While there are multiple variations, there are three basic types of community currency systems that have been popular over the past 25 years:
1) Local Exchange Trading Systems (LETS), 2) Time Banks, and 3) Ithaca Hours [paper currency] systems.
Each system has its strengths and challenges and the most successful local programs reflect the needs and characteristics of a particular community. Here is a brief overview of existing systems. LETS began in British Columbia in the early 1980s and have been the most widespread form of local currency systems. The values of these currencies are usually pegged to their national currency and they are tracked electronically or by a checkbook system through a centralized administrator. LETS are the most wide spread of complementary system spanning the globe with a wide variety of models.
The most significant challenge historically for LET are low trading volumes (as with all complementary currency systems) and the lack of administrative capacity in some programs. This is understandable due to the grassroots nature of the original local program and the frequently reliance on volunteers for staffing. However, there are many emerging formal structures for LETS include those that combine local currency with traditional banking services. The best example of this is the Common Good Bank which plans to be FDIC certified.
Since LETS currencies are not exempt from taxes or and welfare benefit calculations, they are often not attractive to the poor and unemployed.
On the plus side, not only are LETS the most widespread models, there are several national and international networks that allow one to use credit between programs. Also, LETS handle both goods and services.
Ithaca HOURS is a paper currency system develop by Paul Glover in 1991 in Ithaca NY. It is a fiat currency whose value is linked to the U.S. dollar. Since its founding, thousands of individuals and hundreds of businesses have exchanged the currency. The system is straight forward, does not depend on sign-up membership, and depends on community cohesion to be successful. This model spread rapidly across the United States during the 1990s. As of 2004, 82 HOURS systems had been attempted across the U.S. However, only 17 (a 20.7% survival rate) were still active. Maintaining dedicated administrators, ongoing recruitment of participants, a lack of useful services and insufficient resources all are challenges to the Ithaca HOURS system. Like LETS, Ithaca HOURS currencies are not exempt from taxes or welfare benefit calculations but can be used for goods and services.
The Time Bank modelwas founded by a law professor Edgar Cahn and implemented first in Miami, Florida in the mid-1980s. This model is flexible and there is a wide range of different programs in existence today. Participants earn and spend the egalitarian electronic currency (Time Dollars) that is measured in the amount of time that is required to provide a service (rather than the monetary value of the service). A paid staff is required to recruit participants, provide orientation, match providers and recipients as needed, track the hours, and distribute statements to members. The formal administrative structure of Time Banks USA have helped make them more stable than the other forms of local currencies.
Complementary Community Currency Systems and Local Exchange Networks
COMPLEMENTARY ROLES OF DIFFERENT EXCHANGE SYSTEMS (click on for more info)
CHARACTERISTICS Value generated on competing for scare resources Currency is hard to get, but easy to spend Goal: get the most for the lest Independent of community participation (Examples)
CHARACTERISTICS Value generatedon cooperating to maximize local resources Currency is easy to get, but hard to spend Goal: get the most for the most (common good) Dependent on community involvement & participation (Examples)
Fiat" - Secured by authority-guaranteed
National Currencies BerkShares, (local paper currency can be exchanged for National Currencies-some community building features)
"Backed"- Secured on external reference guaranteed
Frequent Flyer Miles (reward system backed by contracted value) Barter (backed by exchange of good - negotiated value) E-gold(backed by gold) Liberty Dollar(backed by silver content in coins - frequent conflict with government - this is more an anti-fed currency more than a local currency)
Mutual Credit Systems (backed by community good will and transparency) Time Dollars(electronic time exchange) LETS* (electronic credit exchange) Examples> Common Good Bank (credit currency hybrid with FDIC banking services)
OUTCOMES
Promotes Opportunities to maximize individual wealth Rewards elitism Maximize individual choices of products and services Low cost factor Emphasis lowest cost or best buy Revenue flow from consuming area to producing area Support mass production No incentive for community involvement
Promotes Opportunities to maximize community health Rewards egalitarism Maximize use of local products and services Local loyalty factor Emphasis best local buy or service Revenue flow within local community Support local businesses and services Maximum incentive for community involvement
* LETS = Local Exchange Trading System (Common term for several types of electronic mutual credit systems)
Design Characteristics of Representative Currency Systems
A growing number of currency and payment systems, each oriented toward different social and material incentives, are available for use today. The most appropriate one for any given transaction will depend on the needs and objectives of those taking part in the exchange.
