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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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204518 videos foundNext > 

Favabank Mutual Credit System Explained.wmv

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

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: ...

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 is ...

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: ...

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 footage ...

Member share their reasons for joining the London Mutual Credit Union

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

Mutual Savings Credit Union Business Dev Video YouTube

Mutual Credit in peer to peer network

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

What's wrong with using credit cards if we pay them off?

Josh in Indianapolis uses a credit card for the rewards and pays it off every month. Is it really that bad? Dave answers and gives his reasons. ☆ FREE money ...

204518 videos foundNext > 

226 news items

 
Fayetteville Observer
Wed, 19 Aug 2015 13:26:15 -0700

He sits on the board of directors of Bragg Mutual Credit Union. Deaver noted that land surrounding the 2.86 acres is zoned commercial. "It just doesn't make sense not to do it," he said. "I think it sends a bad message to any industry or big business ...

MacroBusiness (blog)

MacroBusiness (blog)
Wed, 19 Aug 2015 12:12:09 -0700

“The profit model is an important reason for the large-scale collapse of credit guarantee firms, a 2% profit is not sufficient for taking on 100% of the risk.” (Source: Credit Guarantee Firms Go Down Like Dominoes). The long simmering problem of credit ...

Anglicannews

Anglicannews
Wed, 11 Feb 2015 07:00:00 -0800

The Archbishop of Canterbury's drive to promote access to responsible credit and savings receives a major boost today with the launch of the Churches Mutual Credit Union Ltd. (CMCU). The Most Rev Justin Welby joined the Moderator of the General ...
 
Utne Reader Online
Mon, 25 Feb 2013 12:27:39 -0800

Find out how Ireland initiated a mutual credit system to their advantage during a financial crises in the 1960s to 1970s in this excerpt from chapter 6, “Strategies for Banking.” Of all the many ways of organizing banking, the worst is the one we have ...

THE BUSINESS TIMES

THE BUSINESS TIMES
Tue, 17 Mar 2015 18:58:36 -0700

Michael Lim, chairman of SAC, said: "This mutual credit recognition is a testament of the robustness of the Singapore QP and will serve as a strong foundation from which the CA Program and Singapore QP candidates can leverage on, in their journey ...

BBC News

BBC News
Tue, 10 Feb 2015 16:56:15 -0800

The Church of Scotland has launched a credit union, claiming it will offer a 'fairer' alternative to banks and payday lenders. The Churches Mutual Credit Union (CMCU), is a collaboration with the Church of England and other denominations. About 35,000 ...

The Independent (blog)

The Independent (blog)
Mon, 23 Jun 2014 03:12:31 -0700

Now comes news that the Churches' Mutual Credit Union (CMCU), will be launched on 1 October. It will initially be aimed at members of the clergy, before being made available to all of the “active members” of the Church of England at 16,000 churches as ...

Telegraph.co.uk

Telegraph.co.uk
Sat, 11 Jan 2014 23:31:12 -0800

Mr Duncan Smith himself joined the London Mutual Credit Union last month, while membership across the UK is growing at its fastest in a decade. Credit unions, which operate like mutuals in lending out members' money, expect to gain 20pc more members ...
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