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Currency Systems
Backed CurrenciesTransaction NetIthaca HOURS
LETSNational Currencies
ROCSTime Dollars
Complementary Currencies

LETS - Local Exchange Trading Systems

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Benefits of the LETS model:

No central authority is required to guarantee the currency and manage its supply: LETS is backed by goods and services, and is created as mutual credit (like ROCS and Time Dollars).

Given that there is no interest on LETS currency, the built-in incentive to discount the future found in national currencies is reduced, but not reversed.

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How LETS credits are issued:

LETS money (like ROCS and Time Dollars) is created as mutual credit: Each transaction is recorded as a corresponding credit and debit in the two participants' accounts. The quantity of currency issued is thus automatically sufficient and (unlike fiat money) does not depend on the judgment and effort of a central authority.

When too much money is issued, the local currency will inflate or even become completely worthless; when currency is underissued, the problem local currency was meant to address--too little trade among people in the community--will remain. So it is not a trivial task for anybody or any group to guess the correct quantity of money to issue, because that ideal quantity will continuously vary according to the rate of acceptance of the local currency, which will change over time; and the overall state of the local economy (including the conditions of the economy in the "normal" national currency), which will also change over time).

Mutual credit solves both these problems in a self-organized way.

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LETSystems measure Green Dollars in the corresponding national currency unit.

Using the National Currency as a reference is more convenient for convertibility and easy pricing, but anchoring a local currency to national fiat money leaves the local currency system vulnerable to any crisis occurring in the national currency; thus the importance of this feature will depend on the particular national currency chosen as reference (e.g. for the WIR it worked well because the Swiss Franc has been the most stable national currency in the postwar era).

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LETS exchanges are negotiable.

In LETSystems, as in most other complementary currencies (and in national currency), the amount of money exchanged in any transaction is negotiable. LETS is thus flexible enough for use in diverse communities where products or services requiring a greater variety of skills, experience, training, equipment, or risk are exchanged.

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Structural incentives in LETSystems:

Complementary currencies, because they do not bear interest (which discounts future earnings in relation to present cash),

Those complementary currencies backed by an external reference (a commodity or service) rather than the fiat of a central authority are less susceptible to inflation.

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Applications of the LETS model:

 

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The Transaction Net site is an independent, open forum where anyone and everyone can explore new economic media, so if you know of another site that deserves attention, please let us know. You're also invited to register and join us over in The Money Conference.

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