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Local exchange trading systems (LETS), also known as LETSystems, are locally initiated, democratically organised, not-for-profit community enterprises that provide a community information service and record transactions of members exchanging goods and services by using the currency of locally created LETS Credits.[1] In some places, e.g. Toronto, the scheme has been called the Local Employment and Trading System. In New South Wales, Australia, they were known as Local Energy Transfer Systems.
Michael Linton originated the term "local exchange trading system" in 1983 and for a time ran the Comox Valley LETSystems in Courtenay, British Columbia.[2] The system he designed was intended as an adjunct to the national currency, rather than a replacement for it,[3] although there are examples of individuals who have managed to replace their use of national currency through inventive usage of LETS.
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. The time-based currency mentioned in United Nations Millennium Declaration C6 to Governments was a UNILETS United Nations International & Local Employment-Trading System to restructure the global financial architecture.
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.
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.[4] Many of these problems can be overcome through effective community organization and development. and effective use of software.
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LETS are generally considered to have the following five fundamental criteria:[3]
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."[5][6] Michael Linton has stated that such systems are "personal money" networks rather than LETS.[3]
LETS is a fully fledged monetary or exchange system, unlike direct barter. LETS members are able to earn credits from any member and spend them with anyone else on the scheme. Since the details are worked out by the users, there is much variation between schemes.
LETS is not a scheme for avoiding the payment of taxation, and generally groups 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 pastimes, 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 units, or a registered or incorporated business sells part of its product for LETS units. In such cases, the businesses are generally encouraged to sell the service or product partly for LETS units and partly in the national currency, to allow the payment of all required taxation. This does imply, however, that in situations where national-currency expenditures would be tax-deductible, LETS must be as well.
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 Keating 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.
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 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.
Local exchange trading systems now exist in many countries. Some examples include the following:
Australia, in 1989 allocated $50,000 for the development of LETSystems, including the running of state conferences, the production of software, a LETSystems Training Pack, and assistance to Michael Linton to visit Western Australia. By 1995 there were 250 LETSystems in Australia, with Western Australia having 43 separate systems serving a population of 2.3 million (although actual participation is by only a tiny fraction of that population)[1] making it then 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.
Several Canadian cities have LETS groups, including Kitchener-Waterloo, Niagara, and Peterborough in Ontario, Halifax, Nova Scotia, and St. John's Newfoundland.
Ecuador had 140 Ecosimia-Groups (in 2000).
French speaking Europe has a coherent SEL network.
In German speaking Europe there are lots of local "Tauschring", or "Tauschkreis" (exchange circles) networks which share all sorts of services.
In Hungary the term used is "Community Service System" (KÖR). One group from the capital city is Talentum Kör (Gold Talent Group), a British Council-supported project.
In Japan, the Peanuts system in Chiba, near Tokyo. Approximately ten percent of all payments made at local stores are in the community currency (2002). The LETS movement saw its peak around 2002–2003, but since then it has been declining slowly. See also Fureai kippu.
The Netherlands has spawned a number of innovative concepts based on the LETS formula, some of which try to lower participation barriers by completely moving their exchange platforms online, like NOPPES.
South Africa – In 2003 the Community Exchange System (CES) started operating an internet-based LETS in Cape Town, South Africa. This has grown into a global network of over 250 local exchange systems in more than thirty countries (end of 2010), among them New Zealand, Australia, Finland, Spain, USA, UK, Vanuatu etc. Many of these are former LETS groups but others are time banks and hybrids.
South Korea has some active LETS too, such as Hanbat LETS in Daejeon and Gwacheon Pumasi in Gwacheon.
In Switzerland, the WIR Bank operates a system close to a LETS.
The UK has many LETS systems, many loosely affiliated to LETSLINK UK [1].
In the UK Skillsbox operates an online community system similar to LETS, letting users trade their skills and time for credits which can be spent within the online community.
In Venezuela there are around a dozen LETS (as of 2011), with support from the national government.[7]
The value of local money is greatly enhanced if it can be converted and spent elsewhere. Efforts to coordinate the LETS globally, even just to make a proper directory of associations, have yet to succeed. More recently the efficiency of sharing software is bringing schemes together. The Tauschring network in Germany provides software for most schemes in the German speaking world, and CES now has over 250 participating associations, able to trade between each other with a process sometimes called intertrading.