LETS plus local community currency's and bitcoin?

[Haplo]

LETS is a socialist price fixing scheme. It cannot work in the long term. If LETS credits were actually traded against currency, the price advantage of LETS would disappear, and it would have all the disadvantages of every other arbitrary fiat.

Economies can't run on charity, that's just not how reality works.

[jtimon]

I live close to the Chiemgauer region, afaik they don't allow changing Chiemgauers back to EUR, at least not officially (black market maybe, but we Germans are nice and follow the rules  ).

I thought you could convert them back at 0.95€ per Chimgauer or something like that. If you can't convert them back they're not backed by anything.
From wikipedia...
Businesses: accept 100 Chiemgauer at face value and spend them for their own purchases or exchange 100 Chiemgauer into €95, losing 5% for commission but earning more by attracting Chiemgauer members to their products and/or services. Of this, €2 is devoted to administrative costs, and €3 replaces the original discount to the non-profit.

[jtimon]

Well, fixing the unit is a problem. Any sort of fixing will lead to an abuse of power by those with the ability to do the fixing. It also leads to problems with arbitrage. That's why it needs to float.

Again, it is not cash, it is credit. For every positive balance there's another participant with a negative one. There's no need for arbitrage because it is not a commodity nor cash. It's like saying that loan debts need to float. I don't want debts to me to float. I want to negotiate a unit and get paid back. The unit is just an agreement. Instead between each debtor/creditor pair, between the LETS community as a whole. As a prerequisite, all participants know and trust each other. Also every participant needs to understand and accept the rules.
The only way to abuse the system is by leaving with a negative balance. In that case you're betraying the trust that you were given.

I haven't logged in to ShireHours for quite a while. I know I've been registered on that system since 15 Dec 2008, but I'm only connected with two other users. It mostly seemed to me to be a way for people that don't have any money to pay off debts without doing the work required to earn the money.

I haven't participated in ShireHours but it is just a fork of Ripplepay and that's not how it works. If you're stupid or generous enough to forgive debts without receiving anything in exchange that's your problem.
It's like saying that barter is for people who want things but don't want to pay with money and pay with useless stuff. If that's how you've bartered the problem is not with barter, you just let people screw you. That's part of the free market, if you're stupid you make awful deals. Is that a problem with the free market or with stupid people?

LETS is a socialist price fixing scheme. It cannot work in the long term. If LETS credits were actually traded against currency, the price advantage of LETS would disappear, and it would have all the disadvantages of every other arbitrary fiat.

Economies can't run on charity, that's just not how reality works.

With all due respect you don't have a fucking clue what you're talking about.
What in the world makes you think that?
Is that you think that fixed wages is a requirement? It is not. Even if you chose hours as the unit all the prices are negotiable. An hour is supposed to mean (as said before) an "hour of unskilled labor". That is (in case you read it the first time but didn't get it) "an hour of certain work that anybody can do". That includes, for example, moving boxes from a store to a truck. That doesn't include, for example, an hour of programming.

What price advantage? What charity?
Have you even read the wikipedia page about LETS? Where are you taking all that nonsense from?

[herzmeister]

I thought you could convert them back at 0.95€ per Chimgauer or something like that. If you can't convert them back they're not backed by anything.
From wikipedia...
Businesses: accept 100 Chiemgauer at face value and spend them

yup, businesses can, consumers can't. that's just to artificially boost the network effect a little i guess.

[jtimon]

yup, businesses can, consumers can't. that's just to artificially boost the network effect a little i guess.

I see.

[ShireSilver]

Well, fixing the unit is a problem. Any sort of fixing will lead to an abuse of power by those with the ability to do the fixing. It also leads to problems with arbitrage. That's why it needs to float.

Again, it is not cash, it is credit. For every positive balance there's another participant with a negative one. There's no need for arbitrage because it is not a commodity nor cash. It's like saying that loan debts need to float. I don't want debts to me to float. I want to negotiate a unit and get paid back. The unit is just an agreement. Instead between each debtor/creditor pair, between the LETS community as a whole. As a prerequisite, all participants know and trust each other. Also every participant needs to understand and accept the rules.
The only way to abuse the system is by leaving with a negative balance. In that case you're betraying the trust that you were given.

Its not the debt itself that gets arbitraged, but the units. If the units are fixed, then an arbitrage situation will arise - whether it is "needed" or not is irrelevant.

And credit money isn't needed for everyday trade - commodity money works just fine for that, better than credit money actually. The only time you need credit money is when you need to expand the money supply beyond what the commodity money can provide. And then you need it to be able to collapse back into nothing (AKA clearing). Trying to base an economic system on credit based currency is suicide, as so many countries are finally starting to find out.

[jtimon]

Its not the debt itself that gets arbitraged, but the units. If the units are fixed, then an arbitrage situation will arise - whether it is "needed" or not is irrelevant.

Please, explain me with an example how this arbitrage could occur. For example, fixing the unit to 1 USD.

And credit money isn't needed for everyday trade - commodity money works just fine for that, better than credit money actually. The only time you need credit money is when you need to expand the money supply beyond what the commodity money can provide. And then you need it to be able to collapse back into nothing (AKA clearing). Trying to base an economic system on credit based currency is suicide, as so many countries are finally starting to find out.

Yes mutual credit money isn't needed, it's just an alternative to cash (my definition of cash includes many many things such as bitcoin, gold, usd...).
What we have today (USD, EUR) is not mutual credit. It is credit from the state (and banks, by fractional reserve banking) to the rest of us which is transmuted into cash by law. If they didn't print like crazy, it would be basically equivalent to gold. So even if it's also credit, what we have today is definitely cash. It's in a blurry frontier.

This video may help you understand my vision of money (and also mutual credit in general, which I really doubt you understand):

http://www.youtube.com/watch?v=ySzqM5dpF7s

This could be the "first part": http://www.youtube.com/watch?v=UQX3tNuC_TY

And this is the film from the LETS crew to promote their system: http://www.youtube.com/watch?v=TwmM5Nb6hiE
A little bit too much "anti-capitalism" for me, but not bad. They are really criticizing the current system.
We all monetary reformists don't like the current system. So your argument "LETS won't work, look at the current system" doesn't serve. Just like I can't criticize gold by criticizing the fed, you can't say "Gesell's free-money sucks because Keynes was wrong" or neither of us can't criticize debt-free money proponents (the conclusion of the money masters documentary, basically) by saying "greenbacks are doomed because Bernanke is crazy".

Also LETS systems have been working pretty well (for its limited local purpose) in many different places for long so your conclusion "it won't work" is already invalid. IT DOES CURRENTLY WORK in hundreds of communities.

Anyway, I'm sure we two can agree that what we want is a free monetary market in which people can chose the system they prefer (or use several of them simultaneously).

[herzmeister]

yup, for all you gold bugs and other commodity-bugs out there, what is money, in short?

Money is information.

That's all it is really.

Its purpose is to serve our bartering and trading with as least friction as possible.

All those different means and tools we have used as money in history and today have different characteristics which serve its original purpose in different ways, some better than others.

[daybyter]

Hmmmh...from that perspective, *coin is the perfect money, because it reduces money to pure information. No need for additional means, like paper bills, metal coins or funny plastic cards. Just a sequence of 0's and 1's...

So anyone with a LETS should love bitcoins, because it leaves out the need to print any money, or so...

[Haplo]

LETS is a socialist price fixing scheme. It cannot work in the long term. If LETS credits were actually traded against currency, the price advantage of LETS would disappear, and it would have all the disadvantages of every other arbitrary fiat.

Economies can't run on charity, that's just not how reality works.

With all due respect you don't have a fucking clue what you're talking about.
What in the world makes you think that?
Is that you think that fixed wages is a requirement? It is not. Even if you chose hours as the unit all the prices are negotiable. An hour is supposed to mean (as said before) an "hour of unskilled labor". That is (in case you read it the first time but didn't get it) "an hour of certain work that anybody can do". That includes, for example, moving boxes from a store to a truck. That doesn't include, for example, an hour of programming.

What price advantage? What charity?
Have you even read the wikipedia page about LETS? Where are you taking all that nonsense from?

A little bit too much "anti-capitalism" for me, but not bad. They are really criticizing the current system.
We all monetary reformists don't like the current system. So your argument "LETS won't work, look at the current system" doesn't serve. Just like I can't criticize gold by criticizing the fed, you can't say "Gesell's free-money sucks because Keynes was wrong" or neither of us can't criticize debt-free money proponents (the conclusion of the money masters documentary, basically) by saying "greenbacks are doomed because Bernanke is crazy".

Also LETS systems have been working pretty well (for its limited local purpose) in many different places for long so your conclusion "it won't work" is already invalid. IT DOES CURRENTLY WORK in hundreds of communities.

Anyway, I'm sure we two can agree that what we want is a free monetary market in which people can chose the system they prefer (or use several of them simultaneously).

There is no such thing as a "generic unskilled labor hour", and I don't have to prove that Keynes was wrong in order to say that Gessel's depreciating money is crap when Gessel himself was full of crap.

The stated purpose of LETS and every other ponzi scheme like it is "to provide an alternative (or adjunct) to state money, and to create jobs in the community". In every case, people get some sort of discount; either in the form of a markdown on goods or else (extremely) cheap labor. I remember an article about it once, noting some old lady getting her house painted for less than half of what it would cost her in dollars.

The system overall is basically the same stuff the NGOs shove down poor developing countries' throats: shame based credit money. They claim by offering either zero interest or artificially low interest you can stimulate business, but all real business runs on capital, the holders of which demand interest and for good reason. The incentive of interest ensures that money is spent on the most efficient businesses rather than socialist bridges to nowhere. By taking away interest and economic responsibility through their arbitrary credit materialization, they invert economic control from consumers to producers and eliminate any chance of getting capital influx or developing any real business.

If you want to be a "good person" and paint some old lady's house for free, then volunteer and do it for free. Don't use some retarded socialist ponzi brainwashing scam. LETS, Berkshares, and all their crony companions are pure blooded communists, and the results of communism are always the same no matter what shade of red you paint it.

[herzmeister]

the most efficient businesses

http://www.scribd.com/doc/26248658/Is-Our-Monetary-Structure-a-Systemic-Cause-for-Financial-Instability-Bernard-Lietaer

[Haplo]

Are you saying bitcoin doesn't create diversity and interconnectedness? Do community currencies even create diversity or interconnectedness? I would think a currency that is only accepted in a small region would create more separation than anything.

[herzmeister]

We're all using a very local currency every day. That is our own precious time, our own work hours. Whether we buy groceries, do some boring paper work, or some mundane task in our job that is well below our qualifications but must get done so it's out of the way, all these things are *inefficient* because there'd surely be businesses we could find to outsource those tasks, who are specialized and thus more efficient at it.

So why don't we outsource everything? Because it makes us dependent. It makes us slow to react to changes. It makes us inflexible. And changes will occur. So this approach is unsustainable in the long-term. This is the *resilience* factor.

An actual local currency is an extension of this concept to a community. So often in history there were factories standing still while there were still skilled workers and there was still demand, but there was recession, there was "no money". So they could and should have established a local economic cycle with their own money before everyone starves of poverty.

With a money that is scarce, no matter if naturally or artificially, such things will always happen. I don't see how Bitcoin will mitigate that. Even the American colonies resorted to scribs at some point when gold became too scarce. But the scarcity of a currency is necessary in order to be ubiquitous and universally accepted, while in local context it has to be abundant in order to encourage activity. These are diametrical requirements that a dual currency system (i.e. gold with scribs, or bitcoin with ripple) can solve.

[Technomage]

+1 for both jtimon and herzmeister for a great understanding of currencies. Scarcity is a two way street, it's a good thing in some ways and a very bad thing in some ways. Currencies based on mutual credit basically have no scarcity because the currency itself forms from the work that is done in those communities. It can never be scarce. Commodity money however can become scarce in a community, making it impossible for someone to use it as payment. Of course that person could take an expensive loan and become a debt slave but it's not necessarily the best way to go.

In a mutual credit system taking and giving credit is all about the community and there is no sense of debt in the same way. One of the reasons for this is that all of the credit is interest free. There is also no forced payment. That credit is loaned from the entire community, not from any single person. Of course one could abuse this by only taking and not giving but at some point people would stop giving if a person has a balance of minus 100 hours (in a timebank).

The problems with these type of currencies come when we go to large scale human interaction and large production chains. Their acceptance is entirely based on community trust which is why mutual credit systems don't really scale well. This is where Bitcoin comes in. Bitcoin could be the widely accepted currency that is accepted everywhere but at the same time people could use mutual credit within communities because it does not have scarcity which can sometimes limit the possibilities of what people can do.

[jtimon]

There is no such thing as a "generic unskilled labor hour",

Yes, is a work that you don't need preparation nor any special abilities to complete. It's a very simple definition. Usually it's said "it is more or less equivalent to 10$" as an orientation. The intention of using hours is avoiding USD inflation.
Anyway, if you don't like that unit, you can use USD, silver oz, liters of milk or whatever you prefer. Whatever the group agrees will work better for them.

and I don't have to prove that Keynes was wrong in order to say that Gessel's depreciating money is crap when Gessel himself was full of crap.

Glad that you get they're different. Out of curiosity...What would you say is the worst crap from Gesell?
Not talking about solutions, what misconception?

The stated purpose of LETS and every other ponzi scheme like it is "to provide an alternative (or adjunct) to state money, and to create jobs in the community". In every case, people get some sort of discount; either in the form of a markdown on goods or else (extremely) cheap labor. I remember an article about it once, noting some old lady getting her house painted for less than half of what it would cost her in dollars.

LETS aren't designed as ponzi schemes. You don't need more and more users to make it work. In fact, it's trust requirements make growing the user base very difficult or even impossible from certain point.
What makes you think they're ponzi schemes?
I haven't heard of any discount not in stuff prices nor in wages. Where have you heard that?
I read some articles about bitcoin being a ponzi scheme too. Could your article be biased too?
Could the old lady be saving the hidden costs of conventional money?

The system overall is basically the same stuff the NGOs shove down poor developing countries' throats: shame based credit money. They claim by offering either zero interest or artificially low interest you can stimulate business, but all real business runs on capital, the holders of which demand interest and for good reason. The incentive of interest ensures that money is spent on the most efficient businesses rather than socialist bridges to nowhere. By taking away interest and economic responsibility through their arbitrary credit materialization, they invert economic control from consumers to producers and eliminate any chance of getting capital influx or developing any real business.

This is not to borrow money for investing. This is just realizing the internal trades within a community and replacing conventional money with their own accounting in the degree that is possible. Nothing to do with micro-credits which, by the way aren't at zero interest.
But you can also borrow to invest at low or no interest with others systems like Wir or JAK.
Still they aren't ponzi schemes nor destroy the economy. Read about them, also interesting.

If you want to be a "good person" and paint some old lady's house for free, then volunteer and do it for free. Don't use some retarded socialist ponzi brainwashing scam. LETS, Berkshares, and all their crony companions are pure blooded communists, and the results of communism are always the same no matter what shade of red you paint it.

Amazing how fast dogmatic people bring up words like brainwashing. I'm far far away from communism. You haven't read Gesell (specially critic with Marx) nor Riegel (who inspired LETS). Both libertarians.
Start with their wikipedia pages because it seems that you haven't gone that far in your research:

http://en.wikipedia.org/wiki/E.C._Riegel
http://en.wikipedia.org/wiki/Silvio_Gesell

Then reading directly what they said from them won't hurt you:

http://www.newapproachtofreedom.info/
http://www.community-exchange.org/docs/Gesell/en/neo/

[jtimon]

The problems with these type of currencies come when we go to large scale human interaction and large production chains. Their acceptance is entirely based on community trust which is why mutual credit systems don't really scale well. This is where Bitcoin comes in. Bitcoin could be the widely accepted currency that is accepted everywhere but at the same time people could use mutual credit within communities because it does not have scarcity which can sometimes limit the possibilities of what people can do.

Yes, that's exactly what I meant when I said "LETS is not cash". You cannot build a skyscraper or buy a car using LETS, because coordinate that much credit would be very difficult, but for selling your backyard fruits and buy some bread it is perfectly functional and far superior than say, barter. Bitcoin has more potential growth than LETS. A LETS community must be limited so LETS can only grow in usage by starting more independent groups. Ripple doesn't have that inherent limitation. I'm very optimistic about Ripple's scalability but it could be that it were also only suitable for small deals.

Different advantages, different uses. We should embrace polimonetarism and forget monomonetarism.
A more complex monetary environment is also a more resilient one. And I disagree that diversity needs to necessarily mean a sacrifice in efficiency. You could not dream with the efficiency of very diverse systems like the rain forest if you had just a few types of organisms.

[herzmeister]

yay for polimonetarism.

Ripple really really has to become totally ubiquitous in order to benefit from the 6th degree of separation effect so that it can "scale up" properly. And even then, as a developer I'd say Ripple is O(log n) for trusted transactions, while Bitcoin is O(1).

Yes it surely depends on a lot of factors in how far efficiency would be sacrificed for diversity, especially in today's world where we're all connected and can exchange information fast, but there definitely is a statistical tendency. The more production facilities you have for a car, the more likely there'll be reinvented wheels, but the more diverse cars can be produced.

[ShireSilver]

So often in history there were factories standing still while there were still skilled workers and there was still demand, but there was recession, there was "no money". So they could and should have established a local economic cycle with their own money before everyone starves of poverty.

With a money that is scarce, no matter if naturally or artificially, such things will always happen.

This is true, but only when there is some government either limiting the supply or fixing the price. If the price is allowed to float, then any amount of commodity money will suffice.

[ShireSilver]

In a mutual credit system taking and giving credit is all about the community and there is no sense of debt in the same way. One of the reasons for this is that all of the credit is interest free.

This is a real problem.

For one thing, it seems to be saying that people will be forced to not charge interest. That is just plain wrong. Why should anyone get to tell me how to use my hard earned money? Who made you the economic dictator?

Second, it denies the reality that lending has a cost. When I lend someone something, whether its a lawnmower, a hammer, or some money, I am unable to use it until it is returned. And the longer it is loaned out, the more it costs me - whether the cost is in opportunities lost or just inconvenience doesn't matter. Interest on debts is a way to compensate the lender for their cost. It isn't necessarily the only way, but to deny that option is immoral.

I know a lot of people don't like the idea of charging interest, but that's due mostly to the problems associated with it. But most of those problems are due to the underlying currency being based on debt. You don't get anywhere near as many problems with lending for interest when you use a wealth based currency.

[herzmeister]

If the price is allowed to float

yes, but does the price of the one universal commodity currency currently float in a way that is beneficial to the requirements of a local community at a given time and place?

For one thing, it seems to be saying that people will be forced to not charge interest. That is just plain wrong. Why should anyone get to tell me how to use my hard earned money? Who made you the economic dictator?

No dictatorship required. Theoretically there can be interest of course (and it's implemented in some Ripple systems afaik), but in practice it shows that local-/trust-based exchange system encourage people to not use interest very much, don't forget also because these units of exchange are abundant.