FUNCTIONAL CURRENCY

It is becoming increasingly difficult for local businesses to compete with big box stores, chain stores, and franchises. Spending money with local merchants has a compound effect on the local economy, as those merchants are then more likely to keep that money in the community. As a means of encouraging citizens to spend locally, many communities are creating local currencies. This currency rewards consumers with a bonus for converting cash or national currency into local currency while helping the community overall by keeping that money local. You may even have such a scheme in your community.
In this Discussion, you will explore how one community, a London suburb called Brixton, successfully implemented a local currency and the mathematics behind this. Using Brixton's experience as inspiration, you will examine what it takes to launch your own local currency.
Note: The currency used in the United Kingdom is called "pound" or "sterling." Both terms are used interchangeably.



To prepare for this Discussion:

View the video on how local currencies give value for money and consider how you might promote the idea of creating a local currency in your community. Then, think about what you would name your local currency and reflect on two benefits of local currency that Woolf (2013) discusses in the video.

• Consider how you might promote your idea in a 250-word letter to your local town or city government (in England these are called “councils”). Use the following prompts to persuade them to allow you to present your idea in person.
• Reflect on the 10% conversion bonus Woolf (2013) describes in the video and consider a bonus between 11% and 15% (rounded to the nearest tenth) that you might offer to consumers to encourage conversion to your local currency. Then, write a function c(x) = ___ to model the conversion of cash to your local currency.
■ Hint: Think carefully about the fact that this percentage is a BONUS, and your amount will increase, not decrease, or become more than 100% of your original value.
• Thinking back to the video, consider the importance of making your local currency available electronically. Next, think
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about a fee between 0.5% and 2% of the total transaction that will serve as a transaction fee.
Write a function f(x) = ___ to model the transaction fee.
• Write another function t(x) =__ to model the amount a merchant will be able to keep after the transaction fee is deducted.
• Reflect on the scenario presented in the video in which community members were charged a fee for converting the local currency back to cash. The fee was imposed as a penalty for taking money out of the local economy. Think about a fee between 5% and 10% rounded to the nearest tenth percentage. Next, write a function p(x) = ___ to model the amount paid in cash after converting the local currency to cash.
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Think about the cost of accepting the local currency from a merchant's point of view as described in the video. Merchants must pay a transaction fee, and if they want to convert the local currency to the national currency, they must pay another conversion fee. Write a composite function that is a composition of p(t(x)) = ___ to show a function that will model the amount a merchant will keep after converting the local currency to cash.
• Reflect on how you might persuade your community to adopt your local currency proposal in the conclusion of your letter.