What is Local Exchange Trading Systems
Local exchange trading systems are locally organized economic organizations that allows members to participate in the exchange of goods and services among others in the group. Local Exchange Trading Systems (LETS) use a locally created currency as denominations of units of value which can be traded or bartered in exchange for goods or services. Members of LETS typically view the systems as organized and cooperative schemes that maximize purchasing power while benefiting members and the community.
BREAKING DOWN Local Exchange Trading Systems
Local Exchange Trading Systems typically exhibit five fundamental traits: cost of service, consent, disclosure, equivalence to the regional currency, interest-free. These traits along with general guidelines such as membership fees, detailed logs of transactions and member directories allow for an organized and well run exchange. Additionally, transactions do not necessarily require a nominal exchange of units. For instance, members can repay other members who have performed for them a service by providing a service in return, as opposed to paying for the original service.
History of Local Exchange Trading Systems
Michael Linton coined the term "local exchange trading system" in 1983, and for a time, he ran the Comox Valley LETSystems in Courtenay, British Columbia. His intent was to design a system to complement national currency, not replace it.
LETS networks facilitate exchange between members by providing a directory of offers (and wants) and by allowing a line of interest-free credit to each. Member IOUs are consolidated into an accounting system, which publishes a directory and 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.
Many people have difficulty adjusting to this type of money system, which is quite different from conventional currency, which yields interest to savers and costs interest to borrowers. A LETS system incentivizes different behaviors to mutual credit which has no commodity value and no interest.
Most LETS groups range from 50–150 members, with a small core group who use the system as the basis of a lifestyle. After its height in the 1990s, the LETS movement now mostly comprises the same aging people. Interest in local currency has moved on to other designs, such as time-based currency and dollar-backed local voucher schemes. In many countries apart from Canada, USA and UK, the distinction between LETS and timebanking is much less clear, as most LETS now use time as their unit of account.
On the whole, the movement has been 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