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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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5 news items

 
Brattleboro Reformer
Tue, 16 Sep 2014 00:52:30 -0700

8) Create a mutual credit system, and stop supporting wall street and put our taxes in a State Reserve bank to support new business, and stopping payments to wall street of over 80 Million a year. 9) Be willing to give young families a few acres ...

Bleacher Report

Bleacher Report
Sun, 14 Sep 2014 18:54:05 -0700

What Walker and Stephenson have to their mutual credit, however, is a system both designed for and conducive to their respective skill sets. Steve Clifford, poised to enter his second season as head coach of the Charlotte Hornets, is the man tasked ...
 
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.”.

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 ...
 
Namasthe Telangana
Mon, 15 Sep 2014 12:52:30 -0700

Mutual Credit Guarantee Scheme కింద భారతదేశంలో నెలకొల్పబడిన మొట్టమొదటి సంస్థగా చెప్పవచ్చు. ఈ సంస్థకు CGTMSME, ఆంధ్రాబ్యాంక్‌తో ప్రత్యేక ఒప్పందం ఉంది. ఈ ఒప్పందం లో భాగంగా ఈ సంస్థ ...
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