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A local exchange trading system (also local employment and trading system or local energy transfer system; abbreviated LETS) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community information service and records transactions of members exchanging goods and services by using locally created currency. [1] LETS allow people to negotiate the value of their own hours or services, [2] and to keep wealth in the locality where it is created. [3]
Similar trading systems around the world are also known as Community Exchange Systems, Mutual Credit trading systems, Clearing Circles, Trade Exchanges or Time Banks. These all use 'metric currencies' – currencies that measure, as opposed to the fiat currencies used in conventional value exchange. These are all a type of alternative or complementary currency. [3]
In the 21st century, the internet-based networks have been used to link individual LETS systems, into national or global networks.
Michael Linton may have originated the term "local exchange trading system" in 1983, for a time running the Comox Valley LETSystems in Courtenay, British Columbia. [4] The system he designed was intended as an adjunct to the national currency, rather than a replacement for it. [5] He called the currency "green dollars" and it was mostly used by a local dentist, but dwindled when he moved away. Linton started at least four more versions, with varying degrees of success, such as the "Community Way Dollars" in 2008. The system's turnover in the first two years amounted to green $500,000. There were 5 LETS in Great Britain in 1992. In 1995 this number increased to 350 with 30,000 membership and 2 million turnover. [6] In 2018 the University of Victoria undertook to research his archives as a demonstration of how people react to new ideas that are outside the norms of society. Linton thought that he had failed to communicate his idea adequately. [7] LETS is a new type of money which makes it easy to pursue new Livelihood without the previous wholesale transformation of Capitalism. It is thus regarded as an alternative currency movement, and as a form of political protest. [8] After flourishing in the 1990s, the LETS movement waned. Interest in local currency moved on to other designs such as time-based currency and dollar-backed local voucher schemes.[ citation needed ]
On the whole, the movement was slow to adapt to the internet and to the possibility of networking together. Reluctance to engage with technology, a belief in decentralisation/localisation and lack of funds all contributed to this.[ citation needed ]
Examples of LETS networks based on free software are the Cape Town-based Community Exchange System (CES), which as of March 2019 [update] links to the Geneva-based Community Forge [9] and Spanish IntegralCES. [10] [11]
Internet Exchange Trading System was established in 1998 as an idea to spread local exchange tradings systems online and establish a service exchange online platform. It didn't reach critical mass of users and the idea was later abandoned. [12]
LETS networks facilitate exchange between members by providing a directory of offers and needs and by allowing a line of interest-free credit to each. Members' IOUs are logged in a centralised accounting system which publishes a directory as well as balances visible to all members. In case of a default, the loss of value or units is absorbed equally by all members, which makes it a mutual credit exchange. 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, or they may spend first and earn later.[ citation needed ]
In many countries, the distinction between LETS and timebanking is not clear, as many LETS use time as their unit of account.[ citation needed ]
As per Linton's definition, LETS are generally considered to have the following five fundamental criteria: [5]
According to a 1996 survey by LetsLink UK, only 13% of LETS networks actually practise equivalence, with most groups establishing alternative systems of valuation "in order to divorce [themselves] entirely from the mainstream economy." [13] [14] Michael Linton has stated that such systems are "personal money" networks rather than LETS. [5]
A list of services offered by network members is put together to create a LETS scheme, and trading takes place between members using a local currency. The LETS foundation is a virtual currency, a check book, a directory as well as a transparent accounting system built on trust and community regulation. [8] The first LETS required nothing more than a telephone, an answering machine and a notebook. [15] Since then, there have been several attempts to improve the process with software, printed notes, and other familiar aspects of traditional currencies.
LETS is a full-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 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 trade, and made rulings concerning their use. [ citation needed ] Generally for personal arrangements, social arrangements, hobbies or pastimes, there are no taxation implications. This generally covers the vast majority of LETS transactions.[ disputed ] 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.
In a number of countries, LETS 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 LETS as a way of letting welfare recipients borrow against their welfare entitlement for urgent personal needs or to establish themselves in business. [16]
Since their commencement over 30 years ago, LETS 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.[ citation needed ]
LETS can help revitalise and build community by allowing a wider cross-section of the community—individuals, small businesses, local services and voluntary groups—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. The environmental benefits of enhanced locals' self-reliance involve less-distance transport (as local goods are substituted for imports) and more evident environmental effects. Moreover, diverse local economies support sustainability by decreasing the need to use assets in an inefficient manner to satisfy external consumer demands. That also requires improving the local quality of life without having to make expenditures. LETS can allow for much greater self-direction and flexibility in employment patterns than the mainstream, conventional economy and, in particular, enable the skills of the unemployed to be valued and used. [17]
Even though LETS are strongly oriented towards the formal market economy, they disengage from it by establishing small, cooperative exchange enclaves in which trust and intimacy relationships are cultivated. And it also means that there is a small range of services available. LETS members must be economically involved outside to meet their needs. LETS also does not effect a 'return' to bartering or the abolition of property. [6] "LETS currency only has value when it is circulation." [17] While LETS members could decide individually to change the way they value money and life and develop new codes and live by them to a large degree, they were restricted in their ability to sustain this utopia. LETS have limited resources, so when they need mainstream resources, they might be unable to transfer their codes through their network. [8]
Local exchange trading systems now exist in many countries. Currency exchange between countries is done automatically through the CES or a similar network.
In 2003, the original CES was founded as internet-based LETS in Cape Town, South Africa. By 2011 it had grown into a global network spanning 99 countries. [18]
As of March 2019 [update] the following African countries had active communities linked in to the CES network: Botswana 2; Cameroon 1; Ethiopia 1; Kenya 2; Lesotho 2; Liberia 1; Madagascar 1; Namibia 2; Nigeria 2; South Africa 62; Swaziland 1; Uganda 1; Zambia 2; Zimbabwe 2. [11]
In Japan, the Fureai kippu (in Japanese ふれあい切符: Caring Relationship Tickets) is a Japanese sectoral currency created in 1995 by the Sawayaka Welfare Foundation so that people could earn credits helping seniors in their community. [19]
The Government of Australia, in 1989, allocated AU$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.[ citation needed ] 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), [1] making it then the region with the highest LETS coverage in the world.
From around 2007, many Australian LETS groups started trading online using the Community Exchange System.[ citation needed ] This system allows new members to sign up directly, list offers and wants, and enter trades without assistance from the administrator.
By 2011 Australia had become the most active country on the Community Exchange System, prompting Tim Jenkin and Annette Loudon to set up the Australian Community Exchange System. [20] As of March 2019 [update] there were 31 communities using CES. [11]
In the Czech Republic, there are multiple LETS. Rozleťse, operating in the region of city of Brno sharing the same Cyclos3 server with other smaller groups in the regions of Jeseník, Ostrava and Beskydy.[ citation needed ] The capital, Prague, uses Pralets. [21]
In Germany, CES has 11 German communities on its network. [11]
In Switzerland an adaption of LETS, the Talent, was established and quite successfully launched in 1992.[ citation needed ] This spread out in Europe and spawned many other Talent-Groups in other countries.[ citation needed ]
The United Kingdom has many LETS systems, many loosely affiliated to LETSLINK UK and some operating under the CES system, such as North London LETS. [22] 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.[ citation needed ]
The Flemish part of Belgium has many LETS groups. There is a non profit organization promoting LETS: Lets Vlaanderen vzw. They assist the local groups in starting up, they organize events, they share knowledge. [23]
The Suska Kör (Suska Circle) is a CES in Hungary that is present in some of the major cities. [24]
As of March 2019 [update] , there were many active communities in the region being hosted on the CES global server: Argentina had 11; Brazil 14; Bolivia 1; Chile 9; Colombia 13; Costa Rica 3; Curaçao 1; Dominican Republic 2; Ecuador 3; Guatemala 1; Nicaragua 1; Paraguay 1; Peru 3; Puerto Rico 2; Sint Maarten 1; Trinidad and Tobago 2; Turks and Caicos Islands 1; Uruguay 3; US Virgin Islands 1; Venezuela 3. [11]
In trade, barter is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists usually distinguish barter from gift economies in many ways; barter, for example, features immediate reciprocal exchange, not one delayed in time. Barter usually takes place on a bilateral basis, but may be multilateral. In most developed countries, barter usually exists parallel to monetary systems only to a very limited extent. Market actors use barter as a replacement for money as the method of exchange in times of monetary crisis, such as when currency becomes unstable or simply unavailable for conducting commerce.
A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a system of money in common use within a specific environment over time, especially for people in a nation state. Under this definition, the British Pound sterling (£), euros (€), Japanese yen (¥), and U.S. dollars (US$) are examples of (government-issued) fiat currencies. Currencies may act as stores of value and be traded between nations in foreign exchange markets, which determine the relative values of the different currencies. Currencies in this sense are either chosen by users or decreed by governments, and each type has limited boundaries of acceptance; i.e., legal tender laws may require a particular unit of account for payments to government agencies.
Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market.
In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area, while a community currency might be local or be used for exchange within an online community. A local currency acts as a complementary currency to a national currency, rather than replacing it, and aims to encourage spending within a local community, especially with locally owned businesses. Such currencies may not be backed by a national government nor be legal tender. About 300 complementary currencies, including local currencies, are listed in the Complementary Currency Resource Center worldwide database.
Monetary reform is any movement or theory that proposes a system of supplying money and financing the economy that is different from the current system.
In economics, a time-based currency is an alternative currency or exchange system where the unit of account is the person-hour or some other time unit. Some time-based currencies value everyone's contributions equally: one hour equals one service credit. In these systems, one person volunteers to work for an hour for another person; thus, they are credited with one hour, which they can redeem for an hour of service from another volunteer. Others use time units that might be fractions of an hour. While most time-based exchange systems are service exchanges in that most exchange involves the provision of services that can be measured in a time unit, it is also possible to exchange goods by 'pricing' them in terms of the average national hourly wage rate.
Digital currency is any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency. Digital currency may be recorded on a distributed database on the internet, a centralized electronic computer database owned by a company or bank, within digital files or even on a stored-value card.
A complementary currency is a currency or medium of exchange that is not necessarily a national currency, but that is thought of as supplementing or complementing national currencies. Complementary currencies are usually not legal tender and their use is based on agreement between the parties exchanging the currency. According to Jérôme Blanc of Laboratoire d'Économie de la Firme et des Institutions, complementary currencies aim to protect, stimulate or orientate the economy. They may also be used to advance particular social, environmental, or political goals.
"Mutual credit" is a term mostly used in the field of complementary currencies to describe a common, usually small-scale, endogenous money system.
Virtual currency, or virtual money, is a digital currency that is largely unregulated, issued and usually controlled by its developers, and used and accepted electronically among the members of a specific virtual community. In 2014, the European Banking Authority defined virtual currency as "a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically." A digital currency issued by a central bank is referred to as a central bank digital currency.
Labour vouchers are a device proposed to govern demand for goods in some models of socialism and to replace some of the tasks performed by currency under capitalism.
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment.
Bartercard Private LTD. is an operator of a barter trading exchange. Bartercard enables businesses to exchange goods and services without using cash or cash equivalents or a direct swap. Bartercard is a trading platform enabling businesses to exchange goods and services. These transactions are recorded electronically, with ‘Trade Dollars’ substituting New Zealand currency. Each trade dollar is equivalent to one New Zealand Dollar.
A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is not compliant with an institutional set of rules. If the rule defines the set of goods and services whose production and distribution is prohibited or restricted by law, non-compliance with the rule constitutes a black-market trade since the transaction itself is illegal. Such transactions include the illegal drug trade, prostitution, illegal currency transactions, and human trafficking.
A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another measure of value, such as gold.
Fiat money is a type of currency that is not backed by a precious metal, such as gold or silver. It is typically designated by the issuing government to be legal tender, and is authorized by government regulation. Since the end of the Bretton Woods system in 1971, the major currencies in the world are fiat money.
Emissions reduction currency systems (ERCS) are schemes that provide a positive economic and or social reward for reductions in greenhouse gas emissions, either through distribution or redistribution of national currency or through the publishing of coupons, reward points, local currency, or complementary currency.
Fiscal localism comprises institutions of localized monetary exchange. Sometimes considered a backlash against global capitalism or economic globalization, fiscal localism affords voluntary, market structures that help communities trade more efficiently within their communities and regions.
The Community Exchange System (CES) is an internet-based global trading network which allows participants to buy and sell goods and services without using a national currency. It may be described as a type of local exchange trading system (LETS) network based on free software. While it can be used as an alternative to traditional currencies such as the Australian dollar or euro or South African rand, the Community Exchange System is a complementary currency in the sense that it functions alongside established currencies.
The Bristol pound (£B) was a form of local, complementary, and/or community currency launched in Bristol, UK on 19 September 2012. Its objective was to encourage people to spend their money with local, independent businesses in Bristol, and for those businesses to in turn localise their own supply chains. At the point of the close of the digital scheme in August 2020, it was the largest alternative in the UK to official sterling currency, and was backed by sterling.