From: (John Turmel)
Subject: TURMEL: Demurrage and other LETS bells and whistles
Date: Tue May 20 03:04:51 1997

Richard Kay wrote:
RK: Bernard Lietaer wrote:
BL: I just joined econ-lets. Thanks for the info, I didn't know about
them. Lets talk there about it. LETS systems are precisely currencies
to be used as a medium of exchange and not store of value.
     JCT: Nowhere in the LETS engineering design is there the dictum
that LETS tokens can't be used as a store of value. If they don't want
to use it them way, the problems solved by using Green as a store of
value are their own fault.

BL: Whenever someone hoards the local currency he or she deprives the
rest of the community.
     JCT: People hoarding chips has never been a problem to any casino
cashier. I don't see why it would be a problem to a LETS cashier
unless he chooses to create his own problem. How can a LETS run out of
local currency to point of deprivation?

RK: Which brings me to my thoughts about your interesting article
about demurrage or how do you get people who would otherwise sit on
big piles of money to spread this around a bit more.
     JCT: To some, people using LETS to save for a rainy day is a
problem. To me, I see no problem at all.

RK: As with manure, big piles of money get somewhat offensive if not
     JCT: There is nothing offensive with a society storing up lots
for a rainy day.

RK: though I think that money can also have a useful secondary role in
accounting savings matched by investment up to a point, in addition to
its more essential and primary roles as exchange medium and measure of
     JCT: Call the saving role secondary if you wish but it is still a
useful role for LETS tokens to play.

RK: In a LETSystem with the denomination defined as equivalent to
the relevant national money, being itself subject to inflation
and with the LETSystem money attracting no interest, this loss
of value of the LETS unit will act a form of demurrage in the
sense that there is a incentive for those with positive
balances to spend them before inflation reduces their value.
     JCT: There can be no inflationary loss of value of the LETS unit.
LETS Hours don't lose their value, why should LETS Greendollars? But
if any system chooses to forgo connecting currency to Time to connect
to elastic money, then of course, all the problems of orthodox finance
will rightly bedevil your systems.
     When federal prices go up across the board in Ithaca with tires
now costing US$75 real dollars instead of $50, people hand over three
2Hour, one 1Hour and one 1/2Hour notes instead of the usual two 2Hour
and one 1Hour notes since they have decided the price is right. And
since the federal prices in their own commerce have probably risen as
well, the same thing goes slowly on as it equals out over time. Yet
they've stayed connected to the federal currency just for the

RK: I therefore see the use of money involving demurrage or negative
interest as being potentially a powerful medicine for restoring the
well being of the most disadvantaged communities but can see little
advantage in continued use of this medicine after it has helped in
restoring the patient's health. Those writing about the experiences
where this kind of money was used successfully in the thirties report
that these currencies were closed down by the actions of central
banks, governments and courts of appeal. Even so I think these
negative interest currencies would have fallen into disuse without
state coercion because once their job was done other options would
have become more readily available and would have been more readily
     JCT: All of a sudden, paying positive interest as borrowers of
currency will be more readily accepted than paying negative interest
as savers?
     The whole issue of demurrage and hoarding of tokens cannot exist
in a properly run token cashier cage.

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