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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. Local exchange trading systems (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, especially if it is run with unsecured debt, is the possibility of people exploiting the system by running up a large negative balance and not repaying it. This problem can be addressed by caps on negative balance that can be raised as balances are paid off. The problem can also be addressed by a using a well-worded membership agreement with clauses that specify members remain fully liable for all negative balances and reasonable time limits for calling in stagnant negative balances. Another solution is limiting the system to a small, close-knit community based on trust, where the community holds people accountable. Perhaps for this reason,[citation needed] most mutual credit systems are small, under 2000 members.[citation needed].

Examples and types of systems[edit]

The local exchange trading system (LETS), the Community Exchange System, the Cincinnati Time Store and, (in the United Kingdom), 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. E-book excerpted version

Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Mutual_credit — Please support Wikipedia.
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258862 videos foundNext > 

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...

Favabank Mutual Credit System Explained.wmv

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

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...

Mutual Credit in peer to peer network

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

London Mutual Credit Union

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...

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...

Mutual Savings Credit Union Auto Quest 2014

Let Mutual Savings help navigate you to the lowest rates during Auto Quest!

Member share their reasons for joining the London Mutual Credit Union

Members share their reasons for joining the London Mutual Credit Union.

Prof. Bernard Lietaer On the difference between a complementary currency and mutual credit

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

258862 videos foundNext > 

241 news items

Ecumenical News

Ecumenical News
Mon, 29 Dec 2014 01:41:23 -0800

The Churches' Mutual Credit Union Ltd. was authorised by the Prudential Regulation Authority on December 16 will open for business in February 2015. It is an ecumenical venture involving the Church of England (Anglican), the Church of Scotland ...
 
Poughkeepsie Journal
Sat, 17 Jan 2015 13:56:15 -0800

One of the panelists participating in the discussion was Chris Hewitt, executive director of the Hudson Valley Current, a mutual credit system in the mid-Hudson Valley that I have the privilege of working for through the Bard Center for Environmental ...

Charisma News

Charisma News
Mon, 12 Jan 2015 11:02:58 -0800

The Churches' Mutual Credit Union President Canon Antony MacRow-Wood tells the Times he believes the launch "will help the credit union sector grow" so that in 10 years' time "there will not be a need for the payday lending sector." Most churches are ...
 
Fayetteville Observer
Tue, 13 Jan 2015 09:38:16 -0800

Bragg Mutual Credit Union will operate on a two-hour delay Wednesday. The Health Center at St. Joseph of the Pines, Southern Pines, will operate on a two-hour delay Wednesday. Harnett Area Transit Services will operate on a two-hour delay Wednesday.

Poughkeepsie Journal

Poughkeepsie Journal
Sat, 27 Dec 2014 15:02:18 -0800

One of the panelists participating in the discussion was Chris Hewitt, executive director of the Hudson Valley Current, a mutual credit system in the mid-Hudson Valley that I have the privilege of working for through the Bard Center for Environmental ...

BBC News

BBC News
Fri, 02 Jan 2015 13:56:15 -0800

Lucky Chandrasekera is the general manager of the London Mutual Credit Union in Peckham, south London. Membership of his credit union has grown 15% in the last year. He says members are putting £75 a month into the Christmas club on average.

The London Economic

The London Economic
Wed, 21 Jan 2015 01:22:30 -0800

In essence, communities develop elaborate systems of score-keeping – informal 'mutual credit' systems are created, and if I don't eventually honour my obligations under that system, I will be shunned from the community. It is these 'I owe you one ...

The Guardian

The Guardian
Thu, 01 Jan 2015 23:00:20 -0800

Which? said London Mutual credit union was the only payday loan provider it looked at that charged less than the maximum allowed under the cap, with borrowers having to pay just £3 in interest on a loan of £100 over one month, with no default fees.
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