In the early days of New Moray LETS, all members had an ongoing maximum credit and debit limit of plus or minus 250L. In other words we were discouraged from spending or earning more than 250L. If we exceeded this we paid a penalty (a compulsory donation into the NML Community Chest for the members to disperse as they saw fit).
NML was designed to encourage sustainable trading and self resilience. That’s why it is called an ‘Exchange Trading System’. LETS is unlike money in many ways but it is not designed to encourage unlimited hoarding or unsustainable neediness or dependency. We do not charge interest for folk being in ‘debt’ but equally we do not pay interest for folk being in ‘credit’. At any given time the folk in debit always equals the folk in credit. If you add up all the balances in the system, it will always sum to zero. (Try it!)
When you stop to think about it, folk can’t be in credit unless someone else is in debit. Both are equal partners in ‘the dance’ so why should one partner be rewarded and the other penalised through the introduction of the evil instrument called ‘interest’? In LETS, people do not pay ‘interest’ for being ‘in debt’. Equally folk do not get rewarded with interest for being in credit. Why should they? Both are necessary for the currency (current) to flow freely. The current is indeed just like water in many ways – it will always flow from the highest to the lowest level and the surface will always be level. (Interest is a like a man made dam which corrupts this natural process.)
This worked OK for a while until I was challenged by a few members. “Lets is all very well for small trades but how could someone ever buy something large like a car, a caravan or a house? – it will never become a currency which can meet everyone’s needs”.
So that got me thinking. How do we design a system where people can expand their credit and debit limits?. I could have judged each request for extended limits individually on its own merits (like a bank manager) but that introduced ‘Subjective Judgement’ and the danger of nepotism and favouritism. Our Guiding Principles of Fairness and Transparency came to the rescue again. It had to be fair, (same rules applying to everyone). The idea came to create an Expanding Exchange Limit (E.E.L) This would allow folk who had demonstrated that they could both earn and spend in equal measure the opportunity to trade in larger quantities. First they had to ‘Earn the Trust’ by demonstrating that they could manage larger limits. Turnover was used as the measure of their ability to earn and spend. The higher their turnover, the more their EEL grew. After a lot of research 10% of turnover was decided to be the most ‘comfortable’ measure.
So, someone who had earned and spent a total turnover of 3,000L was automatically rewarded with a credit and debit limit of 300L. Someone who had achieved a turnover of 5,000L would extend their limit to plus or minus 500L and so on. We also decided to set a maximum upper limit of 1000L for now. (31 accounts have now traded more than 10,000L with the highest almost 90,000L !) It was easy to program this into the LETS database to automatically make the calculations which are now printed on each of your personal statements.
This worked well until last year when a very few members who had exceeded their limits ‘froze’ and chose to not to earn back their credits. After trying everything to encourage them to stick to the rules we finally gave up and sadly had to ask all the remaining members to pay off their debts so that their accounts could be closed. This knocked our confidence and Trust and it was decided at last years AGM to limit the initial Trading Limit to plus or minus 100L for new members.
I intend to propose at this years AGM that the EEL is now extended to ALL members as 10% of turnover after they have traded 1000L – so that it is the same rule for everyone. There will be a penalty amnesty for those ‘caught in the middle’ for 6 months.