Local Exchange Trading Systems
Encyclopedia
Local exchange trading systems (LETS), also known as LETSystems, are locally initiated, democratically organised, not-for-profit community enterprises that provide a community information service and record transactions of members exchanging goods and services by using the currency of locally created LETS Credits. In some places, e.g. Toronto, the scheme has been called the Local Employment and Trading System. In New South Wales, Australia, they were known as Local Energy Transfer Systems.
Michael Linton
originated the term "local exchange trading system" in 1983 and for a time ran the Comox Valley LETSystems in Courtenay
, British Columbia
. The system he designed was intended as an adjunct to the national currency
, rather than a replacement for it, although there are examples of individuals who have managed to replace their use of national currency through inventive usage of LETS.
LETS networks use interest
-free local
credit so direct swaps do not need to be made. For instance, a member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network. In LETS, unlike other local currencies
, no scrip
is issued, but rather transactions are recorded in a central location open to all members. As credit is issued by the network members, for the benefit of the members themselves, LETS are considered mutual credit
systems.
The time-based currency mentioned in United Nations Millennium Declaration C6 to Governments was a UNILETS United Nations International & Local Employment-Trading System to restructure the global financial architecture.
A number of people have problems adjusting to the different ways of operating using a LETSystem. A conventional national currency is generally hard to earn, but easy to spend. To date LETSystems are comparatively easy to earn, but harder to spend.
LETSystems often have all of the problems confronting any voluntary, not-for-profit, non governmental, community based organisation. LETS organisers often complain of being overworked, and may suffer burnout
. Many schemes have ceased operation as a result. Many of these problems can be overcome through effective community organization
and development
. and effective use of software.
Of these criteria, "equivalence" is the most controversial. According to a 1996 survey by LetsLink UK, only 13% of LETS networks actually practice equivalence, with most groups establishing alternate systems of valuation "in order to divorce [themselves] entirely from the mainstream economy." Michael Linton has stated that such systems are "personal money" networks rather than LETS.
LETS is a fully fledged monetary or exchange system, unlike direct barter. LETS members are able to earn credits from any member and spend them with anyone else on the scheme. Since the details are worked out by the users, there is much variation between schemes.
, and made rulings concerning their use. Generally for personal arrangements, social arrangements, hobbies or pastimes, there are no taxation implications. This generally covers the vast majority of LETS transactions. Taxation liabilities accrue when a tradesperson or professional person provides his or her professional services in payment for LETS units, or a registered or incorporated business sells part of its product for LETS units. In such cases, the businesses are generally encouraged to sell the service or product partly for LETS units and partly in the national currency, to allow the payment of all required taxation. This does imply, however, that in situations where national-currency expenditures would be tax-deductible, LETS must be as well.
Since its commencement over 20 years ago, LETSystems have been highly innovative in adapting to the needs of their local communities in all kinds of ways. For example in Australia, people have built houses using LETS in place of a bank mortgage
, freeing the owner from onerous interest payments.
by allowing a wider cross-section of the community
—individuals, small businesses, local services and voluntary group
s—to save money and resources in cooperation with others and extend their purchasing power. Other benefits may include social contact, health care, tuition and training, support for local enterprise and new businesses. One goal of this approach is to stimulate the economies of economically depressed towns that have goods and services, but little official currency: the LETS scheme does not require outside sources of income as stimulus.
Australia, in 1989 allocated $50,000 for the development of LETSystems, including the running of state conferences, the production of software, a LETSystems Training Pack, and assistance to Michael Linton to visit Western Australia. By 1995 there were 250 LETSystems in Australia, with Western Australia
having 43 separate systems serving a population of 2.3 million (although actual participation is by only a tiny fraction of that population) making it then the region with the highest LETS coverage in the world. South Australia
also pioneered an "InterLETS" allowing members of one system to trade with members of other systems.
Several Canadian cities have LETS groups, including Kitchener-Waterloo, Niagara, and Peterborough in Ontario, Halifax, Nova Scotia, and St. John's Newfoundland.
Ecuador had 140 Ecosimia
-Groups (in 2000).
French speaking Europe has a coherent SEL network.
German speaking Europe has a coherent Tauschring, or Tauschkreis network which shares software.
In Hungary the term used is "Community Service System" (KÖR). One group from the capital city
is Talentum Kör (Gold Talent Group), a British Council
-supported project.
In Japan
, the Peanuts system in Chiba
, near Tokyo
. Approximately ten percent of all payments made at local stores are in the community currency (2002). The LETS movement saw its peak around 2002–2003, but since then it has been declining slowly. See also Fureai kippu
.
The Netherlands has spawned a number of innovative concepts based on the LETS formula, some of which try to lower participation barriers by completely moving their exchange platforms online, like NOPPES.
South Africa – In 2003 the Community Exchange System
(CES) started operating an internet-based LETS in Cape Town, South Africa. This has grown into a global network of over 250 local exchange systems in more than thirty countries (end of 2010), among them New Zealand, Australia, Finland, Spain, USA, UK, Vanuatu etc. Many of these are former LETS groups but others are time banks and hybrids.
South Korea
has some active LETS too, such as Hanbat LETS in Daejeon
and Gwacheon Pumasi in Gwacheon
.
In Switzerland, the WIR Bank
operates a system close to a LETS.
The UK has many LETS systems, many loosely affiliated to LETSLINK UK http://www.letslinkuk.net/index.htm.
In the UK Skillsbox operates an online community system similar to LETS, letting users trade their skills and time for credits which can be spent within the online community.
In Venezuela there are around a dozen LETS (as of 2011), with support from the national government.
Michael Linton
Michael Linton
Michael Linton is the designer of a Local Exchange Trading System known as LETSystem, an open form of money, or personal and practical arrangement of community currency...
originated the term "local exchange trading system" in 1983 and for a time ran the Comox Valley LETSystems in Courtenay
Courtenay, British Columbia
Courtenay is a city on the east coast of Vancouver Island, in the Canadian province of British Columbia. It is the largest city in the area commonly known as the Comox Valley, and it is the seat of the Comox Valley Regional District which replaced the Comox-Strathcona Regional District...
, British Columbia
British Columbia
British Columbia is the westernmost of Canada's provinces and is known for its natural beauty, as reflected in its Latin motto, Splendor sine occasu . Its name was chosen by Queen Victoria in 1858...
. The system he designed was intended as an adjunct to the national currency
Complementary currency
Complementary currency is a currency meant to be used as a complement to another currency, typically a national currency. Complementary currency is sometimes referred to as complementary community currency or as community currency...
, rather than a replacement for it, although there are examples of individuals who have managed to replace their use of national currency through inventive usage of LETS.
LETS networks use interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
-free local
Community-based economics
Community-based economics or community economics is an economic system that encourages local substitution. It is most similar the lifeways of those practicing voluntary simplicity, including traditional Mennonite, Amish, and modern eco-village communities...
credit so direct swaps do not need to be made. For instance, a member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network. In LETS, unlike other local currencies
Local currency
In economics, a local currency, in its common usage, is a currency not backed by a national government , and intended to trade only in a small area. As a tool of fiscal localism, local moneys can raise awareness of the state of the local economy, especially among those who may be unfamiliar or...
, no scrip
Scrip
Scrip is an American term for any substitute for currency which is not legal tender and is often a form of credit. Scrips were created as company payment of employees and also as a means of payment in times where regular money is unavailable, such as remote coal towns, military bases, ships on long...
is issued, but rather transactions are recorded in a central location open to all members. As credit is issued by the network members, for the benefit of the members themselves, LETS are considered mutual credit
Mutual credit
Mutual credit is a type of alternative currency in which the currency used in a transaction can be created at the time of the transaction. LETS are mutual credit systems.Typically this involves keeping track of each individual's credit or debit balance...
systems.
The time-based currency mentioned in United Nations Millennium Declaration C6 to Governments was a UNILETS United Nations International & Local Employment-Trading System to restructure the global financial architecture.
A number of people have problems adjusting to the different ways of operating using a LETSystem. A conventional national currency is generally hard to earn, but easy to spend. To date LETSystems are comparatively easy to earn, but harder to spend.
LETSystems often have all of the problems confronting any voluntary, not-for-profit, non governmental, community based organisation. LETS organisers often complain of being overworked, and may suffer burnout
Burnout (psychology)
Burnout is a psychological term for the experience of long-term exhaustion and diminished interest. Research indicates general practitioners have the highest proportion of burnout cases; according to a recent Dutch study in Psychological Reports, no less than 40% of these experienced high levels of...
. Many schemes have ceased operation as a result. Many of these problems can be overcome through effective community organization
Community organization
Community organizations are civil society non-profits that operate within a single local community. They are essentially a subset of the wider group of nonprofits. Like other nonprofits they are often run on a voluntary basis and are self funded...
and development
Community development
Community development is a broad term applied to the practices and academic disciplines of civic leaders, activists, involved citizens and professionals to improve various aspects of local communities....
. and effective use of software.
Criteria
LETS are generally considered to have the following five fundamental criteria:- Cost of service — from the community for the community
- Consent — there is no compulsion to trade
- Disclosure — information about balances is available to all members
- Equivalence to the national currency
- No interest
Of these criteria, "equivalence" is the most controversial. According to a 1996 survey by LetsLink UK, only 13% of LETS networks actually practice equivalence, with most groups establishing alternate systems of valuation "in order to divorce [themselves] entirely from the mainstream economy." Michael Linton has stated that such systems are "personal money" networks rather than LETS.
How LETS works
- Local people set up an organization to trade between themselves, often paying a small membership fee to cover administration costs
- Members maintain a directory of offers and wants to help facilitate trades
- Upon trading, members may 'pay' each other with printed notes, log the transaction in log books or online, or write cheques which are later cleared by the system accountant.
- Members whose balances exceed specified limits (positive or negative) are obliged to move their balance back towards zero by spending or earning.
LETS is a fully fledged monetary or exchange system, unlike direct barter. LETS members are able to earn credits from any member and spend them with anyone else on the scheme. Since the details are worked out by the users, there is much variation between schemes.
LETS and taxation
LETS is not a scheme for avoiding the payment of taxation, and generally groups encourage all members to personally undertake their liabilities to the state for all taxation, including income tax and goods and services tax. In a number of countries, various government taxation authorities have examined LETS along with other forms of counter tradeCounter trade
Countertrade means exchanging goods or services which are paid for, in whole or part, with other goods or services, rather than with money. A monetary valuation can however be used in counter trade for accounting purposes. In dealings between sovereign states, the term bilateral trade is used...
, and made rulings concerning their use. Generally for personal arrangements, social arrangements, hobbies or pastimes, there are no taxation implications. This generally covers the vast majority of LETS transactions. Taxation liabilities accrue when a tradesperson or professional person provides his or her professional services in payment for LETS units, or a registered or incorporated business sells part of its product for LETS units. In such cases, the businesses are generally encouraged to sell the service or product partly for LETS units and partly in the national currency, to allow the payment of all required taxation. This does imply, however, that in situations where national-currency expenditures would be tax-deductible, LETS must be as well.
LETS and Social Security
In a number of countries, LETSystems have been encouraged as a social security initiative. For example in Australia, Peter Baldwin, a former Minister of Social Security in the Keating government, encouraged LETSystems as a way of letting welfare recipients borrow against their welfare entitlement for urgent personal needs or to establish themselves in business.Since its commencement over 20 years ago, LETSystems have been highly innovative in adapting to the needs of their local communities in all kinds of ways. For example in Australia, people have built houses using LETS in place of a bank mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
, freeing the owner from onerous interest payments.
Benefits of LETS
LETS can help revitalise and build communityCommunity building
Community building is a field of practices directed toward the creation or enhancement of community among individuals within a regional area or with a common interest...
by allowing a wider cross-section of the community
Community
The term community has two distinct meanings:*a group of interacting people, possibly living in close proximity, and often refers to a group that shares some common values, and is attributed with social cohesion within a shared geographical location, generally in social units larger than a household...
—individuals, small businesses, local services and voluntary group
Non-profit organization
Nonprofit organization is neither a legal nor technical definition but generally refers to an organization that uses surplus revenues to achieve its goals, rather than distributing them as profit or dividends...
s—to save money and resources in cooperation with others and extend their purchasing power. Other benefits may include social contact, health care, tuition and training, support for local enterprise and new businesses. One goal of this approach is to stimulate the economies of economically depressed towns that have goods and services, but little official currency: the LETS scheme does not require outside sources of income as stimulus.
LETS systems around the world
Local exchange trading systems now exist in many countries. Some examples include the following:Australia, in 1989 allocated $50,000 for the development of LETSystems, including the running of state conferences, the production of software, a LETSystems Training Pack, and assistance to Michael Linton to visit Western Australia. By 1995 there were 250 LETSystems in Australia, with Western Australia
Western Australia
Western Australia is a state of Australia, occupying the entire western third of the Australian continent. It is bounded by the Indian Ocean to the north and west, the Great Australian Bight and Indian Ocean to the south, the Northern Territory to the north-east and South Australia to the south-east...
having 43 separate systems serving a population of 2.3 million (although actual participation is by only a tiny fraction of that population) making it then the region with the highest LETS coverage in the world. South Australia
South Australia
South Australia is a state of Australia in the southern central part of the country. It covers some of the most arid parts of the continent; with a total land area of , it is the fourth largest of Australia's six states and two territories.South Australia shares borders with all of the mainland...
also pioneered an "InterLETS" allowing members of one system to trade with members of other systems.
Several Canadian cities have LETS groups, including Kitchener-Waterloo, Niagara, and Peterborough in Ontario, Halifax, Nova Scotia, and St. John's Newfoundland.
Ecuador had 140 Ecosimia
Ecosimia
ECOSIMIA , previously known as SINTRAL, is a Local Exchange Trading System and describes an alternative economic structure in Ecuador...
-Groups (in 2000).
French speaking Europe has a coherent SEL network.
German speaking Europe has a coherent Tauschring, or Tauschkreis network which shares software.
In Hungary the term used is "Community Service System" (KÖR). One group from the capital city
Capital City
Capital City was a television show produced by Euston Films which focused on the lives of investment bankers in London living and working on the corporate trading floor for the fictional international bank Shane-Longman....
is Talentum Kör (Gold Talent Group), a British Council
British Council
The British Council is a United Kingdom-based organisation specialising in international educational and cultural opportunities. It is registered as a charity both in England and Wales, and in Scotland...
-supported project.
In Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, the Peanuts system in Chiba
Chiba Prefecture
is a prefecture of Japan located in the Kantō region and the Greater Tokyo Area. Its capital is Chiba City.- History :Chiba Prefecture was established on June 15, 1873 with the merger of Kisarazu Prefecture and Inba Prefecture...
, near Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
. Approximately ten percent of all payments made at local stores are in the community currency (2002). The LETS movement saw its peak around 2002–2003, but since then it has been declining slowly. See also Fureai kippu
Fureai kippu
Fureai kippu is a Japanese sectoral currency created in 1995 by the Sawayaka Welfare Foundation so that people could earn credits helping seniors in their community....
.
The Netherlands has spawned a number of innovative concepts based on the LETS formula, some of which try to lower participation barriers by completely moving their exchange platforms online, like NOPPES.
South Africa – In 2003 the Community Exchange System
Community Exchange System
The Community Exchange System is an Internet-based trading network which allows participants to buy and sell goods and services without using a national currency...
(CES) started operating an internet-based LETS in Cape Town, South Africa. This has grown into a global network of over 250 local exchange systems in more than thirty countries (end of 2010), among them New Zealand, Australia, Finland, Spain, USA, UK, Vanuatu etc. Many of these are former LETS groups but others are time banks and hybrids.
South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
has some active LETS too, such as Hanbat LETS in Daejeon
Daejeon
Daejeon is South Korea's fifth largest metropolis and the provincial capital of Chungnam. Located in the center of the country, Daejeon had a population of over 1.5 million in 2010. It is at the crossroads of Gyeongbu railway, Honam railway, Gyeongbu Expressway, and Honam Expressway. Within the...
and Gwacheon Pumasi in Gwacheon
Gwacheon
Gwacheon is a city in Gyeonggi-do Province, South Korea. It lies close to Seoul in the heart of the Seoul National Capital Area, and also lies just east of Anyang...
.
In Switzerland, the WIR Bank
WIR Bank
The WIR Bank, formerly the Swiss Economic Circle , or WIR, is an independent complementary currency system in Switzerland that serves small and medium-sized businesses...
operates a system close to a LETS.
The UK has many LETS systems, many loosely affiliated to LETSLINK UK http://www.letslinkuk.net/index.htm.
In the UK Skillsbox operates an online community system similar to LETS, letting users trade their skills and time for credits which can be spent within the online community.
In Venezuela there are around a dozen LETS (as of 2011), with support from the national government.
Global network
The value of local money is greatly enhanced if it can be converted and spent elsewhere. Efforts to coordinate the LETS globally, even just to make a proper directory of associations, have yet to succeed. More recently the efficiency of sharing software is bringing schemes together. The Tauschring network in Germany provides software for most schemes in the German speaking world, and CES now has over 250 participating associations, able to trade between each other with a process sometimes called intertrading.See also
- Barter
- Credit unionCredit unionA credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
- Local currencyLocal currencyIn economics, a local currency, in its common usage, is a currency not backed by a national government , and intended to trade only in a small area. As a tool of fiscal localism, local moneys can raise awareness of the state of the local economy, especially among those who may be unfamiliar or...
- Green economics
- Green politicsGreen politicsGreen politics is a political ideology that aims for the creation of an ecologically sustainable society rooted in environmentalism, social liberalism, and grassroots democracy...
- The ob in Eric Frank RussellEric Frank RussellEric Frank Russell was a British author best known for his science fiction novels and short stories. Much of his work was first published in the United States, in John W. Campbell's Astounding Science Fiction and other pulp magazines. Russell also wrote horror fiction for Weird Tales, and...
's The Great ExplosionThe Great ExplosionThe Great Explosion is a satirical science fiction novel by Eric Frank Russell, first published in 1962. The story is divided into three sections... - Ripple monetary systemRipple monetary systemRipple is an open-source software project for developing and implementing a protocol for an open decentralized payment network. In its developed form , the Ripple network would be a peer-to-peer distributed social network service with a monetary honour system based on trust that already exists...
- WIR BankWIR BankThe WIR Bank, formerly the Swiss Economic Circle , or WIR, is an independent complementary currency system in Switzerland that serves small and medium-sized businesses...
External links
- LETS FAQs, by John Croft of the Gaia FoundationGaia FoundationThe Gaia Foundation of Western Australia is part of the international Gaia Movement of individuals and groups which share concerns with living more sustainably on the Earth, which was inspired by the Gaia hypothesis of James Lovelock and Lynn Margulis, and is attempting to bring about the Great...
- The LETSystem Design Manual, by Landsman Community Services
- The Open Money Project
- Software for time &social banking