Local Exchange Trading Systems

I was exposed to this idea a couple of years ago and it hasn't let me go.  It's taken on various forms and names, but the basic idea allows people in a local community to trade goods and services indirectly.  Participants usually enroll in an online database that keeps track of each member's 'credit' or 'debt' as they give and take. 

This website, about currencies in general, talks about a bunch of ways of organizing this:

http://www.transaction.net/money/lets/

I guess my main question is - What's the critical mass required to keep the whole thing revolving?  It only works with groups of people but seems it could get too large at a certain point.  Or could it?  Is bigger better?  Greater numbers of people would offer more kinds of goods and services, reducing the possibility that you won't find what you're looking for.  Or does it have to stay within the people you know and/or live near to maintain some means of accountability?

I would think without some form of currency and value system without a hardcore group of people it would collapse; people can be dissatified with the worth of their work not up to their liking, people might be in a worse situation than others based on possible restrictions in what they can do, etc...

Your near Petrolia/Mattole River right?

they have a local currency:
http://humboldtherald.wordpress.com/2008/04/01/mattole-free-state-coins/

There is a value chart here:
http://www.americanchronicle.com/articles/view/64315

and the community local currency website is here:
www.mattoleselfhelp.org/

The only place I know of that is strictly barter for most things done in a community setting would be The South Atlantic island of Tristan de Cunha; there is a population of around 350 and most work shared would be harvests, house raisings, and the cannery.

But no doubt there are places that are like that closer to home.

Without there being subdivisions in communities I think 400 would be the max in a given population before it gets too complicated. I would really say that 100-200 would be ideal though since with a few organizers most people would be able to follow whatever needs to happen and can be update quickly.

The Mattole area (that I live several hundred miles away from) came up with their own currency in the form of silver coins they had minted, and that's all well and good, but LETS is different.  The system that I referred to doesn't use a currency that has any value in an of itself, unlike the silver in a coin.  I've seen a couple of other privately minted currencies and they're pretty and valuable I guess...but at the end of the day all they are is a lump of silver. 

I'm attracted to the idea of a "currency" where the value backing it is tangible goods and services.  This sort of a system discourages hording of resources, and encourages the re-circulation of resources within a community.  Seems that it could have the power to really draw people together, if it was organized correctly. 

The only "value" this sort of non-currency has IS the goods and services for which it is exchanged.  That's the beauty.

AND!  I just read about a man who is battling counterfitting charges for a silver currency he made and sold.

Not the article I read but about the dude:  http://en.wikipedia.org/wiki/Bernard_von_NotHaus ;

No such thing could possibly happen if the "currency" is a symbol for goods and services and has no value in and of itself. 

There are many successful examples of non-currency trade systems.  The one I witnessed personally was in the Golden Bay of New Zealand, called H.A.N.D.S. - How About a Non-Dollar System.  One person was responsible for keeping track of members, it seemed to me, (also seems a weakness in the system though theirs was small scale).  They even made (quite beautiful) paper HANDS "non-dollars" for a HANDS market.  No real currency was exchanged at the market, only these HANDS dollars, and it was quite lively!  I was invited on a sailing trip with two people who paid for it with these HANDS dollars that they acquired in exchange for food at that HANDS market. 

So instead of the "value" of the boat trip being quantified in a certain weight of a precious metal (as national currencies are), the value of the boat trip was represented by food made from local ingredients, by the labor of caring people who made it, and the appreciation of the people who exchanged a paper symbol of their contribution to the community for their food. 

I agree that between 100 and 500 people is probably the ideal size for something like this to work.  If it's kept truly small and local, a desire to help the community that supports you would be good incentive to provide quality goods and services for trade.

I like the idea of a locally recognized currency/trade unit but there still is a need for transportable wealth outisde the local area for purchases of goods not available or produced locally. 
  How would you see or facilitate an exchange rate for local currency and one used outside a community?

I think the idea is that these systems exist within national currencies and do not attempt to replace them.  They offer a community-building alternative for local trade.  Regular ol' $s  is used for anything not available within your locale.  The advantage to having this kind of trade organization even thought it's not "needed," is that in the event of the collapse of a national currency (and our $s are worth less each second), there would be a system already in place so that trade could continue locally. 

Each user decides how many units their time or product is worth, and I'm sure there would be some kind of consensus for guidelines to "pricing", either agreed upon as part of the organization process, or organically worked out as trading took place.  I'd think a unit equals a unit, but how many units someone wants for something can vary as much as they want.  Is that what you were asking? 

I'm reading a pretty good book that covers some related territory: The End of Money and the Future of Civilization.  it's not without it's flaws, but I'm digging it so far.

A good friend of mine started the North London LETS many years ago, and it had 500 members and was a fairly ideal size.  Many people were actually living to a large degree from the LETS, without needing cash for their living needs.  That person started the Fourth Corner Exchange in Bellingham, which is around that size now, but I don't think it's got the diversity of services that would be needed to make it a true "localized economy". 

Regarding the second question that began this thread, the whole idea of a mutual credit exchange is that it's relationship-based.  Money is a trust agreement.  When the trust is a split barter system (different than a straight barter, since the transactors don't have to have what each other wants, but can use credits to bridge needs), there is a need for relationships to build that trust.  They can be enhanced by a transparent accounting system, where anyone can see what other's trades have been (online is a convenient way to do that). 

I met with Tom Greco (local currency guru) when he was on a book tour stop in Seattle. His strategy (described in his latest book) is to create a business-based local currency, similar to the currency that was created in Switzerland during the 1930's between Swiss businessmen - the WIR bank.  It's a mutual credit system that enabled trade even during the Depression when cash was scarce, and has survived ever since then as a complement to the trading that occurs with the Swiss Franc (Euro) system.

Anyway, Greco envisions starting with bioregional businesses who have goods and services to trade with one another as the base of the trading system, which can then add individuals into the system who also have goods/services to trade. 

I like that hybrid system better than a "citizen-based" (LETS style) trading system, since these systems tend to be without major goods and services, but serve more the "candle/incense/massage" realm.  I started a local currency system in Port Townsend that is still going (has about 150 traders),  but what it really needs is real food and goods to make it more attractive and viable as an "alternative money system".  Even if a farmer wanted to sell produce for local currency, what would she/he do with the local currrency, if there weren't sufficient goods/services available to make it worth not taking cash for the food produce?  That's the real challenge:  to create a true localized economy, and then the local currency would be able to have a "current of flow" back and forth and be of real value.

That's where I see the hump getting that localized trade/currency flowing and becoming viable.  Getting enough trade partners established to make the selection of goods broad enough to satisfy the local trade economy.

That's the real challenge:  to create a true localized economy, and then the local currency would be able to have a "current of flow" back and forth and be of real value.

Exactly, thank you so much for your input to this thread, cestin.  The reason it worked in the London area was that it got to the right size of people with lots of stuff to offer in a small enough area.  Thank you for bringing up that this system works because of personal relationships - I'd say it can help forge new relationships also.  That's another part of the idea that is attractive to me. 

Robert - I think there might be an unavoidable period of time during start up when the thing could resemble a glorified craft fair - the "incense/candles" phenomena cestin brought up - for it to be really successful the trade would have to approach encompassing all your needs.  Each system is really is going to be unique based on what that particular community has to offer to each other, and only gets better with more diversity of 'stuff' offered for barter.  In an area where everyone produces wool and wool products (for example)....not that much of an incentive to trade with your neighbor. 

I wonder if there would be a way combine a rural and urban system?  The (extremely) general differences in the two places of habitation is that rural dwellers usually produce goods and urban dwellers are more a part of the service sector.  Enabling the two populations to trade without money would greatly facilitate the flow of 'stuff' between people who don't necessarily live near each other but have things that the other party wants.  What about a LETS that is specific to one particular farmer's market that happens regularly?  Or...something?  Do things like that exist?

Thanks for your comments, Marina. 
I think it makes sense to have an ultimate vision of what a system would like like, and then work backwards to create a strategy for how to get there.  That's what Tom Greco has done in his new book.  I'll look  when I get a chance to see whether it's online, as he often does with his writings.

-Chuck