In “Buy Local—With Town Currency“, BusinessWeek’s Jeffrey Gangemi writes on a local currency called “BerkShares” used in smalltown Great Barrington, Massachusets.

The program works like this: Shoppers visit one of 10 branches of four participating local banks and convert their cash into BerkShares scrip. For every 90 cents, they receive one BerkShare note, that is accepted at some 280 participating area businesses…”

The BerkShares program aims to help keep money in the local economy rather than encouraging trade with other locales. But Gangemi claims BerkShares are “…also honored at about 250 other businesses throughout the Southern Berkshires region that aren’t officially registered.”

This reminds me of Jane Jacob’s Cities and the Wealth of Nations, which I just reread. Jacobs felt strongly that if individual cities still had their own local currencies they could trade much more efficiently with other parts of the world, because the local exchange rate would automatically manage the prices of their local goods and services relative to outside prices. Instead we have national currencies, which don’t generally do a great job helping individual cities, since national exchange rates account poorly for locale-specific costs, availability of capital, supplies of jobs and labor, market demand, and so on. (Think about how Halifax, Toronto and Calgary, for instance: these three very different cities are slaved to a single currency and exchange rate governing their import/export trade. Contrast that to Hong Kong, where the coupling between local reality and exchange rates is tight.)

Perhaps someday we’ll come full circle to city currencies again. It’s fun to ponder, especially as the internet makes it possible for new currency-like instruments such as eBay’s PayPal and Second Life’s Linden Dollars to emerge.

Katrin has a blog! She’s writing about Toronto:

Welcome to the Mukodu Blog: a whimsical exploration of Toronto’s random nooks and crannies, its many unique neighbourhoods, and the lives of its citizens. Mukodu is about culture, places, people, and goings-on around the city. It aims to be a quirky, opinionated and honest sampling of what makes this city great.

Check it out, especially if you’re a Toronto-dweller.

Backfence.com, a “social media” site that billed itself as “Do it yourself local news”, is shutting down operations. Mark Potts, one of the co-founders, posted his learnings a few days ago. Very interesting, particularly on the business model challenges.

One bit in particular from Potts struck me: “Partner with a media company or some other distribution source. Because of the critical need to market to and engage the community, it’s better to piggyback on a print or broadcast partner’s existing community relationships and marketing power.”

Backfence actually didn’t partner in this way, and I find it strange that Potts would recommend this as a strategy. Relying on old media to jumpstart an online community seems wrongheaded to me. Look at Toronto Star’s OurFaves, for example, launched May 2, 2007. It’s a promising notion — “amplify local opinion on what’s great in the city” — but after playing with it briefly I find it empty and unappealing. Part of that is the look and feel: it’s slick, polished… surely passed muster with Star execs, but too stark and corporate to attract the customers they’re seeking. More importantly though, the content seems to come from a very small number of people (forgivable for a while; you’ve gotta start somewhere), appears to be editorialized, and focuses on city-wide popularity as the key vector for discovery. Add that all up and it’s hard to trust as a source for recommendations. They missed the mark.

Partnering with an already-trusted social network like Facebook — the way iLike.com did — is a much better recipe for success.

P.S. I found Potts’ post through Greg Sterling, who often writes about local search and related trends. This morning Sterling put up a post on local and social media. It includes a long-yet-not-exhaustive list of sites in this space. Worth reading.