Money Wise

Local Exchange Trading Systems LETS


Local Exchange Trading Systems        

Local Exchange Trading Systems (LETS) also known as LETSystems are local, non-profit exchange networks in which goods and services can be traded without the need for printed currency.

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.

Michael Linton originated the term "Local Exchange Trading System" in 1982 and, with his wife Shirley, 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 are generally considered to have the following five fundamental criteria:[1]

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."[2][3] Michael Linton has stated that such systems are "personal money" networks rather than LETS.[4]

How LETS work
Local people set up a club to trade between themselves, keeping their own record of accounts.
A directory of members' offers and requests—goods, services or items for hire, priced in local LETS units—is compiled and circulated.
Members use the directory to contact one another whenever they wish. They pay for any service or goods by writing a LETS cheque or credit note for an agreed amount of LETS units, or by exchanging printed LETS notes.
If applicable, the credit note is sent to the LETS bookkeeper who adjusts both members' accounts accordingly.
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.

LETS is a fully fledged "monetary system", unlike direct barter, with LETS members able to earn credits from any member and spend them with anyone else on the scheme.

LETS and taxation
LETS is not a scheme for avoiding the payment of taxation, and generally schemes 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 pass-times, 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, or a registered or incorporated business sells part of its product for LETS. In such cases, the businesses are generally encouraged to sell the service or product partly for LETS and in part in the national currency, to allow the payment of all required taxation.

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 Keeting 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.

Benefits of LETS
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.

Criticism of LETS
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.[5] Many of these problems can be overcome through effective community organisation and development.

LETSystems, whilst generally appealing to people supporting a general communitarian or environmental ideology, have in many places managed to successfully translate themselves as social welfare initiatives. There are far fewer systems that have managed to communicate and translate themselves into a local business initiative catering to locally owned small to medium businesses. This is generally considered to be an unfortunate weakness of LETSystems to date by the initiators, as they feel that LETS potentially has the capacity to allow small business to compete on a level playing field with larger national and transnational business corporations.

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. The success of a LETSystem is therefore determined by the ease with which a person can spend their LETS credits, and improve their quality of life by participation. Placing difficult arrangements or undue service fees in the way of LETS members will produce difficulties in the future.

LETS around the world
Local exchange trading systems now exist in many countries. Some examples include the following:

Australia: The Psychologist Jill Jordan started the first Australian LETSystem in the town of Maleny, Queensland in 1987, after visiting Michael Linton in Canada to observe the LETSystem functioning in Courtenay, British Columbia. Jill also pioneered the idea of naming local currencies after icons of local importance: in Maleny their currency is the bunya, named after the local nut of the bunya pine. By 1995 there were 250 LETSystems in Australia, with Western Australia having 43 separate systems serving a population of 1.5 million, making it 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.
Canada: The original LETS, the Comox Valley LETSystem developed by Michael Linton in 1982, is now dormant. However there are plans are to revive it. The second LETSystem in Canada was the Victoria LETS, established in 1983.[1] LETS have been established in several Canadian cities, including Kitchener-Waterloo, Niagara, and Peterborough in Ontario, Halifax, Nova Scotia, and St. John's Newfoundland.[2]
Ecuador: Since beginning in 2000, there are now 140 Ecosimia-Groups.
France: A consortium of social economy financial institutions including Crédit Coopératif and the mutuals MACIF and MAI have joined with the Chèque Déjeuner co-operative to launch an alternative currency called the SOL, which will be held on a smart card. The Sol will be piloted in the Ile de France, Britanny and Nord-Pas de Calais regions as part of an EQUAL development partnership in 2005-2006. Le site des Lets (SEL de France) SELidaire : [3]
Germany has established a number of local currency "Tallent" systems using LETS Principles. Germany is hosting an International Conference in Monetary Regionalisation (Monetäre Regionalisierung) from the 28 September to the 1st October 2006 in Weimar.
Hungary: The used term there is Community Service System (KÖR). One group from the capital city is Talentum Kör (Gold Talent Group), a British Council-supported project.
Japan: The Peanuts system in Chiba City. Approximately ten percent of all payments made at local stores are in the community currency (2002).
New Zealand: As of the mid 1990s there were approximately 70 "Green Dollar Systems" in operation. A National Conference of Systems was a means of supporting new groups through the various developmental stages.
United Kingdom: An estimated 40,000 people are now trading in around 450 LETS networks in cities, towns and rural communities across the UK.[6] LETS currencies have their own names, and often reflect local distinctiveness: Readies in Reading, Locks in Camden Town, Groats in Stirling, New Berries in Newbury, Berkshire, Piers in Southend-on-Sea, Hearts in Birmingham, Furze in Furzedown.
South Africa: In 2003 the SANE community Exchange System (CES) started operating an internet-based LETS in Cape Town. In the meantime there are several such systems operating in different regions in South Africa, and the CES network is being used by LETS in several countries, among them New Zealand, Australia, Israel, USA, Norway, etc..
Various approaches are being proposed to link Local Exchange Trading Systems. UNILETS has been developed by the United Nations as a mechanism for linking LETS in communities around the world. The Ripple monetary system has been proposed as a virtual system to connect the diverse LETS systems.