Since 1991, over 80 communities in the United States introduced locally printed money. It is argued by proponents that community currency systems revitalize local economies by keeping money circulating locally rather than flowing out, but this study is the first known in-depth economic analysis of these systems. Monetary theory and the experience with local currencies in Argentina indicate that in periods of financial instability and high unemployment, local currencies might provide widespread economic benefits. The experience of the United States during the 1990s, however, suggests that local paper currencies do not promote local economic development during periods of economic and financial stability. Seigniorage from local currencies is small, and cities in the United States that attempted local currencies during the 1990s did not experience higher rates of growth in income than other cities. Eighty-five percent of the local paper currency systems initiated in the United States since1991 have become inactive.