The "LETS" system.
<http://www.gdrc.org/icm/lets-faq.html>
An FAQ on the LETS system
This document was prepared by John Croft, of the Gaia
Foundation. and edited by Warwick Rowell - [EMAIL PROTECTED] .
It describes the why, the how and the what of Local Economic Transfer
System (LETS) schemes.
THE TWENTY MOST ASKED QUESTIONS ABOUT LETS
Q.1 What is a LETSystem?
A LETSystem is a locally initiated, democratically
organised, not-for-profit community enterprise which provides a
community information service and records transactions of members
exchanging goods and services by using the currency of locally created
LETS Credits. The LETS Credit currency does not involve coins, paper
money or tokens of any kind but rather acts as a scoring system, keeping
track of the value of individual members' transactions within the
system. It is simply a community information system attached to its own
market-place. Different LETSystems call their LETS Credits by different
names, adding a "local flavour".
Q.2 How does LETS work?
LETS works a little like a baby-sitting club, where members
earn credits by baby-sitting other people's children, spending whenever
they need child minding. Unlike a baby-sitting club, however, LETS
extends the range of services to whatever is available locally. A
successful LETSystem can provide members with food, clothing, housing,
transport, health and legal services, repairs, equipment, business
services, entertainment and much more, at a reduced or no cost in
Federal dollars, through the operation of a community based credit economy.
* It is available to anyone who is a member of the
community and who joins a LETSystem.
* Individuals and businesses can use it to advertise
goods or locate what they want, either by telephone, mail or in person.
* Information is updated regularly, added to or deleted
at any time, and circulated regularly to members.
* There are no limitations or obligations on use. LETS
is its name and "lets" is its nature!
Upon paying a small registration fee members are issued
with a Registration Number which acts as a license to trade. On joining,
members also list goods and services they are prepared to offer to, or
require from the LETS community. In most systems, members also elect a
LETSystem Committee or Board of Advisers at an Annual General Meeting,
and establish a system to maintain LETS accounts and update trading
sheets, advertising the goods and services available or needed.
Q.3 Why start a LETSystem?
When ordinary money is in short supply, needed community
projects are put on indefinite hold, local businesses fail, people
become unemployed, and individuals and families suffer, not because they
have nothing to offer, or because they lack skills and abilities, but
simply because there is not enough money to go around.
LETSystems helps develop and free local markets by
operating like a community bank, in which members open an account.
Unlike a bank, however, it gives unlimited interest-free credit,
generated at the point of sale, to facilitate trading with other
members. In this way, LETS acts like a supplementary currency, creating
an additional system of value in a community. By supplementing
conventional cash flow with a local currency, a community can maintain
full employment, and protect itself from changes and fluctuations in the
money supply.
Q.4 What other benefits are there in starting a LETSystem?
There are many benefits to LETSystems. Some others are--
* Mobilising the Real Wealth of a Community: The
knowledge and skills of its people is the real wealth of a community. A
local currency keeps this wealth working in the community, even while
conventional money drains away, generating employment and income for all
involved. People who have accumulated a wide range of skills and
abilities suddenly become once again highly valued members of the community.
* Helping Community Groups: LETSystems help other local
communit organisations by giving them access to resources to extend
their services to customers or clients currently not gaining access.
Volunteer burn-out is reduced as LETS helps organisations recognise and
acknowledge donated time and effort, allowing volunteers to meet their
own needs while meeting the needs of others.
* Fostering Self-Reliance & Self Esteem: In our
communities, unemployment is growing at the same time increasing numbers
of people are unable to get their needs met. Supporting single-parents
may need respite care or other services for their children. Elderly
pensioners also need a range of specialised services or may simply
require company to combat loneliness. At present a person's ability to
access these and other services is proportional to their purchasing
power. LETS breaks this bottleneck, by making it more possible to match
someone's need with another's available labour. People are no longer
dependent upon welfare or charity, and everyone's self esteem benefits.
* Increased Personal Savings & Disposable Income:
Because members can get local goods and services through a LETSystem,
members can substitute LETS for Federal dollars. The disposable income
in Federal dollars, available after basic needs are met, actually
increases. For those involved who are regularly trading in LETS will
find they have more money left in their pockets at the end of each week.
The rate of community savings, and therefore of community investment
capital generation, and with it the quality of life of everyone, will
improve.
* Opportunities for Businesses: LETS adds a new tier to
a local economy and generates wealth that is not able to be accessed
through the conventional monetary system. This wealth creates new
opportunities for expansion of existing local businesses, or even
markets for new goods and services that previously were not available.
* Creating Local Economic Control: LETS helps to plug
the leaky bucket of the local economy, by creating a local currency that
cannot leave the community, thereby reducing uncontrolled and activity
limiting capital outflows. As LETS credits only have value in the
community in which they were generated, they stay circulating to create
more wealth for everyone. LETS gives community members a powerful new
tool with which to "steer" the local economy in directions which benefit
everyone.
* Support to Buy Local: At present, economies of scale,
transfer pricing, and capitalising on cheap Third World labour or raw
materials enables larger multinational and interstate manufacturers and
retailers to tip the so-called "level playing field" in their direction,
to the detriment of local businesses. LETS provides an Federal dollar
discount to those using local businesses, manufacturers and retailers,
while not sacrificing total income in the hope of making it up through
increased business. Local businesses thrive.
* Building Community Support Networks: Because LETS
plugs members into a local information network, it provides new or
isolated residents living in a local community with an instantaneous
community support system, which avoids the embarrassment of
introductions to strangers. Through the LETS network all members have a
ready reason for calling for support or help. Elderly pensioners,
unemployed youth, supporting parents, new arrivals, and single-income
families with partners "trapped" in a dormitory suburb, can all build
firm friendships on relationships established through a LETS connection.
* Fostering Social Justice & Equality: Because the
value attached to one's time and commitment is set individually amongst
the participating members, a LETSystem equalises the wage differential
that exists in the value attached in the conventional economy to the
work of women as compared to the work of men. This greater equality
helps to prevent the polarisation of the community between those that
"have" compared to the "have-nots". There is no value in accumulating
LETS credits, as they cannot earn interest. It is only by putting them
to productive work that the individual or the community benefits. LETS
fosters local participation in the community at all levels.
* Helping Community Projects: There are many worthy and
worthwhile community projects and activities that languish for lack of
money. By donating LETS credits to a community chest, major community
initiatives for local improvement or charitable work can be generated,
without putting a severe strain on one's Federal dollar income. Because
the local LETS credits remain in the local community, the wealth donated
will circle back to the donor as a form of long-term "money back
guarantee", to generate demand for the goods and services they are
providing to their community.
* Building a Sense of Community: The increasingly
transient, temporary and mobile lifestyle in Australia has greatly
damaged our sense of belonging to a meaningful community. Because a
LETSystem builds local relationships it is a powerful means of
regenerating a sense of trust among members, a necessary component to
the health of any community. As communities become more self-aware and
self-reliant as the result of a LETSystem, community isolation, fear and
loneliness diminishes and everyone benefits.
Q.5 What is Multi-LETS?
A Multi-LETSystem is a LETSystem like any other. Like any
other LETS, a Multi-LETS provides a register of members, in which
transactions are recorded, statements and accounts are prepared, and a
notice-board or trading sheet of offers and requests are prepared.
A Multi-LETS, in addition, has the facility for a number of
separate networks to exist within the single registry. These networks
resemble separate LETSystems, in that they charge their own membership
fees, that members of a particular network may trade goods and services
in their own local currency, according to the rules and conditions upon
which members agree, they may provide their own separate list of offers
and requests, and their own newsletter. Again, like a LETSystem, the
LETS Credit units cannot be transferred outside of their membership base
or taken out of the system.
The difference with a conventional LETSystem is that in
Multi-LETS, people initially join the general register, specifying which
networks they would like to participate in. In return they receive a
single trading Registration Number which can be used in the general
register, and in any network to which they may belong. People then have
the choice whether to record the transaction within the general system,
or at the level of a particular network.
In a Multi-LETS, all transactions are recorded at the level
of the Multi-LETS register, so networks can have the advantages of a
LETSystem, without needing to worry about the recording of transactions,
or the issuing of statements. This can be an immense advantage to a
particular club or group who do not have any members interested in
"running the system" but who wish to use LETS for their own purpose,
without necessarily wanting to go through the hassle of starting their
own separate LETSystem. Their members also gain access to a wider range
of goods and services through the general register than they would in a
smaller system of their own network. In a Multi-LETS people have greater
freedom of choice, as they can choose which networks they want to
participate in and which local causes, clubs or groups they want to
support whilst trading in LETS.
Q.6 How do I join a LETSystem?
Each LETSystem is independent and has its own contact
person or mailing address. Once you have made a decision about which
LETSystem or systems you want to join, make contact and they will tell
you how much it costs. Generally people then fill in a sheet of offers
and requests, their name, mailing address and phone number. The
LETSystem will then inform the new member of their Registration Number
within that system, which acts as their license to begin trading.
Different LETSystems have different ways of renewing memberships, but
generally members have to renew their membership once a year.
Q.7 What happens with my list of offers and requests?
You have already listed what you want to receive from the
LETS Community, and what you are prepared to contribute to that
community in return. These are incorporated with those of others into
the Trading Sheet. There is a charge of a proportion of a LETS Credit
per line for listings in each trading sheet (to pay the Trustee who
updates the listing). Your account may head backwards, therefore, if you
are not trading.
It is a good idea, therefore, to regularly check your list
to make sure that it does reflect what you are prepared to provide, or
prepared to receive. As you will discover, it can be frustrating to
members to have to make a large number of phone calls before they find a
"genuine" trader in that item, or if they discover that it was sold 6
months ago! This can be overcome in part by keeping your list
up-to-date. This is your responsibility. It does not cost you to delete
an item, and will save your account the expense of listing unwanted or
no-longer-traded goods and services.
Q.8 What should I do now? How do I start trading?
Your LETSystem, like all LETSystems, works best through
your participation. Rather than waiting for someone to contact you about
your listings, your LETSystem will best meet your needs if you use it
actively, rather than passively. Contact someone perhaps who is
requesting some good or service that you can offer. It may be something
that you did not even consider listing in your offers in the trading
sheet, something that you never considered before. Whatever it is the
person you phone will be glad to make a new LETS contact.
This will give you a taste of trading, and show you how it
is done. If that person is interested in your assistance, make sure that
you clearly establish exactly how many LETS Credits you propose to
charge. This may result in some friendly "haggling", but do not proceed
until a mutually agreeable "price" has been set. Make sure that both
parties to the transaction have the correct name, registration number,
and amount before completing the cheque tab, or phoning the transaction
through to the Trustees.
Q.9 How do I get most personal benefit from my LETSystem?
Your LETSystem will have the greatest economic use to you
if you look at where you currently spend money. Have you built a
personal relationship with the people involved, or is it only a
commercial transaction? If you can recruit to the system individuals
with whom you normally spend Federal Dollars, you will find that being
able to buy the same goods and services in part for LETS will have a big
effect on increasing your savings and disposable income. For instance,
if you can buy local foodstuffs and groceries for LETS it will have a
big impact upon your spending patterns and you may save Federal Dollars!
If you want help enrolling someone into the LETSystem, ask your area
coordinator, Trustee or LETS Committee. If successful, you can start to
spend local currency more widely, so creating more jobs and increasing
the wealth of your local community!
Try to develop the LETS habit by using LETS first, Federal
Dollars second, only if you have to! LETS gives people a chance to meet
their neighbours in a new way, enriches your community life and provides
you with a community support network of great strength and durability.
Q.10 How much is a LETS Credit worth?
For most business transactions it is easiest to equate one
LETS Credit to one federal dollar. Business people find it hard to cope
with a system of value that varies widely between different times and
different people trading.
Most transactions in a LETSystem, however, are for goods
and services that would be called personal arrangements, social
arrangements, hobbies or pass-times. For these, people are free to set
their own value scale, which can vary wildly between times of the day,
depending upon the amount of free-time one has, or the nature of other
pressures or demands they may have on their time.
As a result, in a LETSystem, you may find a wider range of
pricing than you would in a conventional market system. Prices for such
items are negotiated freely between the two people engaging in the
transaction, and there is rarely a "set take-it-or-leave-it" price as
one finds in a conventional money purchase. This helps the relationship
building nature of a LETSystem.
Because people attach their own value to what they change,
many of the inequalities that exist within the normal economy are not
found in a LETSystem. The gap in hourly wage rates between professional
and labouring work, between the work of men and the work of women, and
between tasks that would be normally considered voluntary or unpaid, and
those that are paid for, are narrowed or do not exist. Generally, a
person's purchasing power in a LETSystem is equal to the purchasing
power of anyone else, although the demand for their services may vary
widely.
Q.11 Can I charge part LETS Credits/part federal Dollars in a
Transaction?
Yes. If in providing that service you will have to pay
federal dollars for providing part of what is requested (eg. for paint,
petrol, your tax (if you are a tradesperson or professional exercising
their regular occupation)) you can ask for dollars to cover this needed
component. Make sure that the other person understands why you are
charging dollars, as this helps make sure that they feel what you are
charging is fair.
Q.12 How should I charge in LETS if I run a business?
If you run a business, a useful way to start is to offer
what you think would be a fair percentage in LETS Credits and federal
dollars. The other person in the transaction is free to accept or
reject, as in LETS, there is no obligation. LETS is its name and LETS is
its nature!
The only requirement is that you are prepared to consider
trading in LETS Credits for whole or part of the transaction. Make sure
that the other person understands in advance of providing the goods or
services if you are not trading any item for LETS. Not doing so will
come as a nasty shock to your customer, and may lead to them telling
others of their unfortunate experience, with the result that you may
find you do little trading in the future!
If you are running a business and wish to trade in LETS,
ask us about the "LETS Do Business" information. We can explain how you
can record transactions in part LETS part dollars in an easy and
reliable fashion. Members of a LETSystem would prefer to trade in local
currency, so you will probably find that your number of sales, and your
total cash turnover will increase as your business joins the local system.
Q.13 Do I have to be in credit before starting to buy?
No. You do not have to be in credit before making your
first buying transaction. In this way your LETS Account is very
different from a conventional Bank Account! If you wish to purchase a
good or service from the LETSystem, you can do so straight away, as when
you go into debit (which in LETS is a measure of your future commitment
to the system), someone else will go into credit. The system will in
this way stay balanced at zero.
It is by buying that "new LETS Credits" enter the system,
creating more wealth in the local trading community. As the LETS Credit
cannot leave your LETSystem, eventually they will come back to you in
the form of someone who wants what you provide. A debit (or commitment)
thus is a "money back guarantee". This is very different to money.
Q.14 What happens if I leave the area?
It is a good idea to inform the Trustees or your area
coordinator immediately you shift residence. This helps make sure that
they can send any future trading sheets or newsletters to the correct
address.
If you are shifting out of the region of the LETSystem, you
have a number of options.
Firstly, you can keep your account open, in case you visit
the area and want to do some trading, or if you are prepared to provide
services to your LETS members who visit your new place of residence.
Secondly, you can close your account. This can be best
achieved by returning your balance to zero. Your area coordinator or
LETSystem Trustees can help show you how this may be done.
Thirdly, if you leave with either a credit or a debit
balance, you should not worry too much, as the LETSystem as a whole will
still be balanced at zero, and the LETS Credits, unlike federal dollars,
can never leave the area. People will still be able to trade, and get
their needs met.
Obviously, if everyone left your LETSystem, it would become
inactivated, and transactions would dry-up. This has happened to
LETSystems in the past, but nothing is lost, and no-one is hurt by the
process (again, unlike the conventional money system).
Q.15 How can a person "rip-off" the LETSystem?
Forget it. They cannot. Surprisingly LETS Credits provide
one of the only theft-proof, non-rip-off-able currency systems possible
in the world. Its simple rules operate in a fashion entirely different
to conventional money, which can be stolen, and is often "ripped off".
LETS Credits operate in a fashion wholly different to federal dollars.
Consider, for instance, the question of debt. If I borrow
100 federal dollars from you, then I effectively have $100 of your money
which you cannot spend until I pay back. This is inconvenient to you,
and, as a measure of this inconvenience you charge me interest (I may
have to pay back $110 eventually).
In LETS if my account is 100 LETS Credits in debit, it
means I have already paid someone 100 LETS Credits! No-one is
inconvenienced, and so there is no interest. I can discharge my
commitment whenever it is most convenient to me to do so. LETS by name
and LETS by nature!
Q.16 What about Tax?
Do I have to pay tax on LETS Credits? The Australian
Taxation Office ruling on LETS, released in February 13th 1991 states
that there are no Taxation implications for personal arrangements,
social arrangements, hobbies or pass- times. These constitute about 70
to 80% of all LETS transactions.
Only if I am a tradesperson, a professional, a business, or
a retailer or wholesaler and I am trading in my business is there any
implication for tax. In such cases, "Income" is income, and I have to
pay tax on my LETS Credit earnings just as I do on my federal Dollar
earnings. At present you should estimate the amount of tax you would
have to pay on the transaction and charge that as part of the federal
Dollars component to the person purchasing your services or buying your
goods. The "LETS Do Business" guide will help you keep track of the
amount you need to charge. These dollars you collect will have to be
paid, eventually, to the Taxman, just as you do with any federal Dollar
earnings. There is no difference with LETS.
LETSystems across Australia, while agreeing recommend to
their members to abide by the Taxation ruling, also think it unfair. Tax
on LETS should be paid for in LETS - Tax on Dollars, paid for in
Dollars. This has the effect on keeping taxes collected on local
transactions in the local community. If you would like to help your
LETSystem lobby the government on this matter, get in touch with your
Trustees or area coordinator.
Your LETSystem believes that tax is an individual matter,
and an individual responsibility. LETS is not a Taxation Avoidance
Scheme. Your LETSystem takes no responsibility for collecting or
policing tax, and will not act as an agent of the Taxation Office. Under
law, it cannot prevent the Taxation Office obtaining legal right to view
our documents.
Q.17 What about insurance?
Your LETSystem does not provide insurance, workers
compensation, public liability nor any other coverage. These are
individual matters and should be checked, if required, between the
individuals involved in the transaction. If insurance is required, you
may have to pay federal Dollars to help the other person cover the cost
of the premiums (unless the LETSystem has managed to enrol an Insurance
Company! If you would like to help enrol an Insurance Company, contact
the Trustees or the area coordinator!)
Q.18 What about Social Security?
It is a matter of interpretation whether and what degree
LETS is "valuable consideration" under the Social Security Act. If you
are concerned about Social Security, it is a good idea to keep your LETS
account as balanced as much as possible, close to zero. For each
positive transaction, try to provide a negative one balancing up as soon
as you can. If Social Security becomes a matter of concern, contact your
LETSystem, or ask Social Security about the Appeals Procedure, as an
appeal against any Social Security ruling that is open to interpretation
is your right under the Act. In Western Australia 50% of appeals are
found in favour of the appellant, and Social Security have to reimburse
any payments lost.
If you receive Unemployment Benefit, and you wish to
continue to do so, you should not allow your involvement in the
LETSystem interfere with your ability to seek full time or part time
work. After- hours involvement is probably best.
Q.19 How are decisions determined within this LETSystem?
LETSystems are democratic organisations, controlled by
their members. Your LETSystem will probably have an annual general
meeting for the election of office bearers and committee members.
Committee meetings are usually open to members and all are invited to
participate. If you are interested in participating in either the
administration or development of this LETSystem, you should get in touch
with the local contact or LETS Committee. Increasingly, all work done
for LETS Administration or Development will be acknowledged and paid
through the system!
Q.20 Where can I get more information?
The Community Development Branch of the Department of
Commerce and Trade have a LETSystems Training Pack which provides groups
and individuals interested in LETS with the all information required to
start their own system ($25.00 + $3.70 postage & handling). There is
also a video available.
Warwick Rowell
46 Bay View Crescent Dunsborough Western Australia 6281
[EMAIL PROTECTED]
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Hari Srinivas - [EMAIL PROTECTED]
Return to the Virtual Library on Microcredit
Jim Devine said on 08/13/2006 12:48 AM:
On Aug 12, 2006, at 4:51 PM, Carrol Cox wrote:
> The origin of money (or some sort of universal product) was in
> international trade. Money is needed _precisely_ when the 'trading'
> parties don't share anything.
On 8/12/06, Doug Henwood wrote:
Why international? Why not just to avoid the inconvenience of "the
double coincidence of wants"? Is that historically true?
Doug, I think you're falling for the textbook barter vs. money
dichotomy fallacy. It really should a be barter-exchange vs.
money-based exchange vs. non-exchange systems choice.
In an organization not using money internally, the double coincidence
of wants makes exchange so expensive to organize that if barter is the
only choice, people go for other ways of distributing products and
coordinating the division of labor besides money. Polanyi writes about
reciprocity and redistribution within
communities/tribes/clans/extended families. Textbooks talk about
tradition and command as substitutes for trade, but we should
democratic agreement among relative equals as another alternative to
exchange.
In Marx at least, trade originated not internationally but between
communities. I'd guess that was because within communities
reciprocity, redistribution, command, tradition, and democracy are
used (as part of the seamless web of kinship). And it should be
mentioned that the original exchange was seen as a substitute for war,
looting, etc.
--
Jim Devine / "It is however always important to remember that the
ability to see things in their correct perspective may be, and often
is, divorced from the ability to reason correctly and vice versa. That
is why an economist may be a very good theorist and yet talk absolute
nonsense...." -- Joseph Schumpeter [edited]
p4.vert.ukl.yahoo.com uncompressed Sun Aug 13 23:27:00 GMT 2006
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