Alternate money systems: LETS and Timebank

In my essay on dealing with the current economic crisis (here) I proposed resolving some of the problems with our fractional reserve money creation process by expanding the concept of the Local Exchange Trading System (LETS)  into a national system.

Here are links to three articles about LETS or Timebank systems. (onetwo three)  These are presented as ways for local communities to cope with the breakdown of national financial systems.

In designing alternative money plans one must be careful not to repeat the problems of the existing system.

The first is to ensure that the total money supply is  flexible.  So long as the money supply is flexible and able to increase or decrease with the quantity of goods and services to be exchanged, then prices will be steady.  One of the problems of the gold standard was that it did not have flexibility.

The second is to ensure that interest is not charged or paid on the debits and credits created as goods and services are exchanged.  I am not  aware that anyone has tried to think out the problems caused by interest being charged on the loans used to create money in the fractional reserve process but I suspect it is a sort of Ponzi scheme which frequently breaks down into a financial crisis.

I found it interesting that all three of the  articles referred to the social aspects of these exchange systems because I have long believed that  economics is largely about relationships.

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