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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.
Criteria LETS are generally considered to have the following five fundamental criteria: 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 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: * 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. Variants LETS are characterized by a high level of innovation and many new network's choose to experiment with the system's mechanics. On September 21, 2000, Richmond Valley LETS, Nimbin LETS and BMT LETS (Byron Bay, Mullumbimby and the Tweed Valley) in Australia cooperatively launched a "hybrid" system which incorporated a supporting paper currency. This optional scrip, called "Ecos", was developed "with the aim of broadening the range of goods and services on offer through LETS." See also Software | ||||||||
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