This piece, although lengthy is well worth reading. We welcome comments and related contributions.
It should now be clear that the global economy must inevitably marginalise and render largely destitute a very large section of the population of both the industrial world and the so-called developing countries. For this reason alone everything must be done to prevent the further implementation of the NAFTA, Maastricht, and other large scale free trade agreements that are designed to advance the globalisation of the world’s economy.
At the same time, we must revitalise local economies on which the vast bulk of humanity must always depend for its livelihood. Helena Norberg Hodge has outlined some strategies required to achieve this goal. In this chapter, we shall examine two of the devices she mentions for achieving it: – the setting up of LETS and of the Time Dollar schemes.
LETS stands for Local Exchange (sometimes `employment’) Trading Systems. The role of LETS is to revitalise a local economy and thereby a local community by providing an alternative method of supplying people with the goods and services that they can no longer obtain via the formal (globalised) economy. The principle involved is simple. If the formal economy no longer provides people with the goods and services that they require then people must provide them for each other, payment being made in an informal local currency that is only valid within the local area.
The second strategy consists in creating Time Dollar schemes which are basically alternative “welfare” systems. Industrial countries that have developed elaborate and very costly welfare services are now systematically dismantling them – as part of a strategy for reducing costs – so that their corporations may hope to compete with those operating in countries where labour costs are twenty to forty times lower.
Once again, if the state can no longer provide these services, then people must provide them for each other. Under a Time Dollar scheme, they do so without payment in the national currency, but instead they earn credits in a local currency to obtain similar services which can be used when they in their turn are old or sick.
These are not fantasies. There are already, for instance, at least two hundred LETS in England, with about 20,000 people involved, as well as a considerable number in Australia, Canada and New Zealand, and a few in the U.S.A. Time Dollar schemes are so far confined to the U.S.A.; one hundred and fifty of them, with a membership of from a few dozen to several thousand members are now operating throughout thirty states (New Economic Foundation Notes).
Both LETS and Time Dollar schemes do more than merely deputise for the formal economy once it ceases to be capable of catering for peoples’ more obvious needs. Access to the goods and services provided via the formal economy is via money, but Edgar Cahn and Jonathan Rowe, co-authors of an excellent book entitled “Time Dollars,” point out that people need a lot of things that money can’t buy, those benefits provided by the “kitchen-table world” of family and close friends where everybody helped each other without any thought of remuneration. However the functions that were once fulfilled by families and communities for free have been “taken apart, function by function, and sold back to people, who missed the things that these once provided. As a result, for most people in the industrial world, the kitchen table world is no more, and the things it represented – “companionship, entertainment, security, intimacy, even gossip, must now be bought for money”. Increasingly, it is the TV and the computer that will replace the “kitchen table world.”
Very much the same thing has happened to the benefits that were once provided free by the local community. Thus security from crime “no longer means the watchfulness of neighbours. Rather it means insurance policies, burglar alarms and other devices… as well as greater demands for police.” Inevitably “massive social problems ensued, as the glue that held people together no longer seemed to be there” and governments “have been forced to try and patch up the damage with programs and services bought for money.”
People have “become “purchasers” of community and care, rather than “participants” in it” and inevitably they are rapidly losing the capacity to produce the goods and fulfil the functions it once did. “When lawyers settle all disputes, teachers do all the teaching, doctors do all the curing,” as Illich puts it, “then people lose their capacity to do things and the result is an ever enlarging circle of dependency and need.” This is not a mere side-effect of the process of economic development, but its very essence. Indeed, the monetisation of functions previously fulfilled for free by the now largely defunct family and community, accounts for much of the economic growth that we identify with progress.
As Cahn and Rowe put it, the economy grows “by eating the flesh and sinew that hold society together.” Of course as this “cannibalising process” takes place ever more money is required to buy the services that the family and the community used to provide for nothing. Eventually, as is increasingly the case today, to earn its keep now requires a two worker family sometimes holding down three or more jobs between them. But this in itself increases the requirement for more money, among other things, to pay the cost of the day-care centres where the children of working mothers will be looked after, and the old people’s homes to which the grandparents will be consigned.
It is not surprising that government expenditure on social services has literally escalated in the last decades in an obviously unsustainable way. By creating a global economy, however, matters have now been brought to a head. If industrial countries are to compete with Third World countries, which now have almost equal access to capital, technology and management, while benefitting from incomparably cheaper labour costs, they can no longer afford a welfare state and not surprisingly, it is being systematically dismantled.
This creates a state of emergency with the corporations providing ever fewer jobs and thereby producing goods and services that ever less people can afford, and with the State incapable of caring for the growing number of those whose basic needs the market can no longer satisfy.
The most obvious contribution that LETS and Time Dollar schemes can make is to give people access to a local currency with which to acquire the goods, services and care that they require. The local currency can either take the form of special banknotes or merely of entries in a book, or blips on a computer, as is usually the case. If this is possible, it is because the people who use this local currency for buying goods and services are at the same time those who provide them. What in fact we are seeing is the development of a local economy based on an emerging community of people who are willing to cooperate with each other in order to provide benefits that, in recent decades, have been provided (less satisfactorily) by the state and the market.
One of the advantages of LETS and Time Dollar schemes is that for two reasons there can be no shortage of the local currency as there is of the national currency in poor communities. The first reason is that people actually create their own currency themselves by the simple expedient of providing goods and services for each other. The second is that there is no incentive to hoard it, as offered with the national currency during the depression years, for as local solidarity builds up a new and more reliable form of security comes to replace that provided by money. Also, no interest is paid on credit balances just as no interest is charged on debit balances.
Equally important is that the local “currency” is not convertible into any other local currency, let alone the national one, and can thereby only be spent on goods and services provided by other members. This means that rather than serve to fund the production of for instance cash crops, that would be exported to satisfy the needs of distant populations – often at the price of creating local shortages – it is far more likely to fund the production of food for local consumption. This also provides a means of ensuring that purchasing power stays within the community; in sharp contrast to the situation today when money is sucked out of poor communities into the rich urban areas – where, among other things, the headquarters of the large corporations that control most of today’s commerce, are situated.
Thus in the case of a predominantly black district in Baltimore where the inhabitants are largely unemployed as the result of the closure of a steel works and of the local railway station, the shops, according to Cahn and Rowe, have closed down so that there is now almost nowhere to spend the money locally. Shopping is almost entirely in an out of town supermarket. This means that all the money that flows into the area, mainly in the form of social security payments, almost immediately flows out again. In the case of Indian reservations, it has been calculated that it only takes 48 hours for 75% of every dollar the Federal Government provides, to flow out to border towns.
Some LETS have a standard hourly rate for whatever the services rendered might be, but most LETS attribute a different value to different services, and in our view this certainly seems preferable. We well that one of the reasons why Robert Owen’s Equitable Labour Exchange of 1832 to 1834 foundered was that people were paid a standard rate of sixpence an hour, regardless of what particular function they fulfilled, and, as a result, those who were earning more on the open market tended to stay away.
Most LETS seemed to have adopted this view. The price of the different goods and services provided by members, however, is evaluated by the local community, rather than being determined by the market. As a result the price differential tends to be must lower than it would be within the formal economy. To take an example, a dentist, in a Vancouver Island LETS, started off by charging his normal fees, and then expected to hire other members to do unskilled work for him at a minute fraction of his own hourly rate. They refused. The differential still exists, but it has been drastically reduced. This change of attitude can be attributed to the ability of LETS to bring people together and negotiate as members of the community rather than as complete strangers.
With Time Dollar schemes the situation is different. Payment for services provided in these schemes is not that important. Members see themselves as volunteers who are acquiring Time Dollars for doing work which many of them would be quite willing to do for free. Cahn considers that “people who are asked for help will get it even if they don’t have any Time Dollars to pay for it.” “Yet the fact that they receive something for their efforts is important too, because it validates their contribution and encourages people to do things which they would never do for cash.”A retired bank president would never mow a sick person’s yard for money, but he’ll do it for Time Dollars” Cahn says. Price is not the issue, it is status. To accept money for such a task implies one has accepted the market status defined by the wage. “Not entirely surprising only 15% of dollars are ever spent, and no one is refused care because of a shortfall in their account. (NEF notes)
This brings us to one of the most important functions of LETS and Time Dollar schemes – their role in building up the local community. This occurs because the people involved rapidly get to know each other by working, and above all by caring for each other. As a participant in an early Canadian scheme put it “just about every time I trade through the LETS system, I get to meet someone personally. I have got to know an extra 100 -150 people in this way. To me, that wealth of relationships is synonymous with economic well-being” (Dauncey).
As you build up community people learn to trust each other. We are used to a central bank having the responsibility for maintaining confidence in the national currency – which is an increasingly difficult task – since the value of a currency is increasingly determined by giant international banks and even more so by currency dealers such as George Soros. But is is not only a central bank that can create trust. Until the Scottish Bank Act of 1845, banks in Scotland were free to issue their own notes and there was no central bank. An authority on the subject, Laurence H White (Free banking in Britain, Cambridge University Press 1987) concludes that: bad money did not drive out good; banks did not tend to issue too many notes; and that loss of confidence in banks was not an endemic problem.
LETS is clearly yet more decentralised, and so far, there have been remarkably few defaults. This is mainly because members of the system trust and develop a sense of responsibility towards each other. It is also due to the openness of the system. One party to a transaction can always ask to know the balance of the other party’s debit accounts, and he may decline to trade if the other party’s debit balance is too great. Finally, some systems also have limits on how far people can get into debt or “in commitment” – to use the language of LETS.
The first LETS was started by Michael Linton in Jan 1983 in the Comox Valley, British Columbia, Canada. The unit of currency was the green dollar, tied to the Canadian dollar. In its first twenty months, about 250,000 green dollars worth of trade was carried out. LETS was introduced to the U.K. in 1985, after Michael Linton described it at TOES (The Other Economic Summit). By the end of 1994, there were about 250 systems with membership varying from 14 to 500. Today, roughly a fifth of these are growing and developing dynamically.
The largest UK LETS have a turnover of about #70,000 a year. The biggest, and arguably the most successful LETS, is in Australia – in the Blue Mountains of New South Wales, centered on the town of Katoomba, about an hour east of Sydney. The Blue Mountains LETS was started in Feb 1991 with the help of a committee of five people. Since then it has grown to be the world’s biggest LETS with a current membership of about 1800 people, who between them have 1,100 household accounts. In all, locally provided goods and services, worth an equivalent of US $270,000 are traded every year.
Among the more interesting services so far provided has been the organization of a wedding. This involved arranging for the design and production of the bridal gown, the food and entertainments, and, when it was over, the cleaning up of the mess. It has also dealt with the extension of another member’s home, all the building work being paid for in the local LETS currency.
The idea of Time Dollar is the brain child of Edgar and Jean Cahn. They met when students at the Yale Law School, and started their first Time dollar scheme in Miami, Florida, providing services for the elderly, which is still today the main accent of many Time Dollar schemes. Tragically, Jean Cahn has since died and Edgar Cahn has moved to Washington, where he works up to 80 hour a week with students and volunteers to spread the Time Dollar idea as a memorial to her (NEF notes)
The Miami Time Dollar scheme remains one of the most successful. It now has 900 participants, most of them elderly, retired people with time on their hands, and they are putting in more than 8000 hours of work a month at 32 different sites in different parts of the city. The scheme can be seen as a community welfare scheme, also as a vernacular insurance system. Retired people provide help for other retired people, as do younger volunteers. They are known as “respite workers” and they are paid in Time Dollars, which they can use to obtain help for themselves or for their elderly relatives whenever either of them need it.
Similar schemes have been set up in Boston, St. Louis, Brooklyn and San Francisco. In Michigan and Missouri, Time Dollar programs have been launched, with the help of local state authorities. Several are already evolving into mini-economies, linking together people from different generations. Young people are mowing lawns and painting houses for elderly neighbours. Some, rather than keeping the credits they have earned for themselves, actually contribute them to other elderly people who need them more than they do. IN some programs, Time Dollars have been “woven” into conventional medical care systems that provide services that normal dollars alone cannot buy. In this way, as Cahn and Rowe note, the elderly -among others – are becoming “providers” rather than simply “consumers” of care.
A particularly impressive Time Dollar scheme is in El Paso, Texas, a very poor town known as the poverty capital of the United States, where almost two out of every four residents live below the poverty line and 80% of the children are born to teen-age mothers. Lower Valley, directly outside the city, is even more poverty stricken. There are few jobs and hence no tax base to finance public schemes such as schools, water, sewage, public transport and medical care.
Recently, Phylis Armijo, of the Daughters of Charity, started a Time dollar service based on the San Vincente Health Clinic run by members of her Religious Order.
Her idea was that under the Time Dollar scheme, people would themselves “participate” in the provision of the health services. Although they obviously could not replace the doctors, they could provide other very important services, transport for instance. People had to get to the hospital for treatment, so other patients could earn Time Dollars by driving them there. They could also provide counselling and prenatal care, and help mothers once their babies were born, which turned out to be very effective in reducing infant mortality. They could also provide baby-sitting for the sick children of working parents, and companionship for the elderly, whom they could also help with their shopping.
There seemed to be no end to the services that patients could fulfil for other patients, all of which would reduce their hospital bill and in this way giving them access to medical services which would otherwise never be available to them. This is exactly what is happening, for instance, the Time Dollar scheme has reduced the charge for prenatal care from $250 to $75.
However, Phyllis Armijo is even more ambitious. Conventional medicine is largely concerned with treating those who are already sick, and little is done about prevention, hence about reducing the actual incidence of diseases, which in the long run must be a far more effective strategy, than treating the victims, which is expensive and not always successful. So she extended the services that could be paid for by Time Dollars to such things as digging wells, removing lead-based paint and undertaking a survey of all possible sources of water pollution in the area, of which, she identified thousands.
Fiscal authorities are unlikely to be too concerned about LETS and Time Dollar schemes while they are still small, but as they grown bigger they may well begin to feel that they are being done out of a lot of tax revenue. What then can we expect? In the U.K. the general position seems to be that if LETS workers are doing the sort of work they would normally do to earn their living, their LETS earnings are taxable. If on the other hand people are using skills they do not use in their normal work, their transactions are classified as social favours and are not taxable. This seems to be a position with which LETS can live. There have been attempts, particularly in Australia, to secure agreement that taxes, at the state level if not the national level, be paid in LETS. So far it does not seem that the Government has accepted this.
In the U.S., the experience with Time Dollar schemes in the State of Missouri has been significant. In the mid 1980’s the State passed a law to provide tax relief for members of Time Dollar schemes who took care of elderly family members at home. If no Time Dollar member was available to help the person who has earned a credit in the local currency, the State actually committed itself to providing this help at its own expense.
In 1985 the state authorities went further and actually asked the Internal Revenue Service (IRS) to declare money earned in the form of Time Dollars to be exempt from Federal Income Tax. To everyone’s surprise the IRS accepted to do so. However, since then, the IRS has enacted new regulations expanding the definition of barter, requiring full disclosure of all such transactions on people’s annual tax returns. Credits received through a barter network are now deemed to be taxable when received rather than when spent.
Fortunately, Time Dollars were made an exception to this rule. In March 1985, as Cahn and Rowe note, the regional IRS office in St. Louis ruled that volunteers in the State program who earned service credits would not be taxed on their value. The reason is that such transactions are deemed to be of a charitable nature, which serve the public purpose and would otherwise have been provided by the State.
For these reasons a Time Dollar transaction is seen as fundamentally different from a transaction based on commercial barter, which could easily have been undertaken for cash. In commercial barter, it is pointed out, the parties are bound by contract, and credits earned are a “cash substitute.” In Time Dollar schemes, on the other hand, members who “receive” a service have no contractual and hence no legal obligation to pay for it, while people who “render” a service acquire “no contractual right to compensation, the credits merely providing a means of motivating the volunteers to continue their community service.”
What is seen to be particularly important is that Time Dollar members do not have access to the courts to settle their disputes. Resorting to the courts “means you are asserting the rights of a stranger against strangers, and that you are operating in a context of monetary values.” The IRS, as Cahn and Rowe put it, see Time Dollar systems as being very similar to the sort of transactions that once occurred among members of traditional families and communities in the pre-industrial age. “Families and communities” they note “operate on a standard of reciprocity. That is a moral norm, “not a legal one;” The mechanism of enforcement is not the courts, but the sanctions that operate naturally between people”, – people, they should have specified, living in a real community – of the sort that Time Dollar schemes are helping to reconstitute.
How then are LETS and Time Dollar schemes likely to develop? Firstly, it seems but a question of time before people start regarding as a hindrance the restriction that a LETS currency can only be spent in a specific locality. For example, within Perry Walker’s own small scheme in London he has no access to organic vegetables, nor to much food of any sort. There will therefore be pressure to link systems so that they can trade with each other. There are two ways in which this could happen. A centralised register could handle the accounts for several different systems. They could then trade with each other either if they shared a currency or if their currency could be converted into the national currency.
However, this could destroy the essence of LETS because trading would no longer be so local. Hence, proponents of this view are likely to favour setting up additional systems to cover larger geographic areas each with their own non-convertible currency that leave in place the original, highly localised, systems.
Outside LETS itself there are plenty of ways to extend the range of services available to the membership. For instance, Michael Linton has suggested a LETS fund. This is a sort of community bank that only deals in the local currency. Unlike an ordinary bank it would not charge interest on loans or for that matter pay interest on deposits.
The final development, which is already starting to happen, is the greater involvement of business. LETS, at least in Britain, started with a slightly New Age flavour. It was thus not surprising that businesses were initially suspicious. Furthermore, many individuals use skills to earn LETS that they would not other use to earn national currency, which means that the LETS currency they earn is thereby additional to the money they earn in their normal occupation. Businesses, on the other hand, are likely to feel that the LETS currency they earn will be at the expense of earnings in the national currency.
Nevertheless, in many areas small local businesses start joining after a while. One reason may be that charging partly in LETS can bring them new customers who could not afford to pay entirely in the national currency. Furthermore, their ability to pay in LETS reduces their expenditure in the national currency.
Again, the Australian experience illustrates how business can become involved. Already twenty one businesses have joined the Blue Mountain LETS system, together with twenty five self-employed traders. The businesses involved include cafes, healing and medical centres, schools, hardware and fresh fruit and vegetable stores, together with a legal partnership, a few accountants, a book store, nursery, a food cooperative and a local community newspaper called “The Weekender” (Lets-link, 1994)
As it happens, what appears to be little more than a relatively marginal self-help system becomes in effect an almost mainstream local economy, though one that is partly, at least, insulated from the global economy that would otherwise swallow it up. This partial insulation is critical. That is why LETS cannot be allowed to expand indefinitely by allowing supermarkets and other large enterprises that are integral parts of the economy to join, which they may well want to do if these schemes continue to grow. This would clearly be totally self-defeating, and LETS must be very vigilant to assure that, whatever the temptations, this is not allowed to occur.”
Cahn and Rowe make a number of interesting suggestions regarding the future development of Time Dollar schemes. One is the creation of a new government tax to meet basic social needs, and that can be paid either in dollars or in Time Dollars. Another is to introduce Time Dollar schemes into the field of education. A portion of the financial aid to students, whether it takes the form of guaranteed student loans, tuition grants, work-study money and other benefits, would be set aside for students working in Time dollar schemes. Students would thereby become participants in their own education by doing such things as maintaining their college buildings, tending the gardens, growing and cooking their own food, and looking after the library. Some of these things are already done a at Berea College in Kentucky and also at Schumacher College in Devon, England.
The question of State involvement in Time Dollar schemes is clearly delicate. Clearly it is in the interests of the authorities to stimulate both LETS and Time Dollar schemes. Both seek to assure the livelihood of people who otherwise might be seeking unemployment benefits and other welfare payments that the state, operating under the constraints of the global economy, must be ever less capable of providing. For this reason, it should welcome these initiatives, even if they marginally reduce its tax receipts.
This has been one of the objections levelled against these schemes. It is argued that they are just providing benefits that the State and the corporations should themselves provide, and that, in this way, it is discouraged from providing them. There is a certain element of truth in that, but the objection is not entirely fair. By building up local economies LETS and Time Dollar schemes reduce our dependence on the State and corporations, making it far easier for citizens to oppose the latter’s socially and environmentally destructive development policies.
Finally, it could be argued that the formal world economy is already tottering on the edge of collapse. The Mexican crisis we have just experienced (see Heredia and Purcell) is by no means over and it might be but a foretaste of what will soon occur elsewhere, probably on a bigger scale and with more permanent consequences. Since today, a vast proportion of people depend for their sustenance on the functioning of the global economy, this would have the direst possible consequences, but they would be incomparably less dire for those who have organized their own local community-based economies and have thereby partly, at least, insulated themselves from the consequences of such an eventuality.
In any case, as already noted, the formal economy, dominated by the corporations and the State, cannot even in the most propitious conditions provide all the benefits that were once provided by the “kitchen-table” world that it has so effectively supplanted. Ralph Nader, in the prologue to Cahn and Rowe’s excellent book notes how “the serious problems our society faces come from the erosion of….. the economy., of the family and neighbourhood”, and “the Time Dollar is a currency designed to reward time spent on rebuilding that economy” – and so, of course, are the LETS. That is why both these schemes are a source of great hope to us all.
From my letter to Mr. Edward Goldsmith about his LETS essay:
Wednesday Oct 01 1997
Mr. Edward Goldsmith,
46 The Vineyard,
Richmond, surrey, TW10 6AN, UK
Tel: 0181-332-6963/0295 Fax: 0181-948-6787
Dear Mr. Goldsmith:
In your July 16 1997 letter to Pauline was included a copy of the July 17, 1995 paper “New Local Currency Systems” by you and Perry Walker. I hope you expected that I would, as Pauline’s mentor, give it a LETS engineer’s critical appraisal. As financial angel and consulting Banking Systems Engineer on Michael Linton’s Local Employment-Trading System project, I was truly thrilled at your conclusion that Time dollars and LETS Greendollars are a source of hope to us all and was moved many times by your sympathetic prose in praise of LETS.
I judge my interest in what I read by the amount of yellow high-lighter and exclamation points I use. With the exception of the few paragraphs on “leakage” concerns which I hope to later thoroughly reassure you can be dispelled, I’m happy to find that it was loaded with great points, whether on content or on style of phrase.
I would suggest you present it to the TOES 98 Summit in London next year. I’ve already invited the Bishop of Worcester, Peter Selby, to join me in making a presentation on the Local Currency Panels and Workshops. Another interesting speaker might be the Labour MP from Falmouth who belongs to his Falmouth LETS. Don’t forget that LETS is already endorsed by many Jewish, Christian, Muslim, Bhuddist, Sihk ministries. Next year’s TOES 98 conference could provide a stunning array of LETS support.
Frankly, you are the first person with a likely association to Team Rich who I’ve ever heard speak of LETS in such a positive way though I’m sure you have accepted that all personal fortunes will end up more or less stabilized with only earnings and spendings affecting new score. I have a hard enough time getting poor people to accept that LETS won’t charge them any interest let alone getting rich people to accept that with LETS, they won’t need to get any interest. Your support of LETS in such an eloquent way is a great step in preparing people for that eventuality. “If a rich guy like him doesn’t think LETS is going to hurt, why should I?” I hope you don’t mind my citing some of the best quotes and facts in my internet and political LETS debates without attribution until you indicate otherwise.
I was pleased you noted that it operates as if by “no contractual rights” other than a neighbor’s word to try to return that which was borrowed. Any abundance supplied at the present time for neighbors’ want is later expected to supply our want. The essence of “Lend expecting nothing in return but what they can.” Having argued for years that LETS Time Dollar employment opportunities would be effective in reducing teen suicides, the most thrilling result you found was in El Paso Texas which reported:
“Time dollars are effective in reducing infant mortality. They could also provide baby-sitting for the sick children of working parents, and companionship for the elderly, whom they could also help with their shopping. There seemed to be no end to the services that patients could fulfil for other patients, all of which would reduce their hospital bill and in this way giving them access to medical services which would otherwise never been available to them. This is exactly what is happening.”
JCT: I only wish they had done statistics on teen suicides which might have confirmed the fact that less teens commit suicides when local employment-trading is available. What is really amazing is that all the plaudits you report are for mere drops of interest-free medium of exchange in the overall planetary pool. Just try to imagine life where 100% of what we need is available on Time Dollars. I want the large barter corporations to standardize to an Hour value and I’ll connect them to a market of people with Hours to spend.
Of course, I discern my co-LETS engineer Michael Linton’s concerns about “leakage from our money barrels” in a few paragraphs. Page 1 Par. 3 argues for “Currency that is only valid within the local area” to prevent leakage; Page 5 Par. 2 points out leakage concerns: “funding cash crops creates local shortages;” “purchasing power leaving the community;” “money sucked out of poor communities to corporation headquarters.” Page 15 Par. 1 are more concerns on “leakage:” “swallow it up;” “critical multi-nationals can’t join.” Page 13 Par. 3 mentions “pressure to link systems.. could destroy the essence of local.”
JCT: To reassure you about such currency flows, I have placed responses to each point raised in those paragraphs on leakage to Appendix: Parsed Paragraphs. Overall, my lack of concern about leakage will be based upon the major advantage which you cited on page 5 Par. 1: “Advantages of LETS and Time Dollars schemes: #1) there can be no shortage of local currency because people create their own currency themselves; #2) there is no incentive to hoard with no interest.”
TOWN FATHER’S CASINO CHECKS
I think that the Scottish banks you cited in your paper could put leakage concerns to rest but since they relied on gold backing and a little usury rather than collateral backing with a little service charge, it still left their banking system needing a little balancing. So I prefer to use my Casino Turmel “checks” as the best model of reference. Having since 1978 and many times since then been invited by Ottawa’s B’nai B’rith to provide the Blackjack, Craps and Poker games at their fund-raising Millionaire’s Nights, I’ll assume you’ve been to a few Millionaire’s Nights and could help oversee the cashier’s cage with me.
Better, say that as Patriarchs of our town, we partnered the hotel, general store, mule train and gambling casino. And even though we took gold, we also accepted our own casino checks in our own businesses until towns-people started buying in for checks at our casino cage with not only their gold but also their assets because our casino checks were accepted by everyone in town. Of course, our casino cashiers would be very busy issuing more checks for more new pledged collateral, including pledged labor backed by personal credit lines; and redeeming checks for collateral and credits paid out.
It is inevitable that everyone realizes that our casino tokens are redeemable for the collateral pledged to our cashier’s cage and everyone, even outsiders, will value our checks and accept them. They are valid receipts for value and acceptance by all cannot be prevented. On some evenings when we close shop, there are many outstanding checks and on other evenings, there might have been none. But usually, it was between lots and lots more outstanding. Under the conditions that we continue to run our casino accounting using a 1/s LETS software engine, wouldn’t you still sleep easy because you know that the cardinal rule of casino accounting is “collateral held must equal checks out.” I know I did. Casino Turmel Topaz LETS cage was handling hundreds of thousands in cage transactions and millions in gaming transactions every night and not once did I worry about what people were doing with my checks as long as “collateral held equals checks out.”
I hope this overview has assured you that worrying about whether our local tokens get sucked out of town is unnecessary. I am pleased that even with these concerns, you still picked LETS as “a source of hope to us all.” With a government LETS account, I have no trepidation at the advance of the globalisation of the world’s economy through various nefarious trade agreements. As your paper points out, people tethered to their community by a LETS connection start to move towards fairer pricing. Once these transnational corporations are also leashed with the same LETS tether, they will also moderate and justify their prices. I do not dissuade but seek to encourage the world’s largest potential trading partners to accept my IOU as readily as my LETS neighbor does.
Michael and I have publicly dickered for years about the merits of having LETS government-financed social service with government as an equal trading partner. I have always contended that government acceptance of LETS in taxes would cause all my neighbors to also want a LETS account, a 100% saturation of the currency market. At our recent TOES97 LETS Workshop on June 20, 1997, Michael Linton stated that he was looking for 10% of the population to be doing 10% of their livelihood on LETS by 2005, a 1% market penetration. I consider that the hard as well as slow way. I keep trying for a 100% market penetration with government and industry accounts luring the personal ones. I consider a 1% penetration by 2005 to be way too low considering the International Barter currencies are already Green and just lack a standard common denominator to time prevents all LETS seeming as viable link-ups. Get Coca Cola to accept Green and all LETS become more viable markets world-wide.
All notions designing a LETSystem to stifle trading with the world’s biggest trading partners is self-destructive. Still, who LETSers trade with a decision with respect to the steering of the mechanism with no bearing on the optimal operation by professional banking networks.
Which brings us to the crux of the issue: How to best get life-saving LETS credit to most people the fastest. I have always stated that if only the Rothschild and Rockefeller families of banks decided to install the LETS on their networks’ computers and offer LETS Green credit accounts side-by-side with their usury-credit accounts, the interesting historical twist would be that the scions of the guys who in all likelihood are to blame for the financial mismanagement of the world’s currency into this ecological disaster might very well be the scions who atone for their fathers’ errors and save our world by the simple expedient of leading the way in upgrading the software on their banking networks to LETS. Maybe there’s a role you can play?
Given Michael’s projections, I don’t think interest-free currency can be installed in time to help much without the direct intervention of the guys who now own the banking hardware. I don’t know about you but with 100% Green account down at my local bank branch, I see even more of a paradise than you have described in your paper. If they’re cheering for mere drops in the desert, imagine when a large oasis springs up right before their eyes.
I don’t know the status of your paper as it is yet unpublished but if you could drop the parts about leakage concerns which are short-circuited by LETS Advantage #1, “no shortage of local currency,” I would rate it a perfect piece.
Just the mention of your paper in Pauline’s TOES97 report posted on the Internet and Michael Linton expressed interest in getting a copy. I think he’d love it. It’s an articulate approbation of a project we’ve both put years into and it would thrill him as an original LETS engineer as much as it did me. Dropping those leakage concerns might not make him so happy but you’ll have to decide which LETS engineer is right.
I’m sure everyone in the LETS world has now heard of your paper on LETS and will want to know more. It might be time to publish it in your Ecology Magazine as a solution to the underfunded prevention of ecological disaster. Should you wish to send him a copy, his email email@example.com. But I’ll not key in or post the whole thing without your permission. (JCT: Had to change my mind.)
My Advanced Engineering Analysis of the Banking System on pages 77-85 of my Adventures was just cited in Peter Selby’s, Bishop of Worcester’s new book Grace And Mortgage to refute quotes by John K. Galbraith. Almost two decades ago, I predicted the LETS “Miracle Equation” would win three Nobel Prizes and it’s good to hear the Bishop tell the world’s economists that The Engineer proves them wrong. Maybe your magazine might like to be the first to publish what the bishop judged winning economic thought.
Hoping you enjoy future good health and prosperity, I am,
Yours truly John C. Turmel.
APPENDIX: Parsed Paragraphs
Addressing concerns about the stability and value of our local currency due to having them sucked out to the global economy:
Parsing Page 5 Par. 2:
“Equally important is that the local “currency” is not convertible into any other local currency, let alone the national one,
JCT: It says right above our cashier’s cage “Casino checks convertible for cash, assets, time.” It’s pretty hard to stop convertibility when they can convert from local currency into a national one just by changing the mix of currencies they accept in trade or by merely saying “Give me 10 in cash, I’ll use my Green account to get your sink fixed. “Trying to stamping out convertibility is trying to stamp out a medium of exchange’s most useful function.
*and can thereby only be spent on goods and services provided by other members.
JCT: Are you, as the casino owner, to worry because many non-members would provide goods and services to our casino members in exchange for our casino checks? I never did. It never bothered me when I ran my casino that the owner of the nearby Chinese restaurant would come in every few days to cash out some chips. It never bothered me that my chips had been traded to and by outsiders. Leakage was no concern as long as the cashiers obeyed the cardinal rule of casino accounting: “collateral held equals checks out.”
*This means that rather than serve to fund the production of for instance cash crops, that would be exported to satisfy the needs of distant populations –
JCT: I see nothing wrong with LETS funding cash crops for export to satisfy the needs of distant populations if they are in abundance since this brings in more scarce goods or artificially-scarce cash.
*often at the price of creating local shortages –
JCT: This is contradicted by advantage #1. There can be no shortage of local currency because people create their own IOUs. Let’s say that many of our casino IOUs really are being hoarded by outsiders because they trust our cashier for its store of value. New liquidity can always be bought in for with new pledges perfectly sufficient to facilitate all local exchanges.
*it is far more likely to fund the production of food for local consumption.
JCT: Again, concerns about funding either crops for cash export or for local consumption is based on the premise of insufficient funds to do both. This is again contradicted by Advantage #1.
*This also provides a means of ensuring that purchasing power stays within the community;
JCT: Again, as casino bank owners, whether our purchasing power tokens stay within your community is of no concern and any time we would spend on such control would be superfluous effort.
*in sharp contrast to the situation today when money is sucked out of poor communities into the rich urban areas
JCT: More worries about money being sucked out of the community’s barrel like usury-based money while there is a shower in the cashier’s cage ready to always satisfy just local currency demand.
*- where, among other things, the headquarters of the large corporations that control most of today’s commerce, are situated.
JCT: Do we, as casino owners, mind that large corporations decide to accept our local casino checks to pay their agents in and around our town? Seems like another superfluous expenditure of time to try to control something which would be of benefit to our city’s people.
Parsing Page 15 Par. 1:
*”As it happens, what appears to be little more than a relatively marginal self-help system becomes in effect an almost mainstream local economy, though one that is partly, at least, insulated from the global economy that would otherwise swallow it up. This partial insulation is critical. That is why LETS cannot be allowed to expand indefinitely by allowing supermarkets and other large enterprises that are integral parts of the economy to join, which they may well want to do if these schemes continue to grow.
JCT: Sure, though our casino tokens might appear to be little more than a relatively marginal self-help system, they are in effect an almost mainstream local economy which is insulated from the global economy ever swallowing up all our local currency by our infinite source of casino checks.
Therefore, it is not critical and not even productive, to, in the name of fighting leakage, say that LETS cannot allow supermarkets and other large enterprises which are integral parts of the economy to join. This LETS engineer thinks it’s critical that they, and their
already existing international barter systems, do merge once the Global Hour standard of value is adopted.
*This would clearly be totally self-defeating, and LETS must be very vigilant to assure that, whatever the temptations, this is not allowed to occur.”
JCT: I think the concerns about such leakage have been counterproductive to the availability of LETS to the general population in general. It is inevitable that once the International barter companies that effect trades for transnational corporations adopt the Hour standard of value, the trading between the large networks of commercial partnerships with small markets of LETS networks of personal proprietorships will be the next step.
Parsing Page 13 Par. 3
*There will therefore be pressure to link systems so that they can trade with each other… However, this could destroy the essence of LETS because trading would no longer be so local.
JCT: We can choose to spend from my LETS account as locally as we wish and as nationally and internationally as we wish without destroying the essence or interfering with any the other spendings.