Local Exchange and Trading Systems (LETS)

The creation of local currencies is part of a “relocalization” movement that offers an alternative to globalization and global economic networks. It is an attempt to recognize, value, and create alternative economic practices that are already here and emerging so as to shine a light on the demonstrable construction of other possibilities and futures beyond globalization. Local currency systems, often known as local exchange and trading systems (LETS), represent vehicles for rebuilding local and localized economies because they keep wealth within the community rather than allow it to flow out. By creating closed economies such that the local currency cannot be used outside the area, they prevent money from leaking out of the local area.

Local currency systems are simple to create. A group of people decide to form an association and to establish a local unit of exchange that they will use to trade goods and services with each other. Members then list their offers of, and requests for, goods and services in a public directory priced in this local unit of currency. Individuals then decide what they want to trade, who they want to trade with, how much trade they wish to conduct, and [Page 1088]what the price will be. In practice, most transactions have involved consumer services, ranging from alternative therapies through child care and gardening to house maintenance and, to a lesser extent, the provision of business services, food, and craft products. The value of the goods and services is sometimes established on the basis of the time that goes into their production, irrespective of the qualifications required or skills involved. More usually, however, goods and services are valued through negotiations between the buyer and seller, which often results in “market” valuations being used as the benchmark for deciding what to charge or pay.

Unlike conventional bartering, in which two actors trade directly with one another, local currencies connect a wider network of people together. Some local currency systems have printed money; others operate through virtual currency that exists only in computerized accounts. In the latter, the association keeps a record of the transactions by means of a system of checks written in the local units. Every time that a transaction is made, these checks are sent to the treasurer, who works in a similar manner to a bank, sending out regular statements to the members. No actual cash is therefore issued, and no interest is charged or paid. How many LETS units are exchanged is consequently wholly dependent on how much trading is conducted. Neither does a member usually need to earn money before he or she can spend it because credit is available and interest free. Some LETS impose limits on the amount of credit available, but many see one's credit as a measure of the depth of one's commitment to the association.

In consequence, LETS are private associations for pursuing economically orientated collective self-help based on not-for-profit and cooperative principles. They operate in order to provide for needs and wants that are fulfilled neither by the private or public sectors nor by the informal work of the family, neighborhood, or community.

...