Recently I was talking to an old friend of mine who happened to mention something very interesting. In a small town in India the local shop owners have invented their own form of currency. This town was facing an acute shortage of small change forcing shop
keepers to hand out candies to customers in place of change. Customers were unhappy with this and were demanding to be paid in currency.
What did the shop keepers do? They manufactured their own currency.
Small fiber-based coins of denominations ranging from 1 to 5. They are now giving these to customers who in turn collect and use them to purchase goods the next time they are in the shop. A simple and effective solution to a long standing problem. But
how long will this solution last? Well, until the central court takes notice and decides to shut it down.
There are two sides to this story. The good part is, instead of sitting around and waiting for the bank and the government to give them a solution, they found a workable solution to their immediate problem. But on the flip side, if everyone comes up with their
own currency it will de-value the country's official currency and can adversely affect the economy.
If you have been following recent events you would have read about the situation in Greece. Would alternate currency aid the country in its time of need? With the current economic crisis looming large over it, an alternate currency for local transactions might
keep domestic trade from coming to an absolute stand still. But if used extensively it can destabilize the economy though as a short term solution, it could benefit local trade. Similar situations have given rise to several alternate currencies in the history
of money over the years, but the most popular albeit controversial parallel currency of recent times was invented by Bernard von NotHaus. The Liberty Dollar was of course labeled illegal and NotHaus, a domestic terrorist. Another interesting example is the
Q coin in China. It was invented by Tencent Holdings Limited which developed Tencent QQ, the popular online chat platform in China. This currency was initially introduced for users to buy virtual things related to their chat and blogs, but slowly it leaked
into the real world and people started accepting and paying for 'real' things with Q coins. Of course the glory days for Q coins as real currency were numbered. The most successful by far I think are Linden Dollars, the very famous currency of the virtual
world, Second Life. In fact this currency became so popular that it received its own currency code - SLB!
All of this gets me thinking about the value that cash or currency still has in our lives. While we talk about virtual currency, the mobile wallet and digital payments, the truth is we still have a long way to go before a cashless society becomes probable.
But even when it does, will it really edge out physical money? I would not put my money on that.