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  • Mathieu Provencher

McDonald's money... is it real money?

Hi Guys! Yes I know... a post so fast.. how can you cope with the amazing world of Economics? Well, to that I would answer that you trained with the best!!!!!

SO: some companies create their own currencies. I attached an image of what McDonald did here in Lima. In my own country, called Québec, we have a company called Canadian Tire (ahh these Canadians, their companies are all over my country) that does the same.

Why would companies create their own currencies? Is that a real currency? Is that even legal?

Well... first things first: creating a "currency" as a company is perfectly legal in many countries, including my own. As to see if they are "real" or not, that can get a bit more complicated, depending on your definition of a currency. As an Economist, I see these as perfectly real and legitimate. The purpose of a currency is nothing else than transactions... the legitimacy of a currency is nothing else than recognition (people accept to be paid in it). As such, Canadian Tire currency is as valid as the Canadian Dollar itself...

As a bit of an extreme example, some firms in Russia paid their workers with the products they made at the factory (not so long ago... Russia is a very interesting place to observe but not necessarily to live in). For that transaction, these products were currencies.

Now, why would firms do that. In the case of McDonald here in Lima and Canadian Tire in Québec, these currencies are the equivalent of price-reduction coupons bonded to future consumption. As such, you would expect that only these firms will accept their own currency, which forces consumers to go back there to use them. They are generally too low to buy a new product with them, which means that these companies get a good amount of the more widely accepted currency (the Peruvian Nuevo Sol here) in exchange for their burgers (or whatever you buy from them).

That's good publicity and it makes people come back.

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