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Mutual credit is a type of alternative currency in which the currency used in a transaction can be created at the time of the transaction. LETS are mutual credit systems. Typically this involves keeping track of each individual's credit or debit balance. Although the effect is like a loan, no interest is charged, and since mutual credit allows for trading and cancelling balances with others, debts can be paid off indirectly. The "IOU" is a common example of this.

Advantages and disadvantages[edit]

One economic advantage of mutual credit is that the currency supply is self-regulating—the money supply expands and contracts as needed, without any managing authority. The availability of interest-free loans is a great advantage to members of the system.

One downside of mutual credit, as with any form of credit, is the possibility of exploiting the system by running up a negative balance and then leaving.[citation needed] This problem is often addressed by caps on negative balance which can be raised as balances are paid off, or by limiting the system to a small, close-knit community based on trust, where the community holds people accountable. For this reason,[citation needed] most mutual credit systems are small (under 2000 members)[citation needed].

Examples and types of systems[edit]

LETS, the Community Exchange System, the Cincinnati Time Store and in the UK, the Echo business trading network are examples of mutual credit systems. A number of different mutual credit systems have been proposed. Mutual credit can be combined with a number of features of alternative currency systems. For example, it is usually (but does not need to be) a local currency, and it can have a demurrage fee for the holding of balances.

See also[edit]

References[edit]

  • T.H. Greco. "Money: understanding and creating alternatives to legal tender". White River Junction, Vt: Chelsea Green Publishing, 2001.
  • moneyfix.org

Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Mutual_credit — Please support Wikipedia.
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266781 videos foundNext > 

Prof Bernard Lietaer On the philosophy behind mutual credit systems

Recording date: 23. April 2014 Location: School of Business and Economics, Maastricht University Speaker: Prof. Bernard Lietaer Title: In conversation What i...

Favabank Mutual Credit System Explained.wmv

An introduction to Mutual Credit Systems and how they can facilitate more complex barter arrangements.

Mutual Credit

An explanation of mutual credit in the context of Modern Monetary Theory and a critique of the state. Continued discussion of this video: http://youtu.be/uun...

London Mutual Credit Union

Mutual Credit in peer to peer network

Discribed how Mutual Credit works in Ripple, p2p trust nework.

The Credit Union Movement: A Historical Portrait (2002)

Not for profit, not for charity, but for service. A credit union history piece made possible by CUNA Mutual Group. Narrated by Edward Herrmann. Archival foot...

Creating a LETS Mutual Credit System with Ripple

I demonstrate how to set up a very basic LETS mutual credit-style system using the Ripple protocol. Learn more about mutual credit here: https://en.wikipedia...

Switching from banks to London Mutual Credit Union

London Mutual Credit Union is the financial institution that offers supports for local people in London about their financial problems.

Mutual Savings Credit Union Business Dev Video YouTube

Mutual Credit Union - Vicksburg, MS

Mutual Credit Union 1-877-457-3654 601-636-7523 601-638-0140 601-638-4521 http://www.yellowbook.com/profile/mutual-credit-union_1865640666.html mutualcredit-...

266781 videos foundNext > 

5 news items

Left Foot Forward

Left Foot Forward
Tue, 02 Sep 2014 02:00:00 -0700

While assessing break-even rates for payday lenders back in 2013, the London Mutual Credit Union – whose CUOK product is a credit loan that matches lenders on speed but is sold at a fraction of the price, with the added benefit of a credit union such ...
 
The Edinburgh Reporter
Wed, 27 Aug 2014 03:49:57 -0700

... services to churchgoers and across the wider community, and further welcomes the plans by the Methodist Church in Scotland to work with the Church of Scotland and the Church of England to launch the Churches' Mutual Credit Union on 1 October 2014.”.
 
Co-Operative News
Tue, 05 Aug 2014 07:26:15 -0700

“This will not take a lot of money; it just needs support and commitment from the Ministry of Defence to make it happen and to encourage its development,” said Lord Kennedy, who is also a director of London Mutual credit union. The Lord Bishop of ...

Credit Unions Online

Credit Unions Online
Mon, 11 Aug 2014 08:29:07 -0700

According to Steven Rick author of the monthly CUNA Mutual Credit Union Trends Report, credit unions are experiencing explosive growth, almost completely across the board. “The economic environment improved as the recovery accelerated in the first six ...
 
Financial Reporter
Tue, 12 Aug 2014 06:58:48 -0700

Following the launch of the government's call for evidence on credit unions in June, the Economic Secretary today visited London Mutual Credit Union to hear first-hand how credit unions are providing a payday loan product at a fraction of the costs ...
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