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.
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.
are generally considered to have the following five fundamental criteria:
Cost of service - from the community for the community
- there is no compulsion to trade
Disclosure - information about balances is available to
Equivalence to the national currency
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 work
people set up a club to trade between themselves, keeping their own record of accounts.
directory of members' offers and requests—goods, services or items for hire, priced in local LETS units—is compiled
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. 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. LETS
have been established in several Canadian cities, including Kitchener-Waterloo, Niagara, and Peterborough in Ontario, Halifax,
Nova Scotia, and St. John's Newfoundland.
Ecuador: Since beginning in 2000, there are now
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 : 
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. 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.
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..
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.