Mutual Credit Systems and the Commons Problem: Why Community Currency Systems such as LETS Need Not Collapse Under Opportunistic Behaviour

This paper analyses theoretically how the Mutual Credit System (MCS) is affected by the Commons Problem. The MCS is defined as a pure accounting system of exchange, of which the Local Exchange and Trading System is a real life example. The Commons problem is caused by the incentive of members to issue units without the intention to repay this ‘debt’. This can potentially cause an MCS to collapse. It is found that eight institutional design principles for overcoming the Commons problem can also be applied to the MCS. Moreover, the dynamic interaction of economically motivated members of the MCS is analysed. This yields the conclusion that the MCS can provide a robust and stable alternative to the Central Money Supply System, whilst preserving its important special feature of an endogenous supply of money.

Jorim Schraven Volume 5(2001) 4

IJCCR Vol 5 (2001) 4 Schraven

To cite this article: Schraven, J. (2001) ‘Mutual Credit Systems and the Commons Problem: Why Community Currency Systems such as LETS Need Not Collapse Under Opportunistic Behaviour’ International Journal of Community Currency Research 5 <www.ijccr.net> ISSN  1325-9547 http://dx.doi.org/10.15133/j.ijccr.2001.002

Commodity Currencies for Fair and Stable International Exchange Rates

For the greater part of the history of money, we humans have used commodities as the basis of our currency systems. In 1971 the world went to a fiat currency system and the problems have increased. During the last 30 years the United States has seen a previously unheard of rate of bank failures. Since the early 70s labor wages have stagnated, corporate taxes have been shifted onto the individual, and the gap between the rich and the poor — countries and individuals — has escalated at similarly unheard of rates. This paper shows why fiat currencies are unworkable, why commodity currencies have also failed and how mutual credit systems may be the answer.

J. Walter Plinge Volume 5(2001) 1

IJCCR Vol 5 (2001) 1 Plinge

To cite this article: Plinge, J.W. (2001) ‘Commodity Currencies for Fair and Stable International Exchange Rates’ International Journal of Community Currency Research 5 <www.ijccr.net> ISSN  1325-9547 http://dx.doi.org/10.15133/j.ijccr.2001.005