digplanet beta 1: Athena
Share digplanet:

Agriculture

Applied sciences

Arts

Belief

Business

Chronology

Culture

Education

Environment

Geography

Health

History

Humanities

Language

Law

Life

Mathematics

Nature

People

Politics

Science

Society

Technology

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.
This page uses Creative Commons Licensed content from Wikipedia. A portion of the proceeds from advertising on Digplanet goes to supporting Wikipedia.

283 news items

 
Toward Freedom
Wed, 29 Jul 2015 09:41:15 -0700

A timebank is a system of mutual credit, where a member provides a service to someone else in the timebank and gets credit, which they can redeem for that same amount of time to get something they need from another person in the network. Timebanks ...
 
Lexology (registration)
Wed, 29 Jul 2015 04:15:00 -0700

Section 553C sets out a process for mutual credit and set off between an insolvent company that is being wound up and a person/company seeking to have a claim admitted against the insolvent company. The final result is that “only the balance of the ...

Business Wire (press release)

Business Wire (press release)
Tue, 02 Jun 2015 05:11:15 -0700

LINDEN, N.J.--(BUSINESS WIRE)--IMM, a pioneer of integrated eSignature, workflow, and document solutions for the modern business enterprise, is pleased to announce that Mutual Credit Union transformed its lending and member service processes after ...
 
Vicksburg Post
Wed, 08 Jul 2015 08:56:15 -0700

Mutual Credit Union sponsors a cash prize for the person who has the most online interaction through live tweets with the hashtag #ritzonriver throughout the event. The tweets will be projected on the video screens that are by the stage. “It keeps ...

Vicksburg Post

Vicksburg Post
Fri, 17 Jul 2015 10:26:15 -0700

Mutual Credit Union sponsored a $200 cash prize for the person who had the most online interaction through live tweets with the hashtag #ritzonriver, and the tweets were projected on video screens. The whole event was for a good cause as a portion of ...
 
Vicksburg Post
Tue, 14 Jul 2015 08:22:30 -0700

During Thursday's show, Mutual Credit Union will sponsor a cash prize for the person who has the most online interaction through live tweets with the hashtag #ritzonriver throughout the event, Kirklin said, and the tweets will be projected on the video ...

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 ...

Press Release Rocket

Press Release Rocket
Tue, 28 Jul 2015 05:56:15 -0700

Leaders from local, national and international commercial and non-commercial mutual credit clearing, counter-trade systems and complementary currencies will attend IRTA's Convention. Participants strive to further advance industry collaboration for ...
Loading

Oops, we seem to be having trouble contacting Twitter

Support Wikipedia

A portion of the proceeds from advertising on Digplanet goes to supporting Wikipedia. Please add your support for Wikipedia!

Searchlight Group

Digplanet also receives support from Searchlight Group. Visit Searchlight