On LETS
Makoto NishibeDecember 6, 2001
1. LETS as NAM’s principle“Local Exchange Trading System” (LETS) is a local currency
originated by Michael Linton in Canada. It is a multilateral settlement
system, in which each participant will open his or her account and trade
goods and services spontaneously on an over-the-counter basis throughchange in account balance. There are many other kinds of local currencies
than LETS.
More than three thousand local currencies have beenreportedly introduced all over the world and more than one hundred inJapan.
LETS has some of the properties similar to those found in “money” or“credit.” Endowed with the properties found in such money as national
currencies, it functions as a “means of circulation” to mediate exchange, as a“measure of value” to provide the standard for exchange, as a “means of
payment” to allow multilateral settlement, and as a “means of hoarding” tostore values. It is a unique currency, on the other hand, which will bear nointerest and prevent spillover of capital from local areas as well as credit
creation in a modern banking system, whereby it will not turn into “money inperpetuum mobile” (Boisguillebert) –– i.e. capital. However, LETS is notjust an economic medium; it is also a social, ethical, and even cultural
medium. While LETS has economic purposes such as stimulation of local
economy, establishment of cyclic economy, and prevention of bubbly
expansion as well as capital accumulation, it also has social, ethical, andcultural purposes: to rebuild cooperative and mutual-help human relations
based upon the idea of reciprocal exchange, to bring about trust in region andcommunity, to share values and interests, and to encourage interaction as
well as communication. Thus, in LETS, the economic, the social, the ethical,
and the cultural are closely interrelated, which itself embodies the principleof the new economic society. LETS is a medium of “intercourse” (Verkehr),or a communication medium, to expand the domain of freedom and rebuild a1new space for cooperatives based upon modern liberalism and individualism.
For social movements like the New Associationist Movement (NAM),
an “exscendent” movement that aims to create a non-capitalist market
society, LETS is an indispensable precondition. Any movement seeking tosupersede (aufheben) capital and state must be developed by means of not
only economic, but also social, ethical, and cultural principles. LETS
provides a pivotal means for such principles. Karl Polanyi insisted that thedis-embedded market economy in the capitalist economy must be “reembedded” within societies. But that risks a return to the pre-capitalistic
society that presumes communal reciprocity. LETS does not restore
reciprocal communality; rather, it is a counter-medium that exscends both
capital and state by embedding society within the form of economic exchange.
While it basically carries on the kinds of associationism advocated by Owen
and Proudhon, LETS will overcome their shortcomings and enable us toredevelop them in the contemporary context.
Many people who are implementing local currencies in Japan believethat the economic side and the ethical side of local currency contradict eachother. They insist that local currency should be used to stimulate the tradeof non-market services such as welfare, healthcare, and voluntary assistance,
but not for the trade of goods and services which are currently traded inordinary markets. In short, they try to confine the scope of LETS to the
ethical sphere. They argue that if local currencies were used for the goods
and services being traded in ordinary markets, it would cause competition
between the trades in local currencies and the profit-making activities
conducted with national currency and bring about friction or confusion,
whereby the informal reciprocal relations created by local currencies would
be impaired. We do not share this view, however. Even if local currencies
have not yet revealed their economic power thus far, we should not limit
their potential in accordance with current conditions. Rather, we should
fully recognize the latent potential of local currencies and seek ways ofrealizing that potential. Local currencies, particularly LETS, could act as a“counter-cancer” that transforms capitalist economy from within precisely
because they are endowed with dual properties, i.e., the economic and theethical. Capitalist economy is a complete automatic economic system
driven by the perpetual self-valorization that is capital; the economic
motivations of human beings existing within such a system are totally2

defined by the principle of profit. Therefore, the organized attempt toovercome capitalist economy must be supported by ethical motivations thattranscend economic utility. However, in the absence of economic principles,such a movement would be powerless and unsustainable. Moreover, theidea of not using local currencies for goods and services being traded in theordinary market tries to circumvent the problems of income tax associatedwith local currencies. It would consequently force citizen volunteers toassume responsibility for the domains of welfare and healthcare, that can nolonger be provided for by the state’s social security policy. The movement of
NAM, which resists both capital and state, cannot settle for circumventing
conflicts with state or supplementing state functions: we must go beyond thewelfare state, which redistributes income and provides social security based
upon social democracy. To this end, we must gradually expand the domainof a non-capitalist economy which stands on a principle distinct from that ofcapitalist economy.
2. The Contemporary Implications of Local Currency
Local currency, or “community currency,” is a medium of exchangethat circulates only within a particular area or a community, mediates
exchanges between goods, service, and volunteers, and bears no interest.
Each local currency has the following common purposes: (1) to aim at
a reciprocal exchange on the basis of trust; (2) to resolve inflation andunemployment by establishing autonomous growth of regional economy
through circulation of local currency within a specific region; (3) to prevent
credit creation, speculation, and monopolistic accumulation of capital by zeroor negative interests in order to stimulate trading of goods and services; (4)to provide structures to evaluate non-market services such as welfare, careand relief volunteer from various viewpoints in order to stimulate these
activities; (5) to provide ideas and frameworks to horizontally link between
various activities of non-governmental organizations (NGO) and non-profit
organizations (NPO) related to labor, consumption, welfare, andenvironment; (6) not simply to provide relief and security to people but tobuild up relations of trust and cooperation between them and to stimulate
and enrich communications, which have been reduced to the single
dimension of monetary exchange.

3

As such, modern local currency finds its purpose not only in thestimulation of economy but also in the stimulation of communications. The
globalization of market economy has resulted in the dominance of monetary
value and the decline of the communicative power of people. Local currency
may be able to stop this tendency by serving as a medium for
multidimensional and open communications. Local currency can do much
more than simply communicate a monolithic economic value of goods andservices; the medium in itself can communicate “standard platform”-type
universal messages or ideas, such as freedom and responsibility, zerointerest, co-ownership, and information disclosure. Selling and buying bymeans of local currency resembles linguistic communications in the sensethat it conveys messages. In real, physical communities like towns andvillages, each local currency can express the particularity and individualityof its locale by means of the currency’s name and the relationships between
those who use it. For example, with local currencies in Japan, people haveadopted currency names that represent each locale’s characteristics andideas: the “ômi” of the Communication Supporting Center of Kusatsu,
Shiga Prefecture, is named after a nearby place, the “peanuts” of a Chiba
NPO, the Community Supporting Center of Chiba, takes its name from a
local product, and the “fôre” of the Town of Shimokawa in Kamikawa,
Hokkaido, is named after the local foresting business. Furthermore, local
currency can also be formed within “virtual (or semantic) communities” that
express a particular interest, value, or thought: for example, if “ecology
money” is used for preservation of the natural environment and ecosystems
and “volunteer money” for the purpose of service and help, they are shared asa specific message among participants and add to the universal message
which belong to local currency in general. In this way, monetary exchangeby means of local currency comes closer to achieving the aims of linguistic
communications. Needless to say, these communities are not closed but
rather open communities of independent individuals who are loosely
connected by localities of place or common theme.
Even if local currencies can be both an economic medium and acultural medium for communicating values, culture, and thoughts, it goes
without saying that they can hardly attain the complexity of linguistic
worlds.
However, if numerous and various local currencies can beestablished, people who have lost the power of linguistic communications

4

could belong to multiple currencies of their own choice. This in turn could
provide them with a key to self-expression, which has been foreclosed by themonolithic growth of monetary exchange. By thus supplementing atrophiedlinguistic communications, local currency could suggest a way ofovercoming—instead of circumventing-- the difficulty of “understanding”
others.
However, local currencies are varied in the time and place of theirestablishment, in their purposes and ideas, and in the details of theirstructures and systems. Chart 1 below compares and contrasts national
currencies with local currencies of several types. Among local currencies,
there are (1) the “concentrated issue” type like Ithaca HOURS, WIR, and
RGT, in which managers or committees issue their bills, and (2) the“dispersive issue” type, or “mutual credit” type, like LETS and Time Dollars,
for which managers only record income and outcome in the accounts of boththe seller and the buyer in notebooks, and the buyer voluntarily issues
currencies. We can also classify them into those that link currency value tolabor time (Time Dollars), those that are linked to national currencies (WIR,LETS, and Toronto Dollars), and those that are linked to both above (Ithaca
HOURS and LETS), etc.
These systematic differences can lead todifferences in their actual possibilities.
（Chart 1）A Comparison between Several Different Local Currencies
National
IthacaToronto
Time
LETS
WIR
Currency
HOURS
Dollar
Dollar(LETSystem)
Loc Each
Ithaca (pop. Toronto
USA, 1986, Comox
Türich,atio nation27,000), NY, (pop. 4
200 groups Valley,
Switzerlandn, state, orUSA, sixty
million),of 50,000 Vancouver , 1934.
Yea economic
groups of
Canada,participant Island,
80,000r, community USA and1998
s in USA; Canada,1983 participants
Nu (EU),
Canada as of
320 groups . 2,000, volume of
mb floating
1991
in Canada, localesdealings: 2
er exchange
France,mainly inbillionof rate system
and Japan advanced
dollars per
Par("fureaicountries.
year
tici
kippu"The same as
pati[Intimacy SEL
ng
Tickets]) (France) andGro
Tauschringe5

upsn (Germany)
Uni Dollar,
1 Ithaca
1 Toronto Hours of
1 green
1 WIR=1tEuro, Yen,
HOUR =1 dollar=1
labordollar=1
Swiss franc
etc.
hour of
CanadaCanada(Dollar islabor=10
dollar; four
dollarthedollars; five bills of 20,
internation bills of 2, 1, 10, 5, 1
al standard 1/2, 1/4, 1/8 dollars
money.)Hours
Iss Central
Concentrated Concentrat Autonomo Autonomous Concentrate
uin bank
issue (bills)
ed issue us
dispersived issueg(nonconvert(bills);dispersive issue(bills) +Sys ible note)the same issue(bankbook
Autonomou
tem and Private
printing (bankbook system)s dispersivebanks
technolog system)
issue(credity as
creation)
Canadadollar;there is aterm ofexpiration
Int Interest for No Interest, 10%No
No interest; Loan withere bonds andcommittee contributi interest;
price can low
st,depositcontrols
on tocurrency
be freelyinterests
pric money,money
communi value fixed determined available;e,creditsupply,ty
by a; combined bills used atcocreation
combined business particular
use withthe time ofuse allowed
use withfoundatio time;national
mutualnational
ns atcannot be
currency
creditcurrency
time ofused along
settlement;
exchange withassumedfromnational
combined
Canada currency
use withdollar tonational
Torontocurrency
dollar
Ch The core of Similar to
Possible to Used in
Most widely Oldest andara market
Owen'suse atservicesused local
largestcter economy; "Labor120
likecurrency in
local
isti investmen Notes";
locations welfare
advancedcurrencycst;realizes
including andcountries;
system inrecession equality
supermar volunteer
convenienttheandespecially for kets and activities
and can beworld;
unemploy low-income
restauranused for76,0006

ment;
workers; 400
environme participants
ntal
includingproblems mainly coops
and otherfoodmerchants
anddrugstorests,
doctors,
andlawyers;acommerci
al bank,
CIBC,
takes
care ofexchanges;businessparticipa
nts canconvertto
Canadiandollars at
the rateof 90%

variouspurposes;
there is an
IC cardtype

companies (17% of
all Swisscompanies)participa
te; POS,orelectronicsettlement, used

3. History of local currencies
Local currency is not a completely new idea or movement. Early
precedents and prototypes can be widely found in pre-capitalist humanhistory. In Japan, for example, its characteristic of mutual-help can befound in traditional practices that still partially exist today, such as “yui”(mutual help conducted in villages during busy periods) or “ko” (mutualloans administered from a shared reserve fund). These are pre-modern
systems implemented almost forcibly in closed communities.
The origin of modern local currency should be found in Robert
Owen's "labor notes." Local currency arose almost simultaneously with theindustrial capitalism established in the wake of the industrial revolution.
This shows that local currency was born as a community's countermovement against capitalism, or what Polanyi calls "community selfdefense." Moreover, the local currency that emerged within modern civilsociety has already traversed the ground of individualism and liberalism. It
is a movement that takes individual autonomy and ethics as the basis for its
pursuit of mutual help and cooperation.

7

Although Owen succeeded in the management of cotton spinners in
New Lanark by introducing cooperative principle in management, rational
labor management, education of juvenile labor, and coupons to be used atfactory stores, his attempt to build a cooperative village in New Harmony,
Indiana in the United States ended in failure. After returning to London,
Owen established the “Equitable Labour Exchange” and experimented with“labor notes” in September 1832. “Labor notes” are bills imprinted with thelabor time expended on products. Workers would receive “labor notes” at
the “Labour Exchange” in exchange for their products, whereby they could
purchase other products of the same value. A labor note of 6 pence wasregarded as equivalent to 1 hour of labor, and a fee of 8.33 per cent was
charged on every transaction in order to cover the operational costs of the
Exchange. The experiment, based upon the labor theory of value, sought anequitable exchange of products. But the computation of value in productson the basis of average labor time was unable to properly appraise values forheterogeneous labor or complex labor (skills and proficiency), causing an
inequality among products. As a result, the Labour Exchange was unable
to adjust the supply and demand of necessary goods.
Merchants’
speculative trades also made its operation difficult to sustain. The exampleof Owen’s “labor notes” clearly demonstrates the fundamental problems
behind the idea of directly using labor time as a basis for equitable exchange.
Today, there are still local currencies which adopt labor time as a measure.
It should be noted, however, that Time Dollar is mainly used for volunteer
exchange and that Ithaca HOURS is linked to the national currency in order
to raise the minimum wage level in the region (1 Ithaca HOURS = 1 working
hour = $10). It should be said that most local currencies today are not based
upon labor time.
Pierre-Joseph Proudhon denied collective authority such as state andparliament from the vantage of anarchism, insisting that an economic
system be innovated by replacing the state with associations of independent
producers. In 1849, based upon his “principle of mutual credit,” Proudhon
proposed to establish the “Exchange Bank” as an “institution for circulationand credit” in order to correct the inequality of exchange. According to hisplan, workers would become members of a commercial union called“National Exchange Bank.” The bank required no investment, so they
could mutually exchange their products both as producers and consumers for8

equitable prices computed on the basis of labor time and production expense.
The National Exchange Bank would determine prices of products, take careof product trades, and issue four kinds of exchange vouchers in exchange for
products. Thus, the “Exchange Bank” plan was an attempt to implement
Owen’s Labour Exchange on a larger scale. However, Proudhon’s proposal
was rejected by the assembly and not put into practice. Proudhon argued
that all the products in a modern society are the results of an “ensemble”
based upon workers’ division of labor and cooperation; capitalists deprived
workers of products and appropriated them to without compensation;
therefore, it was unjust theft. While attacking private ownership from thisperspective, Proudhon also criticized the “national workshops” proposed bycommunists like Louis Blanc, insisting that they were state monopolies ofproperty. Although Proudhon’s idea of associationism and critique of stateauthoritarianism were correct, there is a fundamental problem with his ideathat equitable exchange could be achieved on the basis of the “constitutive
value” of time and cost, which regards money as a “symbolic representationof labor” and abolishes the sovereignty of money. Despite his denial of suchcollective authorities as state, as long as his proposed Exchange Bank serves
as the equitable price fixer, in effect the bank becomes the planner andexecutor of collective economic planning. Consequently, this would result ina denial of market and repression of freedom. In this respect, there is aself-contradiction in Proudhon’s proposal. We should refuse his conceptionof money as an indispensable medium for free over-the-counter trades for
producers, but we should also reject his collective system, which inevitably
requires rational money issuers, a price fixer, and a planner and executor.
As we will show, LETS is precisely the system that both inherits the basic
principle of Owen and Proudhon and is capable of overcoming their
weaknesses.
During the 1930s after the Great Depression, complementary
currencies arose in many parts of the world to supplement the shortage ofnational currencies. In the first half of the 1930s, local currencies wereintroduced as a catalyst for intra-regional trade in many communities ofDenmark, France, Italy, Austria, Switzerland, Canada, and the UnitedStates. Many of them were based upon “stamped-money” proposed by Silvio
Gesell at the end of nineteenth century, to which Keynes paid attention in
his General Theory of Employment, Investment, and Money. Gesell,

9

originally from Germany, succeeded as an entrepreneur in Argentina andwrote on free money in later years. “Stamped-money” needs to have astamp (deed) of a certain amount pasted on it every week or month. It is
not valid without stamps. Its value will depreciate as time passes. Such aminus interest on money was intended to prevent hoarding, to encourage
circulation of money, and to stimulate consumption expenditure.
The municipal body of Wörgl, Austria, for example, issued stampedmoney for the payment of public enterprise, which would depreciate 1 percent of its value per month, as a policy measure to solve unemployment.
The unemployed who received wages in the form of stamped-money spent
the money at participating stores, and those stores paid tax with it, whereby
the circulation speed of the money was accelerated by 5 to 6 times. As aresult, the employment rate went down and shopping districts became active.
But the National Bank of Austria took a counter-measure to prevent the useof the money, leading the experiment to suffer a setback. In the early 1930s,
communities and chambers of commerce in many parts of the United Statessuch as Chicago issued coupons called “federal dollars,” which at one point
were circulating at more than three times the speed of the national currency.
However, this currency gradually declined with the implementation of the
New Deal and was finally abolished in 1943 due to the wartime supply
shortage. Whereas the experiments by Owen and Proudhon in the 1830s
and 1840s did not experience state intervention, since the central bank had
not yet been founded, the bill-type local currencies of the 1930s had theirpotentials deprived by the state’s control over money and economy. Thus,
local currency movements had been stagnant until the 1990s.
Depreciating currency, which urges people not to store money, thus
encouraging consumption, is likely to succeed in relatively small towns andvillages. If we attempt to introduce depreciating currency on a national
scale, as Gesell planned, however, a legal tender with legal force must be
depreciated, which requires reliance on state power. At any rate, it requires
compulsion from above and presupposes the presence of authority.
Therefore, depreciating currency, if introduced on a large scale, could also
bring about “compulsory consumption,” urging people to consume even what
they do not want. This threatens to deprive people who do not pursue
economic growth of the “freedom of not consuming.” Moreover, it could
easily encourage the kind of mass-production, mass-consumption, and mass-

10

scrapping that are often criticized today. As in the case of Proudhon, there
is a self-contradiction in Gesell’s depreciating currency in the sense that,
despite its positive characteristic as an economic catalyst, it requires state
power and has an anti-ecological dimension.
The only local currency that originated in 1930s and still survives
today is WIR. WIR is the cooperative exchange ring organized in 1934 bymedium- and small-sized entrepreneurs and store keepers in Zurich based
upon Gesell’s theory of free money, and many workers took part in the effort.
Founded in 1936, its banking institution, the WIR Bank, has the power tocreate credit.
The bank provided WIR with both dispersive andconcentrated issue systems. 1 WIR has been set equal to 1 Swiss Franc.
Today, 76,000 firms and stores, including manufacturing firms, hotels, andrestaurants, participate in WIR, accounting for 17 per cent of the total
number of firms in the country. Inter-firm transactions are also settled in
WIR. Pricing of goods and services must be expressed as a combination of
WIR and Swiss Franc, because salary and international transactions must
be in Swiss Franc and because the federal government and municipalities
worried about decreases in tax revenues. Commodity prices are indicatedin the following manner: “1,000 Swiss Franc, payable by WIR up to 50 %.”WIR has survived until today probably because it started as a bankbook-type
local currency with no printed paper, by which it could evade stateintervention, and because it evolved itself into a banking institution.
The most prevalent local currency today is LETS. LETS, originatedin Canada during the recession of 1983 just like other local currencies, has
rapidly spread into such countries as England, France, Netherlands,
Germany, the United States, Australia, and New Zealand. LETS is a typeof local currency that takes the form of changes in account balance. This
type of local currency is called “Tauschringen” in Germany and “SEL” in
France. People in developing countries such as Thailand, Mexico, South
Africa, and Senegal have also begun to experiment with LETS. It is now
estimated that LETS is currently being used in more than 2,000 regions
worldwide.
The largest scale local currency in the world is La Red Global delTrueque (RGT) in Argentina, with more than 500,000 thousand people
participating. The first exchange ring in Argentina was born in Bernal in
the suburb of Buenos Aires in April, 1995. As of the end of 1997, there were11500 exchange rings nationwide, which cooperate to form a national network.
After the currency crisis, Argentina followed IMF’s advice and pegged its
legal tender, the Peso, to the U.S. dollar. Although the measure succeededin preventing the Peso’s value from collapsing, the accompanying
deflationary pressure led the domestic unemployment rate to exceed 20 per
cent. Such economic turmoil was the backdrop for the rapid spread of RGT.
Most local currencies of the last century, as we have seen, arose
during recession periods. All of them attempted to build a reciprocal
exchange system denying interest, to create employment opportunities forthe unemployed, and to stimulate intra-regional trades of goods and services.
Unlike comprehensive economic planning from above, this movement was
initiated from daily practices by a few and has been spontaneously organizedalong with the growth of participants’ networks. Each local currency has its
own unique name, devices, and improvements. Such uniqueness anddiversity in each local currency have never died out.
Since the first half of the 1990s, local currencies have continued to
grow all over the world, reviving after 60 years since the early 1930s. These
periods have a particular economic condition in common –– recession.
There is also a key difference, however: while planning and control over the
economy were common themes of the 1930s, we are now in a period of
globalization that drives toward the universalization and liberalization ofmarkets. In the 1990s, authoritarianism seen in the collective economicplanning of Soviet socialism or Keynesian macro demand management
retreated, while the market economy covered the entire globe. Nationally,
deregulation and privatization of fiscal and public policies were promoted,
while trade and investment were liberalized internationally. Today, we seesocial democracy reviving in Europe, where currencies and markets were
integrated as the EU. But this simply constructs a pan-European fortressto protect against globalization, while affirming globalization itself; it is not
something that can stop capital’s globalizing movement toward “freeinvestment,” which goes beyond “free trade.” If such is the case, then thetendency toward further expansion and penetration of markets will continue
well into this century.
Motivated by a hatred of money, the state socialism andtotalitarianism of the twentieth century were attempts to abolish money andcontrol economy; however, all of these attempts failed. It is obvious now

12that there is no possibility of eradicating anarchism through collectiveplanning or constructivism. Furthermore, the social democratic welfare
state, which focuses on redistribution, is nothing more than a soft form ofsuch attempts and cannot fundamentally address the problem. Also, thecurrency crises observed in Asia, South America, and Russia in 1997-98 as
well as the financial crisis in Japan clearly indicated the problems inherent
in financial capital like hedge funds, which invite the repeated formation
and bursting of financial bubbles. If we can neither abolish nor abandon
money, then we have no choice but to preserve the positive inherent inmoney, while abolishing its negative –– in other words, the supersession ofmoney itself. To this end, we must transform the total characteristics ofmarket and societies and prevent capital’s globalization by introducing local
currencies which are a de-fetishized medium of exchange.
4. The Potential Significance of LETS
According to Marx, market (commodity economy) begins between
communities, and in the process of reflecting and penetrating the interiors of
those communities, gradually dissolves them and replaces them with
commodity relations. Springing from industrial capital, the capitalist
economy is established at the point when any and all products become
tradable on the market through the impetus of the commodification of labor.
Among “commodities,” there are primary commodities such as manufactured
goods, and fictitious commodities such as labor power. To the latter
category, Polanyi added land and money to labor power, and thereby drew acomparison between cancer and the characteristics of market –– i.e.
penetration into communities and multiplication within them. Economic
globalization is expanding and deepening, and now that the cancer has
spread into the body called the world economy, we can no longer cure it bymeans of a surgical operation like violence revolution. If so, does that meanthat it is impossible to overcome capitalism any more? Not necessarily.
The creation of a new “counter-cancer,” which has the power to penetrate,
spread, and self-multiply like a cancer, yet cannot be eradicated because it
has genetic properties that are not easily identified as a cancer, must be able
to gradually transform the body from within and change its overallcharacteristics by means of the self-proliferation that the program will bring13

about. It is through this evolutionary strategy that it becomes possible toabolish commodification of labor (human), land (nature), and money(medium of exchange) and to supersede capital and state. Of course, thisdoes not mean the abolishment of money or market itself. Rather, the idea
is to create money or market of a new form while immanently transforming
the properties of conventional money and market. A “counter-cancer” of thissort would fight off the disease by stimulating the natural immune system of
the body through the injection of a minute antibody.
Seen from this viewpoint, LETS stands out among the various typesof local currency as especially worthy of attention. This is because LETS isparticularly well-endowed with the basic properties that would enable it tofunction as a “counter-cancer” against capital and state. Such properties
cannot be found in other local currencies; to the contrary, they can easily beassimilated into the capitalist economy by complementing or supplementing
the functions of national currencies. At present, LETS is not necessarily
moving in the direction of realizing its potential in this capacity, although
LETS is the most prevalent and most widely implemented local currency inthe world. It is not wise, however, for us to merely sit back and affirm or
negate the actual movement as arm-chair critics. Rather, through careful
inquiry into the essential properties of the LETS program and thinking
objectively about what it could bring about in the future, we mustacknowledge the quality of LETS as a “counter-cancer” in theory, and thenreorganize the actual movement. This point deserves particular emphasis,
because practitioners of LETS, and even the originator himself, are not yet
fully aware of its potential significance, even though LETS has been spreadall over the world. In order to understand the theoretical potential of LETS,
it is absolutely essential for us to understand how it works and what its
current conditions are.
5. What is LETS?
LETS was initiated by six members led by Michael Linton in Comox
Valley, a town with a population of 6,000, in Vancouver Island, British
Columbia, Canada. There are currently 450 LETS accounts in Comox
Valley, 100 out of which are sometimes used; 50 of which regularly; 10 ofwhich frequently. The total amount of monthly trading is between 2,000

14and 3,000 green dollars, which could not be called very much, but this is asufficient amount of monthly trading to cover operational costs through ahandling charge of 25 cents per trade and an issuing fee of 1 dollar per sheet
of detailed settlement bills, which are regularly sent out.
To begin LETS, you must first determine a “registry” and a “trustee.”
The registry opens accounts for participants and manages them, records
trades, and sends out records of transactions to participants every month.
The trustee determines the trading fees, supervises the system, andpenalizes anti-social behaviors, while collecting and exchanging information
with other LETS communities and developing software systems.
The participants (1) open their own accounts starting from zero, (2) list
up goods and services that they can offer, or that they want to obtain, (3)contact other participants when they find an item that they need or want in
the list and negotiate over such conditions as price, (4) once a trade isestablished, contact the registry and ask him or her to record a minus
amount of the price in the buyer’s account and a plus of the price in theseller’s account. At the time of trade, each participant can inquire a
registry of the other participant’s account balances and past tradings. No
interest is imposed upon the account balances and none is paid. Lastly, theadministration cost for such services is paid from the participants’ accounts
by internal currencies.
LETS is based upon each individual’s value— i.e. freedom and the
responsibility that accompanies it —within a community. Therefore, LETS
has four principles—“agreement,” “zero interest,” “co-ownership,” and“information disclosure.” “Agreement” means that participation in andwithdrawal from a LETS is free and that all exchanges are free exchanges
based upon an agreement between the participants; “zero interest” meansthat no interest is imposed on negative account balances or accrued bypositive account balances; “co-ownership” means that one of the participants
takes care of the supporting service for the LETS on a non-commercial basis,the cost of which every participant will be responsible for; and “information
disclosure” means that it is guaranteed that each participant will be given
complete information at the time of transaction. To these four, Linton
added a fifth principle, which is the use of an internal currency unit that has
the same value as the national currency. Such a LETS in particular could
sometimes be called a “LETSystem.” Comox Valley, where Linton began

15

LETS, named their currency unit the “green dollar” and determined its
exchange rate with cash, or the Canadian dollar, to be 1:1. This is for the
purpose of providing a reference for valuing goods and services, and to makeit possible to show, for example, a commodity’s price by cash together withgreen dollars, as in “10 dollars (payable by green dollars up to 20%).”Let us examine the administrative method of LETS a little more
concretely. If you participate in LETS, you will be handed a plastic cardwith a printed text of “Comox Valley LETSystem” with green letters. The
participant’s name is printed on the card, which serves as the accountnumber, or the ID#. Participants and stores receive sheets for recording, on
which the date of trading, price (amount), and description of the trade are to
be entered. Participants also receive a regularly issued catalogue of goods
and services offered and needed. Based on this, participants make tradesand periodically send a filled-out record sheet to the registry by fax or mail at
set intervals. The registry will calculate and record the amount of trades
and balances for each participant’s account by inputting them into accountmanagement. This is the prototype for LETS. Later on, improvements
were made in the areas of data input efficiency through online systems, theintroduction of an automatic processing system of detailed bills of trading,and the development of printout technology and other functions; on
Vancouver Island, IC cards, electronic wallets, and an electronic money
version of LETS have already been implemented.
The actual exchange would take the following form. A buyer calls
the administrative office and leaves a message like this: “This is David
Higgins, #35. Please record a plus of 100 green dollars in the account of Ms.
Cathy Macintosh, #220, as a price for a computer lesson.” The registry
writes this information in a record book and then enters it on a computer.
As a result, Cathy receives a black of 100 green dollars and David receives ared (or “commitment”) of 100 green dollars. David does not need to have
100 green dollars in his account before he pays Cathy. At the same time,
Cathy can buy a used Volkswagen van, which she saw on the list, for 1,000
green dollars from Mike, if she is confident that she can expect more income
from now on by teaching computer lessons. As a result, Cathy’s account will
have a red of 900 green dollars. Furthermore, if Mike asks David to repair
his roof for 300 green dollars, as a result of these three trades, Mike’s
account balance will be in the black at 700 green dollars, and David’s will be

16

in the black at 200 green dollars. The amount of blacks and reds in eachparticipant’s account will change after each trade, but it should be noted thatthe total sum of pluses and minuses of the accounts for all participants will
always be zero. (In this example, the total of the accounts of threeparticipants is 200+(-900)+700=0.) Because of this, there will be no credit
creation produced in LETS. As each participants mutually gives and shares
reds, they make their trades of money and services smooth. (Figure 1)(Figure 1) An example of trading by LETS
David(+200 G Dollars)

Repair of theComputer Lesson

Roof
300G Dollars

Mike

100G Dollars

1000G Dollars

Cathy(-900G Dollars)(+700G Dollars)
A Used Volkswagen［G Dollar＝Green Dollar，Arrows of real lines indicate the flow of money and services;arrows of dotted lines indicate that of blacks in green dollars; account balances after the
all transactions are indicated within parentheses.］

6. Theoretical Specifics and Significance of LETS
LETS has several features not shared by other local currencies.
Even though some of its characteristics resemble those of ordinary
currencies, unlike national currency or bill-type currency, LETS is not
physical money. LETS is also similar to credit such as deposit money; but
it is not the same. Despite similarities, LETS is neither currency nor credit
per se. The technical and systematic differences between LETS, currency,
and credit may seem minor, but their implications are extremely important
both theoretically and in practice, because such micro differences are the key
to projecting a totally different social and economic system from the17

capitalist market economy.
The following microscopic analyses arenecessary to elucidate such implications.
(1) Adoption of “dispersive issue system”—Establishing the right to issuemoney and equality of the right to purchase
In contrast to non-convertible paper money issued by central banks (central
bank notes) and bill-type local currencies issued by an administrative
committee, in LETS, each individual creates money when they record acertain amount in their accounts as red figures to buy goods and services.
Instead of a “concentrated issue system,” LETS adopts a “dispersive issue
system.” In this system each participant independently issues money as
they need it, so they are not affected by the arbitrary conditions of a central
bank’s money supply and monetary policy or a financial institution’s loanplans. This system implicitly concedes the right to issue money as a basic
freedom for participating individuals. This fundamental economic humanright –– which is quite distinct from the inviolability of property or freedomof contract –– secures the individual’s economic independence and freedom.
Thus, LETS expands the meaning of economic freedom. Each LETS
account begins with a balance of zero. However, since LETS allows redbalances, each individual can make purchases without possessing money
beforehand. In other words, participants can enjoy the “right to purchase”
equally at any given moment because they are not bound by the “monetary
constraint” of how much money they actually possess in black figures. In
capitalist market economy, the right to purchase is monopolized by money
itself as the general equivalent; by contrast, LETS socially guarantees thisright for the individual. Here money is no longer a scarce good issued andmanaged by a single subject; rather, it becomes a “commons,” open to andshared by all individuals. Because the free issuance of money eliminates the
scarcity of money, we can expect increased trading activity. Meanwhile,each participant comes to assume the responsibility for managing his or her
own red balance and the ethical obligation to return the red spontaneously tothe community. However, when organizations like government, firms,
NGOs, NPOs, or cooperatives participate by creating their own accounts,
they may not be able to control the increase in red figures solely by means ofself-responsibility. Therefore, it is surely preferable to have rules that18

impose a certain limit on the amount of red balances, to accommodate theblack (debt financing), or to establish financing by individual voting (equity
financing).
(2) A Currency That Bears No Interest
LETS is a currency that does not bear positive interest (but may haveminus interest). As such, it can prevent accumulation of money and theself-valorization of capital. Because zero or negative interest stimulates theuse rather than the hoarding of money, the speed of currency circulation will
be accelerated and both buying and selling will be encouraged. This
energizes local circulation of goods and services. Moreover, zero or negativeinterest will transform our concept of time itself. When money bears
positive interest, we attach a low value to the future by discounting future
income. When the interest is zero, we attach equal value to present andfuture income, and when the interest is negative, future income is valued
more highly than present income. Such a scenario would thus stimulate
long-term projects whose benefits (income or usefulness) are realized in the
distant future, such as foresting, cultural projects, academic research, andeducation. Because the participants are thus required to consider not only
the present but also future generations, we can expect that they will
naturally deal with such problems as the global environment, culture, andeducation.
(3) Formation of an Autonomous Dispersive Market that Builds Equal
Relations between Seller and Buyer
Although LETS is an autonomous dispersive network, likeconventional markets and the Internet, it constitutes a new form of market
that differs from ordinary markets based on ordinary money. The LETS
market is self-organized and ordered through the accumulation of theautonomous processes of individual purchases, not by collective control orholistic control. LETS trades are made between actual individuals in theover-the-counter manner (mutual consent), but they do not constitute thedirect barter of goods, which requires a “double coincidence of wants” thatmakes trading extremely difficult to realize. On the other hand, LETS does19

bear some similarity to trading in ordinary markets, wherein the basic
initiative is possessed by money itself. Yet in LETS, the absolute privilegeof ordinary money as the equivalent form has been removed, because money
has already been transformed from a scarce good into a medium that can be
freely created. Therefore, the relationship between the buyer and the seller
becomes more equal and flat than the asymmetrical power relationshipbetween the relative value form (commodity) and the equivalent value form(money) described by Marx. With LETS, the “fatal leap” (salto mortale)from commodity to money, which is inherent in selling, is replaced by a“small leap,” so to speak. This difference can be seen in the fact that not
only the buyer but also the seller can take the initiative in trading -- forinstance, catalogues of goods and services list both buyers’ and sellers’ offers.
In addition, since price determinations are fundamentally entrusted to themutual agreement of both parties to each trade, it becomes possible to pricegoods and services by not only referring to customary prices in theneighborhood or in the past, but also by taking into account many othervalues that are not simply economic. As a result, we will see more examplesof “one good for many prices” in the dispersive market rather than the “onegood for one price” in the concentrated market.
In LETS, as in other local currencies, volunteer activities and mutual
help can be quantitatively evaluated and paid for accordingly. Considered
as uncompensated acts of altruism, there are many problems with volunteer
activities. From the psychological standpoint, non-reciprocal gift-giving
requires a return; in addition, quite often the receiver can develop an
inferiority complex and a sense of debt if he or she cannot make this returnto the giver. This kind of gift-giving can also cripple economic autonomy
and mental, personal independence by fostering the receiver’s desire fordependency. On the other hand, the giver may also – even unconsciously -expect to receive some kind of personal benefit from his or her act, such as
psychological satisfaction or the receiver’s gratitude. Thus volunteer
activities frequently create unequal and non-mutual relationships between
the two parties. Because this generates friction and conflict, and at times
even escalates into hatred or antipathy, the relationship between the twoparties can suffer irreparable damage. The acts of gift-giving, giftreturning, and mutual help can produce a strong sense of bonding orcommunity, but they compel a sense of belonging and loyalty to a single

20

community and impose the communal sanctions, such as exclusion andrefusal of recognition, to those who do not make a return for the gift received.
Furthermore, in conditions when the sense of market equivalence haspermeated the consciousness, gift-giving and returning always leave bothparties with a sense of inequality in both parties precisely because they are
not quantitatively evaluated. We do not reject the altruism or the desire tolead a “good life” as an impossibility, but we do not believe in accepting thenegative side of the coin -- in other words, the asymmetry between the twoparties and the antipathy spawned by the hidden factors of selfishness andthe sense of equivalence. To correct this, we should neither isolate therelationship between the parties as that of a creditor and debtor, nor should
we summarily embed them into a reciprocity that is regulated by the holistic
structure of the community.
As Nietzsche said, the personal sense of indebtedness and relationsof responsibility and obligation are materially and economically based upona liability relationship like that of credit to debt. If such is the case, then wemust overcome the negative side of volunteer activities and mutual help bychanging this relationship. LETS offers a solution to this problem byreplacing the credit-debt relationship with a relationship between
individuals established through multilateral settlements that are mediatedby a community and expressed in terms of single-dimensional numericalfigures. LETS does not directly indicate balances between individuals, but
it does quantitatively indicate an individual’s balance to the community by
the standard of zero. In this system, the receiver of volunteer services does
not have to render payment directly to the volunteers, but can make a returnto anyone who belongs to the same community. As a result, the receiver
does not have to feel indebted to the giver; on the contrary, it is even possible
for him or her to become more independent by trying to contribute to thecommunity as much as possible. And as long as the volunteer’s act of
exchange is not based upon mere selfishness, the volunteer can also doubly
contribute by donating any return to a third party, showing the voluntary
nature of his or her own act in the process.
Some bill-type local currencies are currently attempting to deal withvoluntary assistance by having their issuing authorities distribute a set
amount of local currency to senior citizens to pay for volunteer services.
However, this still leaves the receivers of the services with a sense of21

indebtedness and dependency, and does not necessarily resolve the problems
discussed above. As mentioned earlier, some local currencies like Ithaca
HOURS of the United States are linked not only to a national currency but
also to “labor time.” But this is not a necessary condition for local currency,
and it will most likely create operational difficulties for the system sooner orlater. As long as exchanges are based on working hours, which ultimately
promotes exchanges of equal labor time, people will lose sight of therelationship between individuals mediated by the community and the senseof lending and indebtedness to the community, while the sense ofequivalence will gain prominence. One can, of course, refer to “labor time”
and “labor value” in over-the-counter trades as one of the standards for fairexchange, and there is indeed such a LETS in England. However, there isno need to set up “labor time” as a basic standard for exchange with LETS.
(4) The Multilateral Settlement System of Credits and Debts for theCommunity
LETS not only differs from banknotes and bill-type local currencies
but also from checks and bills issued by an individual (a natural person) or ajuridical person. Credit currencies like checks and bills circulate among
receivers and are paid back when they return to the issuer. It is at thismoment that the issuer’s debt is resolved and the credit currencies are
eliminated. On the other hand, a private bank creates credit by issuingdeposit money to lend to companies within the limit of a loan preparation
rate. In this case as well, the debt is resolved and the same amount ofdeposit money is eliminated when the loan is returned to the bank, but there
is no way to discern whether or not the money returned is the same currency
created by the bank.
By contrast, the black and red figures in a LETS are incessantly
created anew as flow through the process of over-the-counter trades between
two participants, while they are added to the outstanding black and red
figures in the two parties’ accounts, thus offsetting each other. Throughthis chain of over-the-counter trades, the past black and red balances of allparticipants get “mixed up” with a newly produced black and red andgradually eliminated, which means that black and red figures are settled
among participants in a multilateral manner. While a check or a bill

22

written by an issuer will be eliminated when it reaches the original issuer(completing one circle), the black and red figures of LETS are produced byindividual participants at any moment, creating numerous circles that takedifferent paths and are gradually eliminated over various time periods.
(This process looks something like an example of the above-mentioned credit
creation. The difference is that in the case of credit creation, money
appears and vanishes only on the banks’ balance sheets at the time of
repayment, and the difference in interest between loan and deposit will
result in profit; whereas in LETS, money can be issued to and subtracted
from anyone’s account and no profit is made.) What makes this possible isthat the black and red balances in LETS are not credits and debts between
two account holders, as voluntary participants in a trade; rather, they arecredits and debts to the local community, i.e. the collective of all participant
subjects. Therefore, the black and red figures do not reflect the relationshipof rights and obligations based upon contracts in accord with civil law.
Rather, the red represents “a promise or a commitment by the people of thecommunity as well as for the people.” Therefore, even if it seems that anindividual directly makes a contract and has a promise with anotherindividual in an over-the-counter trade, it turns out that they are actuallyalways indirectly related by way of the community to which they belong.
For the time being, there is no positive law that defines such a relationshipbetween an individual and a community. While each LETS can establish arule about the maximum red balance at its own accord, the relationships
between participants to a particular LETS should fundamentally be ruled byindividual ethics, unless they are controlled by legal restrictions.
(5) The Principle of Collective Offset (The Zero-Sum Principle)
Each participant in LETS has an account balance in black, in red, orof zero at a particular moment in time, but the total sum of all these amounts
is always zero. In a macro perspective, in other words, the financial asset ofa LETS community is always zero. This “principle of collective offset” (orthe zero-sum principle) is a major characteristic of LETS. Under the zerosum principle, one cannot create credit in a plus-sum manner as in thecapitalist market economy. An individual or a group can make profit
momentarily and sporadically in LETS, but it is impossible for capital, which23

increases its value ad infinitum, to exist in a long term and general manner.
Thus LETS eliminates the general formula of capital (M-C-M’) andsupersedes capitalist economy.
In theory, after a large amount of trades and exchanges, it is not
impossible for both black and red balances in all LETS accounts to revert tozero. If that does occur, it would constitute nothing less than theappearance of an economic system that has no money or credit as stock eventhough a currency has indeed mediated many flows of economic trade. Thisis an “all zero” point at which all the numerous circles of reciprocal
exchanges have been closed and a reciprocal exchange system has been
established. At this point, the amount of each individual’s income – which
would equal the amount of his or her consumption – might be various anddifferent from others, but both money and credit completely vanish since
there is no longer any credit or debt (gift and its reception) to and from thecommunity by any of the participants. Symbolically, the “all zero” point
indicates that currency within a LETS only exists in a “transcendental”
manner. It is also a “regulative idea” based on the desire for a money-free
economy: a reference point that ethically restricts trading by individuals
whose accounts have excessively large black or red balances. However, the“all zero” point can only be attained accidentally; if attained, it cannot last,
even if all the participants make an effort to maintain zero balances inaccord with this “regulative idea.” The “all zero” point only exists as an“idea” that ordinarily cannot be attained.
According to the formula of the quantity theory of money, or MV=PY(M: money supply; V: velocity of money circulation; P: price level; Y: total net
yield), the amount of monetary trade on the left-hand side (MV) always
corresponds to the total nominal income on the right-hand side (PY). In
other words, M, either money supply or nominal monetary balance, will be inproportion with the total nominal income, PY. In LETS, however, the sumof red balances of a whole community, which is an equivalent of the nominal
monetary balance, is not in proportion with total nominal income, because
blacks and reds are multilaterally settled. The relationship between themcan be various depending upon the multilateral settlement relationship.
This becomes particularly clear at the “all zero” point of LETS, where thenominal monetary balance equals zero in each individual account (i.e.,
microscopically) as well as in the whole community (i.e., macroscopically),24

while the total nominal income is a plus, showing that there is no
relationship between them. Thus, the society of a new market economy
where economic income and wealth are not necessarily related to money, or
financial asset, will be attained.
(6) Trust Money and the Reputation Principle
What the zero-sum principle indicates is the simple fact that theparticipants in a particular LETS community support each other throughcredit and debt to and from the community. This happens regardless ofeach participant’s own black or red positions and even if the positions change
in the course of the time. However, as we cannot translate the wholesituation of black and red balances into the relationship between individuals,
it is not clear who supports whom. Because of these facts – the mutual
complement between participants and the impossibility of reducing thebalances to individual relations – LETS is a “trust currency” realized bycommitment to the community and through trust between participants.
The bond between participants is created through trust in thecommunity, not by direct contact between individuals. The duality of LETS
– being both economic and ethical – derives from the fact that ethicalelements which originated in the relationship between individual andcommunity have already been deeply embedded in money as an economic
medium. This duality is a distinctive feature immanent to the system, not a
feature that is introduced from without by arbitrarily deciding what
purpose—economic or ethical—the currency can be used for. This is
another major characteristic of LETS that differs from other local currencies.
Because of this dimension of LETS as trust money, its participants
are always forced to examine their own positions in terms of their relations
to the community. This leads to the formation of an ethical awareness thatone should contribute to the community, not to oneself or others as
individuals.
This mechanism is built in to LETS.
Through thismechanism, each individual realizes his or her indispensability to thecommunity, which enables each person to have full confidence in his or her
own dignity, and also to more actively express his or her own creativity ororiginality in the community. Just by thinking about what one can post in
the “offer” list, for example, can lead a person to not only actively develop25and evolve his or her own potential, but also enable those who have lost theirjobs and confidence to realize their abilities and recover self-confidence as
individuals able to contribute to the community.
But to say that LETS is trust money will surely be met with thefollowing doubts. Won’t this system see the emergence of people who only
accumulate reds without returning to the community? How will LETS copewith such a moral hazard? To answer these questions, we should think
about two aspects—trust and reputation.
First, the trust in LETS is not created between anonymous
individuals nor produced out of spontaneous bonds like local connections or
blood relations. LETS adopts a membership system, which is different frombill-type local currencies that can be used by anyone. As such, we canassume that spontaneously participating individuals have agreed with its
basic ideals or rules. In addition, each LETS has participants who actively
agree with various themes and interests such as economic stimulation of aparticular region, formation of a community, environmental protection, or
feminism. LETS is formed in a thematic community that consists ofindividuals who deeply share a particular idea, value, and interest. We can
expect that the more important the shared idea, value, and interest become
for the core identity of the individuals, the stronger the level of trust in thecommunity, as the individuals cannot easily abandon it. In short, thehigher the values and ideas displayed by LETS, the firmer the bonds createdin the community will become. This especially applies to social movementsthat assume a sharing of high ideas and values such as NAM, a social
movement against capital and state. In such a community, individualistic
betrayal should be checked by ethics that are based on one’s own
commitment to ideas and values—not by utilitarian means such as the fearof punishment.
Second, participants’ behaviors are also restricted by the element of“reputation,” which is evaluation by others. Information about trades
between participants and their accounts is open to the public. Trades by
those who accumulate red balances will be restricted by one of two factors:
first, their own reputations will suffer, and second, the same lowering of
reputation will be experienced by those who trade with such people in order
to increase the amount of black in their accounts. It should be noted that thisprinciple of reputation is a kind of ethical restriction that itself derives from26

the “regulative idea.” From the standpoint of self-interest, participants
may hope to continue accumulating red balances and keep on consuming, but
the very principle of zero sum makes it impossible for all the participants tohave red balances. If there is a participant who accumulates red on one
hand, the same amount of black must be accumulated in anotherparticipant’s account. And since black sums can be used without any
inconvenience, the holder of the black balances has not incurred any damage
by such an exchange. Moreover, if no participants create red figures, thenno goods and services can be circulated and black balances, which arepurchasing power, will never be produced; hence, it can be said that those
who create red sums indeed contribute to the community in a sense. In
short, there is a systematic nature within LETS, which does not allow all theparticipants to be selfish even though they all may want to be. LETS is asystem wherein everybody can not be selfish even though all the members
might hope to be, which is a key difference from conventional market
economy: ethics is internalized not by individual moralistic emotions orconscientiousness but within the system itself.
Despite its surface
appearance of vulnerability, therefore, LETS is actually a flexible and strong
system that would not collapse even though there might be a certain numberof unintentional red balance accumulators and intentional free riders.
In the theory of “the tragedy of commons,” the commons will become
desolate because all the grasses will be eaten up, if all the members become
selfish and leave their sheep to feed at will in the commons. This theory
applies very well to the case of public goods. In principle, however, we will
not see this kind of problem in LETS since all the members cannot have redbalances due to the zero-sum principle. The problem arises not from thesustainability of the whole system but rather from each participant’s sense ofjustice, or what Adam Smith calls “sympathy.” Sympathy is a moral
sentiment that one holds when he puts himself in someone else’s shoes, not anatural sympathy like compassion and fraternity or altruistic humanity.
While we repeatedly have such imaginary exchanges of positions throughexperiences of observing and being observed, we become able to have a moral
judgment on fairness and justice from the perspective of a fair inspector. If
a person has too large an amount of red in his or her balance, the distancefrom the point of “all zero,” that is, the “variance” (=the sum of the square ofeach account’s black or red balance), will become larger. If it goes beyond

27the threshold of most participants’ sense of fairness, they will recognize thesituation as unfair and stop trading or leave such a community. (If there isa person who has a large black balance, there would not be any sense of
injustice, since they would understand that it is a result of having offered
goods or services.) LETS will face a crisis at such a moment. Reputation,
thus, expresses ethics for a community composed of individuals who
recognizes a deviation from a regulative idea as injustice; it does notnecessarily represent each individual’s utility. It is certainly desirable todecide rules beforehand in order to have a standard among all theparticipants, since the judgment on how much red is regarded as unfair
would be various, even though the sense of justice would work naturally to acertain extent. For example, we might make a rule that once his or her redbalance has exceeded a designated limit, a participant cannot make a newpurchase until he or she reduces the red balance by offering goods orservices.
There are many ways to decide a limit for red balance—there aresome cases in which the limit of red balance is the same regardless of theamount of the cumulative total trades; there are other cases in which thelimit will be raised according to the total amount used for all trades. In any
way, LETS can be operated in a more stable manner if we set up such rules
on justice.
Thus, through the trust created by a membership system based upon values
and interests, and through rules and reputation built upon the sense ofjustice, LETS is an attempt to share money as a “commons” even thoughmoney has itself dissolved commons, and to build up trust within that sharedspace.
(7) De-fetishism
LETS eliminates the fetishism of money, and the accompanying desire
to hoard or accumulate, by clearly indicating that the essence of money does
not lie in the physical substance of its materials such as gold, nor in its
scarcity and economic value, but rather in the informational record of
exchange relations. As long as bill-type local currencies take the form of
paper money, or debt notes, an illusion will be generated among users thatthose materials (paper or bill) have value in themselves; hence, the desire to28

obtain and store them will not be completely eliminated. Moreover, sincesuch local currencies are issued by third-party institutions such asadministrative committees, we tend to feel that those currencies are not“what we own,” but “what they created,” like national currency — in otherwords, there is a passive consciousness that money is “given.” This
prevents us from arriving at an ethic of responsibility that would derivefrom the fact that we ourselves are involved in its creation. Further,symbols like pictures or figures printed on each piece of bill-type local
currency visualize the collectivity of a community; hence, it is inevitable that
sentimental or sensual characters will be attached. As we can see here,
local currencies of these types rather take advantage of the fetishism ofmoney as the source of drive, while LETS eliminates this completely.
Because LETS is a “medium of exchange of the people, for the people, by thepeople,” it most simply and clearly represents itself as a form of exchangethat people create on their own. LETS is, therefore, a de-fetishized anddemocratic medium.
(8) The creation of a new market economy through the mixed use of national
currency and LETS
LETS also uses national currency as a transitional measure. Take an
example of bread made from organic wheat. Its price is indicated as “onedollar + one Green dollar.” Here, the cost that must be paid in national
currency, such as fuel and transportation fees, is indicated in national
currency; other costs are indicated in LETS. This procedure allows
producers to participate gradually in the LETS circulation sphere without
excessive burdens from the start. At the beginning, LETS would attract
only some portions of the agriculture and fishery sectors (primary industry),or service, information, distribution, and commerce sectors (tertiaryindustry). Along with extended use in these fields, however, its sphere of
circulation will expand in the primary and tertiary industries and also
include parts of the manufacturing sector (secondary industry) such as iron,
automobiles, or computers. During this process of enclosure, LETS will
also play the role of a complementary currency to national currency. But it
does not stop there, as participants can gradually change their degree of
involvement in accordance with individual free will. The wider the29

economic sphere LETS encompasses, the larger the proportion thatparticipants can pay in LETS. By gradually encompassing mutuallyrelated processes of production in its pricing system, the circulation sphereof LETS expands while eating its way into profit-oriented businesses inordinary markets. This gradualism is a major characteristic of LETS.
Consequently, if we can include both business and volunteer fields
within the LETS circulation sphere, the boundaries between egotism andaltruism and between market and non-market economies will be nullified,and a new non-capitalistic market economy will emerge. LETS is a
strategy that transcends the traditional dichotomies of liberalism andcommunitarianism, individualism and collectivism, by aiming for an
associationism that simultaneously realizes both individual independence
and social cooperation.
(9) Communication Media and Non-Anonymity/Information Disclosure
Ordinary currency produces independent individuals as subjects whomake choices when they buy. By securing anonymity in selling and buying,it has also established the sphere of individual privacy. In this sense, themarket economy has built the foundation of liberalism and individualism.
Nevertheless, the lopsided expansion of individual freedom specifically on
the part of consumers and investors promoted by globalization has brought
about the decline of linguistic communications.
LETS presents a solution to this problem as well. For example, inMulti-LETS (to be explained in the next section), the very meaning of choice
and money possession is diversified. If each LETS forms a thematiccommunity expressing common values, interests or philosophies, then eachindividual’s portfolio –– which LETS that individual possesses, and in what
proportion –– will no longer be determined solely by the view to maximizing
economic value, but also by various cultural, philosophical or normativevalues. Because the medium of LETS is endowed with not only economic
but also cultural, social and ethical properties, monetary communication
through LETS comes close to linguistic communication.
These twocommunication forms are no longer entirely separated, but rather will becompounded and integrated into a hybrid form. By changing the property
of money itself, which has jeopardized linguistic communications, LETS

30

seeks to enrich communications.
In spite of the anonymity formed by money, the proliferation of credit
cards or debit cards has practically diminished the realm of individual
privacy—the possession of personal information by credit companies orbanks has been threatening it. If this is the case, then isn’t it possible for
us to selectively open up a significant part of the private realm in the public
spaces of Multi-LETS? Anonymity or privacy are some of the conditions forpassive freedom, yet they are not absolute conditions for freedom. LETS
has often been criticized for its inability to protect privacy, because it
discloses the transaction and balance data of all participants. But this is a
mistaken critique, since it is completely up to the will of individuals todecide whether they will participate in one or more LETS, as well as what
transactions they will engage in. Individuals can determine the degree towhich they involve themselves in the diverse sphere of circulation called
Multi-LETS. In LETS, information disclosure does not pose a threat to
freedom. To the contrary, LETS is a system which expands the meaning
and realm of freedom, and prepares a circuit that leads individuals to a
multiplicity of public spaces.
(10) The Formation of Real/Virtual Communities and Multiple Memberships
for Individuals in Multi-LETS
Because of the membership system in LETS, blacks and reds circulate
within the “locale” or “community” composed of all its members. This could
be a “real community,” a place of residences like a town or a village, but it
could also be a “virtual community” formed by people who share a common
value or interest. Thus defined, the LETS community is not a closed one,which only allows each participant to belong to one natural and passivecommonality, as in the kinship or territorial bond. Rather, it is a
topological space of proximity, to which various individuals can consciously
and actively commit themselves in accordance with shared values orconcerns.
There should be no rule that each individual can only belong to a single
LETS. Each person is free to belong to several LETS simultaneously, as amatter of personal choice. This is called Multi-LETS. In Multi-LETS,
each person can express his or her individuality by choosing to belong to one

31or more LETS. Any two given individuals can exchange in any LETS towhich they both belong—whether that community is virtual or real. Herethe meaning of the “local” is expanded from a “closed community” thatenforces single membership, to an “open community” that allows multiple
memberships. The meaning of “freedom” and “responsibility” has also
expanded from that of consumers and investors in markets to include thefreedom of choice to belong to one or more LETS, and the responsibility
towards the LETS to which one belongs. Since each LETS reflects a“unique” value or interest, it forms its own space independent of the others,
and these spaces are generally incommensurable with each other. Let us
explain this point in more detail.
Figure 2 depicts eight LETS circulation from A to G and X. If each one
now has a distinct circulation realm, it manifests either a real physical spaceor a virtual space centered around a shared interest or value. The size ofthe circles expresses the relative number of participants in each LETS -- alarger circle has more participants than a smaller one. In Figure 2, the one
with the largest sphere of circulation is X, and the one with the smallest is F.
The seven LETS from A to G each have their own centers and their spheresof circulation differ in size. While some of them partially overlap withothers, they all exist on a single plane. On the other hand, X includes all ofthese LETS circulation spheres within it, so that all participants belong to it
and have an account in it. This model—in which the shared plane is theplatform—can be implemented by technology equipped with the basic
settings of LETS, such as the Internet or IC cards. Therefore, all LETS
have a basic set-up in common, although they vary in geographical spheresof circulation, value, interest, administrative methods, and/or contracts(rules such as the limit of red balance and membership restrictions).
(Figure 2)

Multi-LETS
d
c

X

A
B

32
F

Just as one individual might keep several bank accounts or credit cards,
each of us can belong to various LETS at the same time. The types of
LETS to which a person belongs expresses his or her individual character.
For example, a female high school student living in Tokyo, who is interested
in ecology and welfare, might participate in LETS-ecology, LETS-welfare,
LETS-feminism, LETS-high school, and LETS-Tokyo. On the other hand, afestival-crazed shop owner in Sapporo’s Tanuki-Koji shopping street, who isin need of part-time workers and also interested in nursing, would take partin LETS-Tanuki-Koji shopping street, LETS-festival, LETS-welfare, LETSpart-time job, LETS-Sapporo and so on.
Let us generalize these examples. The squares a and b in Figure 2
represent two individuals. Person a participates in LETS A, D and X;
meanwhile, b participates in five LETS (A, C, D, E and X). The individual
characteristics of a and b are expressed by the various LETS to which they
belong. Both a and b belong to A, D, and X, while only b is the member of C
and E. This means that they can trade with each other in A, D, or X LETS,
but not in C or E. Thus, any two given individuals (or organizations) can

33

trade only within LETS to which they both belong. Among these three
LETS (A, D, and X), since the circulation sphere of A includes that of D (inother words, the circulation sphere of A has D as its partial set), the local
currency of A covers a wider area than D; so does X in relation to A.
Multi-LETS, which is the compound of local currencies with both real andvirtual aspects, forms several layers, many of which partially overlap eachother. Thus, Multi-LETS has not only multiplicity or diversity, but also
multi-layeredness, which is generated not by a central power, but by
spontaneous participation by individuals.
This scenario gives rise to the question of commensurability among thevarious LETS: i.e., can we exchange local currency A with local currency Dwith a certain ratio, like a foreign exchange rate. For instance, if (A : D) is(1 : 2), then it seems possible for person a to change the black of 100 in A to a
black of 200 in D. However, this would cause a decrease of black in A by
100 and an increase of black in D by 200. This goes against the “zero-sum
principle” of LETS. In order to uphold this principle, the “exchange” oflocal currencies should only be allowed if there are two individuals a and b,
who are both members of A and D, and if they agree upon the swapping ofthese currencies. In this case, a and b can swap the currencies at any rate
to which they have both agreed on an over-the-counter basis. Let’s say a’s
account balance is (A, D)=(+500, -200) and b’s is (A, D)=(-300, +200), andthey agree to swap a’s black of 100 in A with b’s black of 200 in D at theexchange rate of 1 : 2. As a result, a’s balance will be (+400, 0) and b’s (-200,0); however, the sum of both persons’ balances remains the same(A,D)=(+200, 0) before and after the trade. Thus, the zero-sum principle
has been maintained. If we determine that this swapping is allowed only
for blacks, both persons’ accounts in A and D will come closer to zero.
Currency swapping will urge each LETS to come close to the “point of allzero,” forming a movement toward the “regulative idea.” In fact, because
there is no officially set exchange rate, A and D are not generallycommensurable; but they are commensurable between two individuals (aand b). In other words, rather than having a widely transferable variable
phase being shown at once, transactions between individuals discover eachtime the invariable phases that are only locally transferable. By notconnecting different LETS with exchange markets as in the U.S. dollar’s
relation to the Japanese yen, Multi-LETS is able to achieve quite a unique34

spatial structure.
Generally, each LETS has geographically different spheres ofcirculation. One LETS circulation sphere can be inclusive to that ofanother, partially overlap with others, or even be completely independent ofothers. The structure of such a Multi-LETS does not take the form of a tree,
but rather what Christopher Alexander calls a semi-lattice. It has not only
multiplicity and variety, but also multi-layers. In other words, Multi-LETS
is a multiplicity of various bodies—rhizome—developed on a single platform.
Each LETS can maintain a distinct individuality that cannot be completely
subsumed by others. Moreover, any individual who belongs to various
LETS will have his or her unique position in a certain part of this MultiLETS. In other words, by keeping a unique position in multi-layered,numerous and various circulation spaces, each individual manifests his or
her singularity, which cannot be reduced to a single dimension or space.
(11) Implementing Multi-LETS by using virtual money
Although we could implement Multi-LETS in such a conventionalmanner as recording on bankbooks or balance sheets, it is more convenient
to use electric money (virtual money), such as IC card-type or network-type.
The software to operate and administer LETS on the Internet has been
already developed. LETS has, therefore, overcome the limit of physicalspace and can now be used in a global virtual community. In November,
2001, Q-project has launched an online network system for LETS called
Worldwide Intercourse Network Development System (Winds: http://www.qproject.org/cgi/Winds/q/winds_q.cgi) that is programmed by Ippei Hozumi.
“Q” is the name given to the unit of local currency on the system. Winds not
only allows a server to automatically handle transaction records, accountmanagement or information publications, but also enables participants to
run membership registrations, commodity listings, and trade settlements on
the web. Q-project has presented a new type of LETS for “glocal”
community in which any individuals and groups on the web can participate
as long as they agree with the aims and rules of Q.
The great reduction in the time and trouble required for participants torecord each transaction and for the registry to manage member’s accounts is
not the only merit of these systems. Of even greater importance is the fact

35

∈
︷

︸
︑

︸

︸
︑
∈
︷

︸
︑
∈
︷

∈
︷

that any group of people – regardless of where they each happen to live -can now immediately launch a LETS by forming a virtual community, if only
they share common values, interests or ideas. Just like mailing-lists,
which connect people around the globe through e-mail, LETS connects
people through local currency. Today’s free mailing list creation websites,
like FreeML or eGroups, enable the creation of a new mailing list in amatter of minutes. Once we can provide a free LETS creation website
similar to these, in which anybody can start a new LETS simply byregistering e-mail addresses, people will be able to launch and operate a new
local currency without much trouble, and the number of LETS is sure to
multiply radically. If we can further create a Multi-LETS network bymutually linking LETS on each server, the Multi-LETS space we have seenin the previous section can be deployed on the Internet.
In Figure 2, we depicted four participants (a, b, c, and d); but in reality,
the points on the plane—individuals (or organizations)—could be limitless in
numbers. According to the sets of local currencies to which they belong,each of those individuals can be described as aA, D, Xb
A, C, D,
E, X cB, X dX . It is, therefore, possible to express the account︑︑

address of each person in relation to servers, as with e-mail addresses; forexample, my local currency account address would be nishibe@xxx.yyy.zzz,
in which “xxx.yyy.zzz” indicates the server of the LETS. If I had several
LETS accounts, I would have multiple account addresses, as innishibe@xxx1.yyy1.zzz1 nishibe@xxx2.yyy2.zzz2 nishibe@xxx3.yyy3.zzz3.
∈│

In reverse, we can also portray each LETS as the set of participants, as in
A={x x A}={a, b, ...}.
Michael Linton already developed the platform for Multi-LETS andstarted to use it in Comox Valley and elsewhere. This system is comprisedof IC cards (smart cards), electric wallets and card readers. The IC cardallows us to have up to 15 different LETS accounts. The small electric
wallets are used for trades between individuals or between an individual
and a shop; when we insert the seller’s and buyer’s IC cards into the wallet,
it can show the balance of each LETS account and transfer blacks between
two accounts in the same LETS. The card readers are used in the samemanner as credit card readers at cashier’s counters. This platform allows
us to pay by a mixture of ordinary currency and LETS.
Although the Internet protocol or software for Multi-LETS has not been36

developed yet, it is technically possible and very likely to be developed soon.
After its development, Multi-LETS will spread around the world, and LETS
will become a powerful influence to transform reality, as a “counter-cancer”
against capital and state. The capitalist market economy has extended its
sphere of activity into the Internet with electric money and e-commerce;
however, from now on, the ghost of Multi-LETS will haunt the world.
NAM is an “association of associations,” in which each individual
belongs to various groups of region (real community), shared interest, andsocial class (virtual community), as well as project-teams made of
spontaneous members conducting individual projects.
Q-project hasdeveloped from one of these project-teams. In fact, the organization of
NAM is similar to that of Multi-LETS. For the economic and ethicalmovement of NAM, LETS—itself an economic and ethical media—isindispensable. Multi-LETS embodies the NAM’s principle of organization.
(12) Creation of Non-Capitalist Markets by LETS
LETS has the potential of creating non-capitalist markets; however, we
can foresee the particular difficulties it will face as it develops. How should
we deal with the individuals or organizations who try to abuse it in acapitalistic manner? Reselling of personal services is by nature impossible;
and reselling of goods is unlikely to take place within a single LETS, since
the transaction information will be disclosed. However, it is possible toresell information or goods bought in one LETS to another LETS.
“Information,” such as documents, computer programs, music, paintings, or
pictures, is especially easy and inexpensive to duplicate; hence, illegal
though it may be, some will attempt to gain large profits by reselling copies.
“Commercial capitalist” activities –– reselling of goods or information one
gets in a certain LETS to ordinary markets outside LETS –– are likely totake place. These reselling activities are permitted in ordinary markets as
the freedom of commerce, yet in LETS markets, they will become the cause
to prevent the expansion of LETS or to exploit the markets.
In order tocope with these problems, we have to prepare the system to regulate
reselling within LETS and to ordinary markets beforehand.
How is such regulation possible? We can find one idea in the General
Public License (GPL), which pertains to free software—free duplication,

37

distribution, and modification of codes. GPL delineates the contractual
terms that must be agreed to for those who wish to use or modify free
software. It includes a self-referential rule that requires the software used
to modify free software under GPL to also be free software. We can apply
this to LETS products: in other words, producers and authors establish aself-referential license for goods and services they trade in LETS.
For example, we can define the “X-LETS commodity” as any productsold in the LETS called “X” that requires 50 percent or more of its payment
to be rendered in LETS. If we call products under similar conditions “LETS
commodities,” the rules for licensing might be determined as follows:
I) “An X-LETS commodity must continue to be an X-LETS commodity
even after being sold.” (The commodity bought with LETS called X should
not be sold to any other LETS or national currencies.)II) “A LETS commodity must continue to be a LETS commodity evenafter being sold.” (The commodity bought with LETS should not be resold
to national currencies.)
We call the former rule the “Particular LETS Commodity License”(PLCL) and the latter rule the “General LETS Commodity License” (GLCL).
Any providers of LETS commodities can choose either of these licenses at hisor her own will and should clearly state it on products when placing them on
the offering list. LETS commodities with PLCL or GLCL can be resold as
many times as physically possible; however, such resale is permissible only
within a particular LETS market or any given LETS markets.
The idea of a license for the resale of LETS commodities is also
applicable to production that uses LETS commodities. As long as we
consume LETS commodities by ourselves, problems will not emerge. But
when we use them for “productive consumption” – namely, as the means of
production such as raw materials or tools – to create a different product tosell, there should be a license to regulate this. For example, we should
apply this license when we make bread out of organic wheat purchased in
LETS and sell it at 100% national currency, when we pay the workers who
prepare the hall for a symposium with a local currency and charge
admission fees at 10 % in LETS and 90 % in national currency, or when we
modify a software bought in LETS and sell it at 40% in LETS and 60% in
national currency. As the examples indicate, the license for productionneeds to be applied not only to products, but to personal services.

38III) “Any commodity produced by means of X-LETS commodities mustalso be an X-LETS commodity.” (The commodities produced by using othercommodities purchased by X LETS as the means of production should not besold to LETS other than X LETS or national currencies.)IV) “Any commodity produced by means of LETS commodities mustalso be a LETS commodity.” (The commodities produced by using othercommodities purchased by LETS as the means of production should not besold to national currencies.)
We call the former the Particular LETS Commodity Production License(PLCPL) and the latter the General LETS Commodity Production License(GLCPL). And let us refer to these four licenses from I) to IV) collectively
as the “LETS Commodity License.” Like PLCL or GLCL above, providersof LETS commodities will choose from these licenses and clearly state themupon placing their goods or services on the offering list.
PLCPL and GLCPL are rules that will benefit from the ripple effect.
For example, commodity 2 produced by using LETS commodity 1 under
GLCPL also should be a LETS commodity. Then, commodity 3 produced bycommodity 2 will also be a LETS commodity…., and so forth. GLCPL,
therefore, infinitely spreads from upstream products to downstream
products through the relation of production processes. In other words,
these products produced under GLCPL will be continuously labeled as
GLCPL. Similar to the free software movement that has extended its own
realm by using such method, LETS will be able to expand its sphere of
circulation by means of the LETS commodity license.
There might be variations in PLCL or PLCPL. For example, the rulecan be applied not only to a single LETS, but also to a group of several
associated LETS. This can prevent both local currency and commodities
from leaking out of the group, because reselling and selling of products are
permitted only within the group.
Commodities are goods and services sold in exchange for money. But
if we had various kinds of monies, the “commoditiness” of those commodities
would also vary depending upon which money those goods and services arecommodities for -- in other words, which money those goods and services canbe bought with. LETS Commodity License will provide producers and/or
authors with the right to choose and decide, prior to selling, the“commoditiness” of their products after being sold as well as the39

“commoditiness” of commodity chains that follow their products. Copyrightof contents such as books/documents and music prohibits “copying” thosecommodities and selling the copies to a third party, but it does not prohibit
selling those contents to a third party. In sum, it prohibits selling copies toprotect the interests of authors. Indeed, used books are sold at usedbookstores and recycling shops. In contrast to this, LETS Commodity
License protects producers and/or authors by providing them with the rightto confine the sphere of circulation for their post-sale commodities or for thecommodities produced with their commodities. This limits the rights ofcapitalists and investors by expanding the rights of producers and authors,
while it does not limit the rights of the consumer. Its purpose does not lie inprotection of producers and/or authors themselves; rather, it is to preserve
the autonomy of the LETS of those producers and/or authors from other
LETS or national currencies, to protect the non-capitalistic nature of LETS
markets from capitalistic abuse, and to embody the idea of superseding
capitalism by expanding LETS markets. The means that allows individuals
to ethically regulate capitalistic behavior for these purposes is the LETS
Commodity License.
In order for the LETS Commodity License to be effective, it isnecessary to have a fair trade commission to monitor license violations andplace restrictions on violators. Yet this should be distinguished fromprotection measures or regulations that states employ to restrict
international trade. Because these licenses are presented by individuals
and groups in LETS as their own right to select the “commoditiness” of theircommodities. Nevertheless, it is not a utilitarian right, since it will bring no
direct profit to producers or authors. Just as GPL insists on “copyleft” asfreedom from monopolistic copyright, these licenses insist on the right to be
free from capital and state by creating non-capitalist LETS markets.
Therefore, they comprise an ethical right based upon the individual’s free
will pursuit of this ideal.
Here, let us apply one of the GLCPL clauses, “a commodity producedby means of LETS commodities must also be a LETS commodity,” to thecommodity of labor power. If labor power is reproduced by the consumptionof rice or vegetables that are LETS commodities, then labor power also must
be a LETS commodity; as such, its trade in ordinary markets will not beallowed. The more individuals participate in LETS markets and apply

40

GLCPL to their products, the less likely it is they sell themselves ascommodities of labor power in ordinary markets or engage in wage labor.
Individuals need either become independent producers in LETS markets andsell their products as LETS commodities or work for cooperatives or NPOs in
LETS markets and receive LETS as payment. Thus commodification oflabor power will be abolished by making labor power a LETS commodity.
Supersession of private properties will be realized by sharing themeans of production in an association of production-consumption
cooperatives. This implies the negation of the state’s protection of private
property. Similarly, capitalistic money will be superseded through thesharing of money. This implies the negation of the state’s monopoly over
the right to issue money. Sharing the means of production and money or, inother words, simultaneously realizing both association of productionconsumption cooperatives and LETS, will enable the abolishment ofcommodified labor power and make possible the “association of free andequal people.”41