar backed mb's or merchants repriced in mb's daily based on the quoted exchange rate this could work, but at some point an mb will have to leave the community in the form of a dollar and if the currency is inflated (getting weaker against the dollar) someone's gonna get shafted.