The local currency index hits a spike
By Rich Creyer, Local Trade Partners, Fayetteville
Northwest Arkansas’ Local Purchase Index increased dramatically for the month of September 2010: .856 up from last month’s .538.
To be fair, we need to factor in that the control group, the “local currency” participants, took part in a program involving 50% rebates on advertising purchased. Since this was a stimulus from outside the control group, I believe the rebate needs to be excluded in computing the index.
That said, we affix the true index at a more modest increase to .593, but still a commendable 10.2% rise.
To put that 10.2% into perspective, it represents monthly purchases of $24,400. Now imagine the impact of that amount shifted from a non-local business to a local business. It represents a sales growth of $85 on average per business that stays in and circles through the market place. Would you scoff at an $85 sale?
It’s clear to me that this month’s index shows progress, in measurable terms, for “Buy Local” initiatives.
The shift in purchasing at local businesses when using a “local currency” (which we explained in earlier columns) happens naturally and is based on simple economic principles. This local currency does not pay interest. It only has value to other local currency participants. Since business owners using local currency have no reason to hold onto it, they spend it before they spend national currency – the almighty dollar and the even mightier credit line.
The economic question then, is: Why would you buy a car battery with cash, which is interest bearing, or bank credit, which has service costs, when you can use alternative currency?
