Bernard Lietaer - The Future of Money - Full Book

This is not to say that the problem of inflation has been solved with this process. But we have shown at the very least that the normal monetary equations mislead us whenever complementary currencies instead of single national currency are involved. It is clearly another game.

One could even argue that it will be possible to reduce inflation risks well-designed community currencies are encouraged in an economy. That this is not just theory is demonstrated by the case of New Zealand. One would expect central bankers to react with suspicion when complementary currencies are appearing. The Governor of the central bank of New Zealand has an unusual contract with government. It stipulates that the Governor will automatically lose his job if the inflation rate on the national currency exceeds 2.5% per annum. This stipulation is one of the many original initiatives created when New Zealand decided to modernise its social and institutional systems a decade ago.

This contract has the advantage of concentrating the mind of the Governor on the main objective of his job: keeping inflation in control. The New Zealand central bank suddenly discovered that complementary currencies are useful in attaining its inflation control objective. If in the pockets of highest unemployment people create a complementary currency to alleviate their own problems, then the political pressure to lower interest rates and potentially fuel inflation would also be reduced. Suddenly, the first central banker in favour of complementary currencies was born... In central banks whose main objective is to keep inflation in check, rather than to protect by principle or monetary dogma a monopoly of currency issuance, then a conclusion similar to the one in New Zealand should prevail.

Why New Zealand is right