Shadow Banking in Spain

The Wall Street Journal had a really interesting piece yesterday about the rise of "time banks" in Spain.  The idea being that, in an economy as thoroughly broken as the Spanish economy, many unemployed attempt to use these intermediaries to facilitate a barter economy.

So, a bunch of people join together and offer to work on various odd jobs for each other, banking the time and using those collected hours to request services from others.  Thus, Silvia Martin

...has relied on other time-bank members to give her lifts around town for her odd jobs and errands, as well as to help with house repairs.  In return, she has cared for members' elderly relatives, organized children's parties and even hauled boxes for a member moving to a new house

Of course, the unemployment rate in Spain for 25-34 year-olds is an absurdly high 27%, while the rate for 16-24 year-olds is an even more absurdly, dangerously, high 53%.  At least they aren't in a recession!

But it is interesting to observe that people are willing to enter these very small economies rather than keep attempting to make the regular economy work.  At some level, they must be making the decision that trading without specialization (all hours are valued equally) and among a very small geographical group are costs worth paying in order to begin making some trades for labor.  Amazing, really.

But, as you might expect, the idea of a time bank, where the unit of exchange is measured in hours, is just a very small step away from turning it into a real bank which uses its own currency.

Which is exactly what has happened in some cases. 

One bank launched something called an "eco," a currency they just made up.  Turns out, not only have dozens of local businesses decided to accept it as a basis for trade, so have two town governments!  

There are some ways in which this is a very positive story: people working to solve problems the government is unwilling to solve.  On the other hand, this represents groups of people choosing to work in a parallel economy with a non-convertible currency (and non-convertible even in, like, the next town over).  That just gives you an idea of how desperate things are in Spain.