Local exchange trading system
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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. LETS allow people to negotiate the value of their own hours or services, and to keep wealth in the locality where it is created.
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.
In the 21st century, the internet-based networks haves 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. The system he designed was intended as an adjunct to the national currency, rather than a replacement for it. 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. In 2018 the University of Victoria undertook to research his archives as a demonstration of people react to new ideas that are outside the norms of society. Linton thought that he had failed to communicate his idea adequately.
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.
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 and Spanish IntegralCES.
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.
As per Linton's definition, 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
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." Michael Linton has stated that such systems are "personal money" networks rather than LETS.
The first LETS required nothing more than a telephone, an answering machine and a notebook. Since then, there have been several attempts to improve the process with software, printed notes, and other familiar aspects of traditional currencies.
- 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 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. 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, 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 30 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.
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.
Local exchange trading systems now exist in many countries. Currency exchange between countries is done automatically through the CES or a similar network.
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.
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.
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. 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.
From around 2007, many Australian LETS groups started trading online using the Community Exchange System. 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. As of March 2019[update] there were 31 communities using CES.
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, Pralets for the capital of Prague, BuďSob for the České Budějovice region etc.
In Germany there are Tauschkreise (exchange circles) networks, many operating with Cyclos software and an on-line exchange platform called [[Easyswap] or on the Tauschring. CES has 11 German communities on its network.
LETS schemes have been proposed as a possible way to alleviate some of the human costs of the euro crisis in Greece, where high foreign debt repayments resulted in rapid deflation of the economy around 2010. It was proposed that LETS schemes could reinflate the internal Greek economy, allowing internal trade to be maintained even if internationally traded currency reserves are being drained for debt repayment. This theory was being tested in Greek cities such as Volos in 2013. 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.
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.
In Switzerland an adaption of LETS, the Talent, was established and quite successfully launched in 1992. This spread out in Europe and spawned many other Talent-Groups in other countries.
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. 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.
Several Canadian cities have LETS groups, including Kitchener-Waterloo, Niagara, and Peterborough in Ontario; Halifax, Nova Scotia; and St. John's, Newfoundland.
South and Central America, Caribbean
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.
- Barter (economics)
- Collaborative finance
- Community Exchange System (CES)
- Complementary currency (aka Alternative currency)
- Credit union
- Green economics
- Green politics
- List of community currencies in the United States
- Local currency
- Mutualism (economic theory)
- Ripple monetary system
- Sharing economy (access economy)
- Time-based currency (time banking)
- WIR Bank (Switzerland)
- "LETSystems Training Pack", (1990) W.A. Government.
- Coupland, Douglas (2016). Throwing Rocks at the Google Bus. Portfolio / Penguin. p. 163. ISBN 978-0-698-15366-0.
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- Linton, Michael (August, 1994). The LETSystem Design Manual. Landsman Community Services Paper No. 1.3 Version No 1.3
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- "Community Exchange Network Statistics". Community Exchange System. Archived from the original on 29 March 2019. Retrieved 30 March 2019. Cite uses deprecated parameter
- Croall, Jonathan (1997). LETS Act Locally. Calouste Gulbenkian Foundation. ISBN 0-903319-81-0.
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- Michael Paraskos, 'LETS save Greece', Cyprus Weekly (Cyprus newspaper), 25 May 2012
- See Helena Smith, 'Euros discarded as impoverished Greeks resort to bartering' in The Guardian (UK newspaper), 2 January 2013
- Interview with Juan Esteban Lopez of Venezuela's Network of Exchange Systems, Venezuelanalysis.com, 30 May 2011
- LETS FAQs, by John Croft of the Gaia Foundation
- LETSystems FAQ, LETSgo Manchester
- The LETSystem Design Manual
- The LETSystem, a local currency that works, Michael Linton, 1984, Context Institute
- Definition of a LETSystem 1986, Landsman Community Services Ltd.
- The Open Money Project
- Software for time & social banking
- Wordpress + BuddyPress Timebanking software System
- Community Accounting software in Drupal
- 2003 Update on the Westport LETS, by Richard Douthwaite