NOTE: Here's some fun thinking about local currencies (a topic that may become increasingly relevant in the coming years). Hope you find it of use.
Regional or local currencies, or scrip, are designed to catalyze and grow local economies. Typically, they gain steam when a regional/local economic depression is exacerbated by national/global deflation (asset collapse and monetary hoarding) -- as we are experiencing today. These currencies take a variety of forms, from "hour of work" equivalents, food/energy stockpile backed currencies, to depreciating currencies (called Schwundgeld in Germay, arguably the most popular).
Schwundgeld is a form of currency that actively discourages hoarding/savings through aggressive rates of depreciation -- as in, notes issued at the start of January depreciate by 2% per month, meaning it is worth 98% of face value in February and 96% in March. This rate of depreciation incentivizes immediate use, or demand, in depressed economies. It also minimizes societal stratification due to financial accumulation, discourages hoarding, and minimizes non-productive behavior. The arguments against Schwundgeld and regional currencies in general, as outlined in "Regional currencies in Germany - local competition for the Euro" by Gerhard Rosl and commissioned by the German Bundesbank, fall into the following categories:
- It depresses trade with global system, reducing total potential wealth generation.
- Users of the system are not indifferent to immediate vs. delayed demand. While this does stimulate demand in the short term, it limits growth of the currency and its ultimate stimulative effect.
- Profits from the system are misused.
- Local currencies ensure that minimal local needs can be met in the absence of a functioning or available global system. In this respect, it minimizes or hedges against catastrophic downside risk and reduces uncertainty. This is an aspect that the national system fails to address. National systems are indifferent to local malfunction.
- While depreciating currencies don't enable rapid monetary growth and accelerating stimulation, they are very effective at dampening excesses (everything from stratification, hoarding, and non-productive behavior). Currencies of this type aren't designed as a store of value over the long term. Alternatives exist for that, and savings are accomplished either through conversion to national currencies, assets, or fungible commodities. The system does what it is designed to do.
- Cui bono? The most telling critique is the issue of, "how is the excesses generated by administering the system spent?" This can be addressed by limiting administration costs to a fixed percentage of the system and allocating the remainder to public platforms -- everything from maintaining an electrical microgrid (in order to eliminate/lower transaction costs) to baseline production of food/energy/etc.
How does this apply to warfare?
If you are working on COIN or stability operations and you aren't thinking about the potential uses of local currencies/scrip, you aren't even in the game. Connecting devastated local economies to a chaotic and hyper competitive global economy does not auto-magically occur, it needs to be built/grown organically and insulated against rapid reversals. Local currencies could play a significant or central role in mitigating and restarting economic activity following:
- Disconnection of local economies due to COIN operations (ink spots) post instability.
- Economic development in areas where national corruption/mismanagement make services highly uncertain.
- Recovery from rapid economic collapse (when formerly developed areas, heavily dependent on the global economy, are economically devastated).