Table of Contents 
A Snapshot of Community Currency Systems in Europe and North America
1.  Achieving Critical Mass	
1.1  Getting Started	
	The "Wedge"	
	Community Way	
	The Bonus Concept	
1.2  Integrating Business	
	The LETS Environment	
	The HOURS Environment	
	Barter Systems	
	Barter and  Community Currency Systems	
1.3  Multiple Community Trading	
	Exchange Rates Between Community Currencies	
2.  Operating Issues	
2.1  Fiscal Tools	
	Budget Spending	
2.2  Monetary Tools	
	Money Supply	
2.3  Inflation	
	Tying the Community Currency	
	Internal Inflation	
3.  LETS, HOURS or Both?	
3.1  LETS and HOURS	
3.2  Hybrid Systems	
3.3  Community Fit	
4.  Key Success Factors	
4.1  The People	
4.1.1  The Champion	
4.1.2  Administration	
4.1.3  General Participants	
4.2  The Community	
4.3  Responding to Real Needs	
4.3.1  Agriculture	
4.3.2  Input Factors:  Wages, Credit and Rent	
4.3.3  Social Services	
4.3.4  Taxes	

A Snapshot of Community Currency Systems 
in Europe and North America

Jeff Powell and Menno Salverda
c/o  CUSO Thailand
17 Phaholyothin Golf Village, Phaholyothin Road
Chatuchak, Bangkok  10900
Tel/Fax:  +66-2-513-3031
Email:   or 
Version  2.0  (06-20-98)


This paper was written to serve two purposes.  The first is to 
provide partner agencies in the Thai Community Currency 
Systems (TCCS) project with a summary of the current state of 
community currency system development (c. 1998) and an 
introduction to the issues being grappled with.  Secondly, it is 
hoped that this paper can stimulate new ideas and debate by 
linking the work of existing practitioners.  It is expected that there 
may be some tension between these objectives; partner agencies 
may find the discussion of system design issues overwhelming at 
times, while those with extensive experience may feel that some 
of the discussion and analysis is self-evident.  We hope this does 
not discourage the reader.  Those who are unfamiliar with 
community currency systems might refer to the articles or books 
mentioned in the bibliography which discuss these systems in 
more detail.

The report summarises the preliminary research for the 
TCCS project which has been funded by the Japan Foundation, 
CUSO and VSO (Voluntary Service Overseas).  The intent of the 
research was to provide the authors with as much practical 
experience in community currency systems application as was 
possible within monetary and time constraints.  For a list of those 
whom the authors contacted please refer to the 
acknowledgements.  The goal of the TCCS project is to share this 
experience with partner agencies in Thailand in order that, 
together, an appropriate system may be created for use in the 
Thai context and its effectiveness analysed.  A more detailed 
explanation of the TCCS project, its rationale, objectives and 
implementation plan, is available upon request.

Approximately one thousand community currency systems 
are operating in North America and Europe.  Roughly speaking, the 
systems fall into four categories.  The first, and largest, group, 
based on the principle of mutual credit, includes LETS (Local 
Employment and Trading Systems) and LETS-like trading 
communities.  These systems are located predominantly in Canada 
and the United Kingdom, with derivatives, such as the Noppes 
system in the Netherlands, appearing across Europe.  The second 
group, fiat systems which print their own notes, has grown out of 
the Ithaca HOURS initiative in New York State (although there is 
an impressive historical precedent for such schemes).  The 
majority of such systems are in the United States, although a few 
have spread to Canada and Europe.  The third group, which can be 
called `hybrid` systems, are those which combine various elements 
of LETS and HOURS systems, and can not, therefore, be considered 
as one or the other.  The final category is based on a `community 
service bank` concept.  The best known of such systems, called 
TimeDollars, has enjoyed a good deal of support from peoples¹ 
organisations and government bodies alike in the United States.  
[Since the goal of the TCCS project is to focus on the broader role of 
community currencies in economic development rather than their 
impact purely on the provision of social services (though, 
certainly, to a great degree, these two are intertwined), we have 
chosen to concentrate our studies on the first three groups and 
only briefly discuss the TimeDollars concept.]

The paper is divided into four sections.  The first three 
sections discuss system design issues, beginning with an 
explanation of initiatives intended to help systems reach critical 
mass, continuing with an analysis of operating issues such as 
taxation and inflation, and concluding with a comparison of LETS, 
HOURS and hybrid systems.  In the final section, those elements 
which were most often mentioned by participants as being crucial 
to success are summarised and discussed.  This includes `people` 
issues such as the project `champion`, the administrative 
committee, and both the internal and external community, as well 
as a brief analysis of those needs which must eventually be 
addressed if community currency systems are to play a significant 
role in economic life.

	We hope that anyone who has any comments or questions 
about either the information or the analysis contained herein will 
contact us at the address noted above.  The next phase of the TCCS 
project is to incorporate this feedback, that of our partner agencies 
in Thailand, and further study of indigenous exchange systems in 
the region, into the adaptation of community currency systems for 
use in Thailand.  
By no means should this paper be considered an exhaustive 
study of the subject matter.  For discussion purposes only.

1.  Achieving Critical Mass

	Community currency systems have had difficulty reaching a 
level of trading which is significant in the eyes of a broad cross-
section of community members.  Herein, we discuss three 
initiatives which attempt to gain community currency systems 
greater acceptance and use.

1.1  Getting Started 
The "Wedge"

	During start-up it can be difficult to overcome the simple 
reluctance of community members to trade in a currency that 
they are not familiar with.  Unlike cash, cheques and credit cards, 
whose acceptance has reached the level of the sub-conscious, the 
use of community currency requires a directed effort.  Several of 
the individuals spoken with expressed the need for a big event 
which uses community currency to pay for inputs in order to kick-
start acceptance of the new trading format.  To describe this 
phenomena, Sat Khalsa, one of the people behind Toronto LETS, 
coined the term "wedge".

	The wedge could be a home renovation, a community project 
or a small business start-up.  More ambitious would be the 
establishment of a `business incubator`, where office/retail/factory 
space, equipment and services could be paid for in community 
currency.  The wedge should get community currency into the 
hands of a wide range of people, allowing them to begin trading 
without having to first earn credits (or, alternately, assume a 
negative account balance in a LETS).  What is important is that the 
stakeholders be trusted members of the community who have a 
means to pay back the credit they are extended.  Without the 
presence of interest rates, the downside risks are small compared 
to conventional business start-ups.

	There is the often cited example of Deli Dollars in Great 
Barrington, Massachusetts.  When restaurant owner Frank 
Tortoriello¹s lease expired, he was refused a loan by the local bank 
which would have allowed him to move to a new location.  
Tortoriello decided to print his own notes, Deli Dollars, which could 
initially be purchased for $9US and would be redeemable for 
$10US worth of food in six months time.  During those six months, 
Tortoriello moved his store with the nearly $5,000US he raised, 
and, more interestingly, the notes took on a value of their own.  
Trading in Deli Dollars was happening all over town.  By assuming 
a large future commitment to return goods (sandwiches, in this 
instance) to the community, Tortoriello created the wedge which 
spurred trading activity.

	Creating a wedge requires planning, creativity and small 
business skills, not to mention careful timing.  This reinforces the 
need to involve the business sector, where such skills abound, 
early on in system development.

Community Way

	The Community Way model, designed by Michael Linton, 
creates an initial Œopening¹ through which trading can be 
encouraged and acceptance of the community currency increased.  
Community Way involves three steps:

1.	A community currency systems development group solicits 
local business for donations to social organisations (such as an 
HIV/AIDS hospice).  These donations are not to be made in 
cash or goods/services, as is normally done, but in a future 
commitment to accept community currency units at par with 
the national currency following pre-agreed upon conditions.  
These conditions may include, for example, that community 
currency units can only be used on slow business days; or, can 
only be used for up to the profit margin percentage of the sales 
price, say 30%.

2.	The community currency systems development group prints 
an amount of community currency vouchers equivalent to the 
total donations (remember, future commitments) of local 
business.  These are sold by social organisations to community 
members at par with the national currency.  They are bought 
with the knowledge that they are backed by local business, and 
that they are providing much-needed assistance to social 
organisations.  The HIV/AIDS hospice can now use this national 
currency as it sees fit.

3.	Community members redeem their vouchers at participating 
businesses, who are obligated to redeem at least the amount 
that they agreed to donate.  In all likelihood, some businesses 
will attract more/less vouchers than they had agreed to donate; 
it is very unlikely that community members will spend them in 
the same proportion in which they were donated.  In the former 
instance, as long as community currency acceptance ratios are 
equal to or less than profit margins, there is no loss in net profit 
and still the possibility of generating new customers.  If, on the 
other hand, no vouchers are redeemed, the (unpopular) 
business has lost nothing and, perhaps, has gained positive 
publicity for their participation in the project.   

	At the time of writing, Community Way programmes had 
been attempted‹all without success‹in Victoria, Manchester, 
Hawaii and Vancouver.  A renewed attempt is under way in the 
San Francisco Bay area.  The authors can only surmise that the 
failure of Community Way has been in the implementation.  While, 
the concept of merchant credits appears sound, the success of 
Community Way is largely dependent on the perception of the 
organisers.  Small business owners will only want to expend their 
limited resources in supporting efforts which are well recognised 
in the community.  Community Way organisers should not 
underestimate the role of influential individuals and the need to 
seek out their support.

The Bonus Concept

The ŒBonus¹ concept was developed by Bruno Jehle, a 
member of INWO (Internationale Vereinigung fur 
Wirtschaftsordnung, or International Association of Natural 
Economic Order) in Switzerland.  Learning from experiences with 
development work in India, the Bonus concept is designed to deal 
with two problems which might arise if a community currency 
system was implemented there.  The first problem comes from the 
political situation in India where middlemen and village leaders, 
in addition to bankers and government officials, hold dominant 
positions in the conventional money market.  Their fear of losing 
control of the credit market and, therefore, political influence 
when a community currency system is introduced, may lead them 
to use their political power to block the community initiative.  
Secondly, if a community currency system were to collapse, either 
because of the aforementioned political resistance or because 
confidence in the system is lost, participants with positive account 
balances would be adversely affected.  The value of the resources 
sold up to that point would be lost presuming that at least some of 
them could have been sold in the market for national currency.

The Bonus system begins with donor funds being given to a 
community-based credit committee.  This committee, in turn, 
loans the money out to interested community members.  The 
credit committee decides on what form the lending will take--
lending circles, credit union style lending, or individual loans.  The 
credit is initially issued exclusively in conventional cash, is 
interest-free, and can be paid back partially or completely in  local 
currency units (called `Bonuses`).  This creates  demand for 
Bonuses in the local economy.

Bonuses, in the form of paper notes, are now issued by a 
separate committee to members of the community.  The amount 
issued should not exceed the total value of national currency loans 
which may be repaid in Bonuses.  Distribution could be organised 
via a subsidy  to low wage earners.  Notably, this requires that the 
Bonus committee is able to effectively manage the demand and 
supply of the local currency units.

Not all of the donor money will be issued as loans to the 
community.  Half of the funds would be set aside in a depot (this 
could be a conventional bank) to `backup` the local currency if 
confidence in the Bonus is lost.  This could happen if, for example, 
middlemen try to convince community members  that the Bonuses 
are worthless and offer to buy them at a discounted price.  The 
backup of the local currency acts as a safety valve because 
participants know they can redeem their Bonuses for conventional 
money.  The Bonuses could similarly be backed up by  rice or 
some other highly valued good.  Historically, when there have 
been runs on banks, once depositors realise that there are 
adequate gold reserves to redeem their notes, they do not want 
the gold.  The same logic underlies the Bonus concept.  To prevent 
Bonuses from being swapped for hard currency immediately after 
issuance, a penalty fee could be charged on those Bonuses which 
are redeemed before a certain amount of time elapses.  This would 
encourage the use of the Bonuses for local trading.

 	After the loans have been paid back, it is possible that the 
whole system would come to a standstill.  The process would begin 
again, with the difference that loans would be issued partially in 
Bonuses.  It is hoped that eventually, as the community becomes 
more familiar with the community currency, the loans could be 
issued completely in Bonuses and national currency backing would 
be unnecessary. 
The BONUS concept claims several advantages over 
unbacked community currency:

*	There is a higher chance that the local currency will be accepted 
as a medium of exchange. 
*	If the system fails outright, or if the local currency is devalued 
over time, there is some protection for participants. 
*	Increases in economic activity are more easily observed and 
*	Administration costs are subsidised  by the interest earned on 
national currency.
*	Businesses are directly involved by creating the demand for the 
local currency.
*	As donated money will initiate projects which would otherwise 
not have been possible, there may be less resistance from 
financial middlemen.  

The disadvantages of the Bonus concept include the following:

*	Bonus is donor dependent. 
*	Start-up is complicated and lengthy (projected to require four 
*	There is a risk that community members will not  accept the 
local currency once it is not backed by the national currency.
*	Management requires considerable understanding of local 
economic conditions.  In particular, the timing of the issuance of 
the Bonuses seems a delicate matter.  

While on paper the Bonus concept provides a means to deal with 
the problems of middlemen and system failure, there remain 
numerous question marks.  Until such time as a viable model has 
been established, it remains to be seen if the claimed advantages 
over unbacked systems hold true.

1.2  Integrating Business

One of the most frequently mentioned shortcomings of 
community currency systems is the lack of involvement of local 
business.  Whereas "individual traders know what they want but 
don¹t know what to offer, businesses know what they have, but 
don¹t know what they want (from participation in a community 
currency system)."1  
The LETS Environment

There is a widely held view that LETS are clubs, with links 
to the `green`, anarchist, or `alternative` movements, which 
exclusively involve social favour trading intended for the 
unemployed and the poor.2  While it is true that people with less 
cash see immediate benefit to participation in community 
currency systems, it does not follow from this that businesses can 
not enjoy numerous benefits from participation.  Small businesses 
stand to increase market share, reduce excess inventory, and 
replace input costs in scarce national currency with those in 
community currency.  The resulting increase in the diversity of 
goods and services available for trade benefits all members of the 
system irrespective of social standing. 

Peterborough LETS, in Peterborough, Ontario, Canada, which 
boasts the fastest membership growth of North American LETS, 
has over 500 members, one third of whom are businesses.  This is 
in stark contrast to the decidedly low levels of business 
involvement in virtually all other systems observed.  While a few 
systems do, in fact, remain committed to individual Œsocial-favour¹ 
trading, most are taking steps similar to those taken in 
Peterborough in order to attract business.  Three main elements 
separate the approach of Peterborough LETS: 
1) 	A willingness to include the business sector is made clear 
from the outset and  strategic alliances are chosen accordingly.  
Peterborough LETS is housed in the offices of COIN (Community 
Opportunity and Innovation Network), allowing them to receive 
support from Human Resources Canada.  The local Chamber of 
Commerce was involved during the early stages of system 
2) 	A paid staff position is dedicated to promoting business 
entry, facilitating participation and providing ongoing education.  
The Œbusiness outreach¹ position is a fully salaried staff member 
in Peterborough supported by a federal government grant.  
Guelph LETS, in Guelph, Ontario, Canada, has also received a 
grant to support such a position.  This is in response to the fact 
that, on average, six visits are required before a small business 
in Guelph agrees to join the LETS.  
3) 	Business involvement is heavily promoted.  Peterborough 
LETS has printed "We Accept Green Dollars" stickers which 
participating businesses can display in their storefront window.  
Articles about the benefits of a community currency system 
which feature the involvement of local business are included in 
the members¹ bulletin and circulated to local/regional 
newspapers and magazines.  Guelph LETS plans to promote 
business participation through the creation of a brochure for 
distribution to tourists.  This will include both a downtown map 
highlighting Guelph LETS supporters and a `free` Green Dollar.  
Rather than simply printing more notes (and, thereby, raising 
the spectre of inflation), these Green Dollars will be debited to 
businesses who attend a fund-raising event.

	Manchester LETS, in Manchester, UK, having realised that 
the lack of local business participation was a barrier to reaching 
sustainability, is now directing a great deal of effort towards this 
end.  Credit unions have been invited to handle business accounts 
through the LETSystem.  Seminars and training sessions have been 
organised to publicise the benefits for business.  When joining 
Manchester LETS, businesses are advised to start slowly 
incorporating local currency ratios in their prices.  This initial 
caution prevents businesses from accumulating large credits 
which they may be unable to spend.  Together with LETS 
administrators, businesses are encouraged to examine where their 
operating costs originate and determine which expenses could be 
replaced by ones paid for in community currency.  At present 
there are 50 businesses out of a total of 600 account holders. 
The HOURS Environment
	HOURS systems have a marked advantage over LETS when it 
comes to involving business‹namely, the use of paper notes 
instead of debit-zero accounting3.  (This is untrue, however, of 
hybrid systems.  See 3.2 Hybrid systems.)  The greatest threat to 
business integration in an HOURS environment is the participation 
of over-zealous businesses‹those which take in more hours than 
they can spend.

	There are two measures taken by HOURS administrators to 
prevent the creation of `wells`.  The first, identical to Manchester 
LETS, is to restrict businesses from accepting HOURS for the full 
sales price of goods on offer until they have proven their ability to 
spend them.  In Ithaca, a popular local restaurant, Turback¹s, 
agreed to accept 100% HOURS for meals.  The acceptance ratio was 
slashed not very long afterwards when the restaurant found itself 
awash in HOURS and unable to meet its US dollar requirements.  
The resulting imbalance from such a situation can be damaging for 
both the organisation concerned and for the community in general; 
all the HOURS which Turback¹s was unable to spend were, 
effectively, taken out of circulation.  Such experiences led the 
Ithaca community to discourage the local branch of an 
international grocery chain from accepting HOURS.  It was feared 
that, once the supermarket had more HOURS than it could 
reasonably spend, it could afford to give away the notes as a 
promotional gimmick.  This would lead to a Œdevaluation¹ of the 
HOURS in the eyes of community members.

	The second method used to prevent the creation of Œwells¹ is 
to provide personal shopping lists for those organisations which 
earn lots of HOURS.  Volunteer help is enlisted to ascertain what 
an individual or business needs and then try to match those needs 
with available offers.  If those needs can not be met by pre-
existing offers, new linkages may be created.  In the case of Ben & 
Jerry¹s, a socially-conscious ice cream store, when it was 
discovered that the owners had been hoping to renovate the shop, 
administrators arranged for an HOURS loan which could be used to 
pay local craftspeople to do the renovation work.  Ben & Jerry¹s is 
now repaying the loan with HOURS earned from ice cream sales.  
(The authors were very pleased to assist in this effort.)  Up to a 
maximum of one-eighth of an HOUR (1.25$US) can be used on any 
single purchase, allowing the shop to meet both its federal and 
local currency requirements.   

Barter Systems 

Barter systems are gaining increasing popularity world-
wide.  Estimates place the total value of barter in all its forms, 
including counter-trade, at nearly one third of total global 
economic flows.  The attraction of barter for business lies in its 
ability to increase turnover; not just in the barter currency but 
also in the national currency as participants are able to reach 
more customers.  Furthermore, the availability of low-interest 
loans in the barter currency allows business to realise increased 
sales without the usual increases in operating costs.

An interesting example of such systems is the Wirtschaftring 
(WIR).  Established in Switzerland in 1934, the WIR has handled 
over an equivalent of two billion Swiss Francs in trading in the 
barter currency (also called the WIR) for its 60,000 members. 

To join the WIR, companies (only companies can become 
members), must pay an entrance fee, a yearly fee and a fee for 
each transaction handled by the system. Most of these fees are 
paid in Swiss Francs.  The WIR has a for-profit, professional bank 
which manages client accounts and issues credit.  Managers¹ 
salaries are paid in the national currency generated through 
members¹ fees.  The barter currency represents the value of the 
goods and services being traded.  Like LETS, the WIR is simply a 
unit of measurement in a member¹s account‹there is no paper 
note.  In order to simplify the valuation and taxation of goods 
traded, the WIR¹s value is officially set equivalent to the Swiss 
Franc.  Normally, goods and services traded between member 
companies are valued partially in the national currency, with the 
remainder in WIR.

Members who hold the appropriate collateral can apply for 
low interest WIR loans.  The most popular way of securing 
collateral is with a second mortgage on a house or business 
premises.  It is essential to request collateral to comply with Swiss 
banking laws.  The credit committee restricts the total value of 
outstanding loans to one-third of the systems¹ annual turnover in 
order to maintain the value of the WIR4.

Participating companies have found that WIR currency is 
often more easily earned than spent.  Over-accumulation of  WIR, 
accompanied by declining income in Swiss Francs, can create 
serious liquidity problems.  Obviously, Swiss Francs are still 
required to pay for such major expenses as rent, salaries and 
insurance premiums.  The result is a black market where WIRs 
are traded for Swiss Francs at rates 30% below the official 
exchange rate5.  The loss of value of the WIR in these cases may 
make loans in WIR more expensive than interest-bearing loans 
from a conventional bank. 

Barter and  Community Currency Systems

Modern barter systems are, in fact, not true barter.  There is 
no direct one-to-one exchange of goods.  Like community currency 
systems, barter systems use their own unique currencies as an 
exchange medium and in some systems, as in a LETS, members 
can create their own credit.  Although based upon the same 
operating principles, barter systems should be viewed as distinct 
from community currency systems.  The most notable distinction 
is the difference in attitudes towards community development.  
Barter systems are guided primarily by profit.  The system is not 
designed to prevent economic leakage¹s from one region or 
community to another.  A further difference lies in the valuation 
mechanism.  Although not by definition an ethical trading system, 
there is  pressure reported by LETS members to value labour 
fairly, instead of adhering strictly to the profit-maximising pricing 
mechanisms of the regular economy. 

It has been argued that community currency systems should 
use the bartering approach to include more businesses and move 
away from the Œsocial favours only¹ trade image.  At the same 
time, barter network participants might be interested in the 
smaller-scale but reliable local market provided by a community 
currency system.  If a multiple community trading format were to 
be used, a Œbusiness-only¹ regional barter system could exist 
alongside both purely community-based systems and community-
business systems without allowing leakages from one system or 
one region to another (see 1.3  Multiple Community Trading, 
MultiLETS).  Income from community-business trading could be 
used by businesses to pay wages.  Currently, this is not possible as 
individual workers are generally not allowed to join the barter 

Many LETS developers see the integration of business as a 
prime objective. The rapid expansion of barter trade shows that 
when a sufficient number of members have joined a community 
currency system, there is great potential to generate economic 
activity that otherwise would not have occurred.  This demands 
that the elements of barter trading which have allowed its 
widespread dissemination be better understood.  The LETS-like 
Noppes system in Amsterdam has set up a professional barter 
circle, which exists alongside the present monoLETS.  Noppes is 
one of the biggest systems in the world with over 800 members 
growing at a rate of 60 new members per month.  The barter 
circle is scheduled to begin trading in June of 1998, and, initially, 
activities will be focused on a relatively small area (the 
Amsterdam region).  It will be set up under another name and use 
different currency units since the existing Noppes system has a 
non-commercial, Œalternative¹ image.  Unlike most barter systems, 
the barter circle will not exclude individual members, including 
the Noppes members, from participating6.

1.3  Multiple Community Trading

The design of a community currency system might be seen 
as an inherent limitation to external trade since trading can only 
be realised within those boundaries defined by participants.  It is 
possible that there are limited resources available for local 
currency trading or that there are needed products which are only 
available in another community.  If one wants to trade beyond 
their community one has to rely, once again, on the national 
currency.  Is there a way to extend the boundaries of local 
currency usage without creating leakages from one region to 
another?  Some care is required in answering this question.

	The immediate temptation, if two or more community 
currencies are equivalent to the national currency, is to allow one 
currency to be traded with the other at par.  This has been called 
Œintertrading¹.  The danger, however, is in replicating in the 
community currency what we dislike about the federal currency; 
namely, the tendency of money to pool where profits are highest.  
If, for example, Community B started a very successful business, it 
might Œsuck¹ all of the community currency units, and therefore 
the trading activity, out of Community A before it had a chance to 
develop its own small business sector.  Intertrading causes a de 
facto merging of two community currency systems, despite the 
use of two distinct currencies.  The accounts of each community 
will, in all likelihood, not balance and therefore leakages from one 
community to the other can emerge.  

	The second way to connect two separate community 
currency systems is to allow each system to maintain an account 
in the other.  If, for example, Ariya of Community A were to 
receive a kilogram of bananas from Bob of Community B, Bob¹s 
account would be credited (in Community B¹s currency units), 
while the corresponding debit would be made to the aggregate 
Community A account (again, in Community B¹s currency units).  
The members of Community A would then have a future 
obligation to render goods/services to the members of Community 
B.  This has been called Œinterlinking¹.  The problem here is that 
individual account holders in Community A are distanced from 
their systems¹ commitment to Community B.  If trade is not 
backed by personal commitment, the opportunity to Œget 
something for nothing¹ increases.  Eventually, faith may be lost, 
either by the members of Community B who decide that they will 
no longer trade with members of indebted Community A, or, by 
members of Community A, who view with suspicion the 
accumulated debt of their system.

	To overcome these difficulties, Michael Linton, Richard Kaye 
and Ernie Yacub developed multiLETS.  The multiLETS concept 
means that individuals will hold separate accounts in both the 
community currency system of their immediate community and in 
other overlapping, neighbouring or Œumbrella¹ systems.  Whereas 
before, Community A was obligated to Community B when Ariya 
received bananas from Bob, with multiLETS it is Ariya herself who 
has a personal commitment to Community B.  This, however, 
requires two things:  Firstly, that Ariya holds accounts with both 
systems (or with System A and an Œumbrella¹ system) and, 
secondly, that computer processing is available to handle the 
increased complexity of transactions.7  This latter requirement 
has been met by the creation of a Œregistry¹.  A registry is a ³not-
for-profit administrative facility which processes transactions and 
produces statements for account-holders in two or more 
LETSystems which choose to use the services it offers.²8

	The requirement to register transactions, effectively rules 
out the use of the  multiLETS concept in an HOURS environment.  
Several communities which have implemented their own HOURS-
based community currency systems have considered  allowing 
trade with Ithaca HOURS.  However, ³there was a fear that other 
communities¹ HOURS would be sucked into Ithaca due to its 
comparative size.²9  Following the preceding analysis of inter-
trading, this possibility seems very likely.  One alternative might 
be to print a unique currency which could be used solely for inter-
system trade.  The new trading boundaries might be a bio-region, 
a state, or an amalgamation of independent communities.  This, 
however, would entail greater expense and might create undue 
confusion.  Could, for example, a community currency be traded 
for a regional currency?  If not, how could this be prevented?

	In North America, multiLETS remains stuck at the 
conceptual stage.  Attempted start-ups in Courtenay, Victoria, 
Vancouver, Ottawa and Toronto have lacked the necessary support 
to become self-sustaining. 

In the United Kingdom, in 1994, an ambitious project, 
referred to as LETSgo, was undertaken to initiate a multiLETS in 
Manchester.  The registry was intended to replace the several 
existing monoLETS in the Greater Manchester region, of which 
Manchester LETS, with 700 members, was the largest.  Training 
schemes were set up to educate individuals who would play vital 
roles in getting communities involved not only in the gmLETS 
(Greater Manchester LETS) but also to set up multiLETS nation-
wide.  It was expected that businesses would be attracted to the 
registry by the possibility of using the Œprime¹ currency, the Œgm 
pound¹, rather than being restricted to trading in a community-
specific currency.  After exhausting considerable effort and  
funding, participation levels have been disappointing.  In fact, 
despite the establishment of an elegant system, there is no trading 
taking place in the gmLETS registry10.  Currently Manchester 
LETS is operating as a monoLETS using the ŒBobbin¹ as their 
currency.  After a setback triggered by the confusion surrounding 
the establishment of gmLETS, when numbers dropped drastically, 
Manchester LETS membership has recovered to previous levels 
(approximately 600 accountholders). 

Besides Manchester LETS, there are 6 other monoLETS 
operating in the region.  According to Siobhan Harpur, one of the 
initiators of Manchester LETS and Creative Living Centre LETS, 
none of the Manchester systems have any formal arrangements 
for members to trade with each other.  Most people who want to 
trade in more than one system are members of each system.  
There are informal arrangements  between such people.  For 
example, members of Manchester LETS who know that Siobhan is 
a member of both Manchester LETS and Creative Living Centre 
LETS, ³will get (her) to buy things for them and they'll pay (her) in 
Bobbins (Manchester LETS currency)².  Despite its support from 
key LETS developers, the Registry concept has not been accepted 
by the general membership of the monoLETS in Manchester.  It is 
the authors¹ feeling that members have chosen to go their own 
way after the confusion and drastic change experienced with the 
LETSgo project. 

East Kent LETS has gone through the process of transforming 
four monoLETS into a multiLETS.  Members can trade between 
communities using the Œumbrella¹ currency, the East Kent Unit 
(EKU).  New members automatically receive two accounts.  The 
administrators of individual communities continue to create 
directories and organise local market days, while the accounting in 
either currency (Œindividual¹ or Œumbrella¹), is handled by one 
central administration.  This has resulted in the reduction of 
transaction fees and a decreased workload for volunteers.  Despite 
the presence of a multiLETS, most trading (over 95 %) takes place 
within individual LETS11.  

Apart from more successful multiLETS such as East Kent, it is 
the authors¹ view that generally the administrators of individual 
LETS fear losing control of an initiative that they have invested a 
great deal of time and effort into.  This may be indicative of a 
misunderstanding of the precepts upon which multiLETS operates.  
There may be a mistaken belief that multiLETS poses the same 
threat to individual LETS systems¹ stability and autonomy as 
Œintertrading¹ or Œinterlinking¹.

These perceptions of multiLETS must be taken into 
consideration before implementation.  In theory, once an 
Œumbrella¹ system is in place, there is little need for local 
administrators.  Volunteer effort would still be required to publish 
the Œoffers/requests¹ directory and to carry out education and 
awareness activities, however, transactions and account records 
could be handled at the Œumbrella¹ level.  In practice, this ignores 
the political reality‹the presence of both stubborn resistance to 
change and well-grounded fears of undemocratic forces assuming 
control over what had initially been a community effort.

	It is the authors¹ opinion that the development of multiLETS 
has preceded the preparedness of individual systems to accept it.  
As long as system growth in individual communities has yet to 
reach significant levels, there is relatively little demand for multi-
community trading.  MultiLETS proponents would respond that 
the inclusion of multi-community trading is critical in making 
community currency systems relevant for a larger proportion of 
the general population.  The concept is sound‹namely that 
currency should follow the nature of goods traded without causing 
leakages from one community to another.  As demand for multi-
community trade increases, multiLETS and similar systems should 
evolve naturally.


The Talent system12 in Switzerland operates as a nation-
wide monoLETS. Only one currency is used and accounts are 
handled centrally.  Multi-community trading can take place via 
intertrading.  Despite this capacity, over 95% of trading takes place 
within individual regions rather than between them.  Intra-
regional trading predominates because regional administrators 
print directories and organise market days, but also because the 
majority of trading involves services.  In January, 1998, the 
system had 762 members nation-wide and 866,516 Talents had 
been exchanged over 4,057 transactions.  It is not clear whether 
leakages can be avoided once there is greater demand for inter-
region trading, or if some kind of control will need to be devised 
to prevent unbalanced resource flows from one region to another.  
Certainly, the Talent administrators have no plans to set up a 
multiLETS.  There is no call for more autonomy from the 
individual regions and, indeed, some LETS promoters in 
Switzerland would like to see the system increase its trading with 
neighbouring countries.

Exchange Rates Between Community Currencies

Renato Pichler from Talents Switzerland has developed  a 
method to allow trading between the nation-wide Swiss Talent 
and the Talents in Italy and Austria.  The different Talents are all 
at par with their respective currencies.  Exchange rates between 
the various Talents are determined by comparing the purchasing 
power of each currency using a basket of goods whose composition 
and weighting is determined by the membership.  

The problem with this method is that there is room left for 
speculation.  The exchange rate is determined by taking the 
average value of a number of different goods; this does not mean, 
however, that the exchange rate will be an accurate reflection of 
the relative prices for all goods.  A speculator could buy a lot of a 
single item which is relatively undervalued in currency A and 
then sell it in another region where it is overvalued in currency B.  
The revenues in currency B could then be exchanged for currency 
A and the cycle begun again.  If, for example, the Talents price of 
potatoes in Switzerland was relatively cheap using the Italian-
Swiss Talents exchange rate,  there would be an incentive to 
transport potatoes form Switzerland to Italy.  This would be both 
damaging for potato producers in Italy and jeopardise the 
credibility of the system.

To counteract the danger of speculation, the administrative 
body of the whole intertrading system would have to put controls 
on trades being made.  This planning and monitoring requirement 
would be the price paid for an exchange rate system which 
facilitates increased trading opportunities between communities.  
So far no such trading exists.

2.  Operating Issues

	As with any economy, a community currency system incurs 
administrative costs, therefore, a system must be devised to raise 
revenues.  Furthermore, members of the community may want to 
either encourage/discourage economic growth or support a variety 
of community initiatives.  The various methods to accomplish 
these goals are discussed below.  Their impact on inflation is 
subsequently examined.

2.1  Fiscal Tools

	Within LETS circles, some debate exists as to the best 
method to raise the community currency required to cover 
administrative costs.  The argument is between the proponents of  
Œtransaction fees¹ (members accounts are debited a small 
percentage of the value of every trade, or a constant amount per 
trade, which is credited to a central administrative account) and 
those in favour of Œflat fees¹ (each member¹s account, whether in a 
positive or negative balance, is debited an equal share of a 
periodic administrative charge, irrespective of trading activities). 

The evolution of Guelph LETS was similar to that in 
numerous communities.  Initially, a five percent transaction fee 
(up to a maximum of fifteen Green Dollars per year) was levied.  
Funds were accumulated and paid out as needed for 
administrative expenses.  Any excess income was given out in the 
form of grants to community organisations as decided at a general 
meeting.  Experience with transaction fees led many members to 
feel that they acted as a disincentive to trade‹essentially 
punishing those who were active traders and rewarding those who 
were not.  Guelph LETS now uses flat fees, as do most other LETS 
systems spoken to.  The growing consensus is that flat fees based 
on a Œcost of service¹ principle provide the greatest transparency 
and the least disincentive to trade.  The former point is 
particularly important in communities where administrative 
responsibilities are not shared by a broad cross-section of 

In an HOURS environment, in the absence of member 
accounts, the only method available to cover administrative costs 
is through the sale of advertising space in the HOURS 
Œoffers/request¹ directory.  Some might ask why not simply print 
more HOURS to pay the bills?  Paul Glover maintains that it is 
better to seek federal currency donations or employ volunteer 
effort rather than risk the loss of confidence and inflation that 
might follow from such a policy.  This reflects a more general 
attitude held by HOURS proponents that systems should look 
externally for administrative support while LETS has enshrined a 
Œpay-for-work¹ principle.

Budget Spending

	The opposite of the taxation issue is that of budget spending.  
Profligate spending on administrative tasks, without the necessary 
accompanying taxation, has nearly meant the collapse of several 
LETS.  Toronto LETS central account had reached a negative 
balance in the thousands of Green Dollars before there was a loss 
of confidence and a nearly fifty percent decline in membership 
(see 2.3  Inflation,  Internal Inflation).  Accordingly, most LETS 
have now taken steps to prevent overspending, including a year-
end settling of the administrative account and a separation in 
year-end trading summaries of Œreal¹ trade and Œbusy work¹.

	Both LETS and HOURS-based systems use grants to 
community organisations to stimulate trading activity.  LETS 
communities balance the outflow from the central account by 
charging a flat fee to members; HOURS communities establish what 
percentage of non-grant hours may be issued as grants (11% in 
Ithaca, New York; 5% in Kingston, Ontario).  In both cases, the 
mutual agreement of system participants is required.  Although 
fulfilling a valuable role in supporting community projects, 
administrators need to be aware of the potential of community 
currency grants to slow the process towards sustainability.  Rather 
than expanding trade by creating their own credit, members may 
become reliant on tax-and-spend injections.  This would lead to 
rapid increases in trading subsequent to the issuing of a grant 
followed by a period of stagnation.  For a LETS to become self-
propelled, it is important for members to accept that negative 
balances are healthy and, in fact, vital for trade.

2.2  Monetary Tools

	While LETS systems rely more heavily on the fiscal tools of 
taxation and spending, HOURS administrators encourage economic 
growth via monetary policy.  In Ithaca, up to 5% of HOURS issued 
(other than as loans themselves) can be lent out as interest-free 
loans.  No single loan can exceed fifty HOURS, and decisions 
regarding eligibility are made at monthly potlucks.  This policy 
can be either tightened or relaxed depending on the growth goals 
of the system.  

In principle, LETS allow their members to create their own 
unlimited credit.  However, in practice, many systems have set a 
limit on negative account balances.  Kitchener-Waterloo LETS, in 
Ontario, uses -500G$ as a limit.  Peterborough LETS uses a more 
strict -250$G.  The Talent system has set its credit limit at -700 
Talents, apart from the social organisations who can go further 
into debt as agreed by all the members.  In the Noppes system the 
credit limit is equal to the amount that a member has earned in 
the last 12 months.  The reverse holds true as well; members¹ 
positive balances can not exceed what they have spent over the 
previous year.  

In this way, members can be confident that no individual 
will receive a disproportionate amount of goods and services and 
then leave the system without Œrepaying¹.  While, conceptually at 
least, such losses could be absorbed by the larger community and 
have little or no effect on the value of an unlimited currency, in 
practice, the perception that a few are exploiting the many could 
lead to a loss of confidence in the currency.  Furthermore, the 
departure of negative account holders upsets the balance of trade.  
There will be less incentive to trade as positive balances 
(representing a commitment to receive goods or services) 
outweigh negative balances (representing an obligation to provide 
goods or services).  This imbalance may need to be remedied by 
the imposition of a Œfree rider¹ tax; essentially, sharing the debit of 
the departing member amongst the remaining members.13

Virtually all LETS systems have their members agree to 
repay any negative account balances in federal currency upon 
departure from the system.  Both Manchester LETS and the 
Noppes system actively remind members who plan to leave the 
community of their obligation to settle their account.  It is 
difficult, however, to imagine that these actions have any Œteeth¹ in 
the case of intentionally delinquent members.  One further option 
is for the system to prepare for such events before they occur 
through the  imposition of an insurance tax which could be used to 
maintain the overall balance of the system.

Money Supply 

	The second monetary option available to HOURS 
administrators is direct manipulation of the money supply.  The 
authors discovered that this issue is a Œblack box¹ for LETS 
practitioners‹ŒDebit-zero accounting doesn¹t require any 
manipulation of the money supply; money is created as needed.  
Just how do HOURS administrators know how much money to 
print?¹‹so it is probably worthwhile to spend some time 
explaining it here.

	Community members wishing to participate in HOURS 
trading fill out a form which includes personal information as well 
as space to list offers and requests.  This is sent to the 
administrator, where the pertinent information is placed in the 
next Œoffers/requests¹ directory, and a pre-agreed upon number of 
HOURS notes are mailed to the new participant (two HOURS in 
Ithaca).  There is tacit, though some argue for the need for 
formalised14, agreement that, in return for the right to use these 
Œfree¹ HOURS notes, recipients must, in turn, accept them for the 
goods and/or services which they offer to the community.  
Moreover, if for any reason one should discontinue their 
participation, they must repay the HOURS which they originally 
received.  Whether explicit or not, what this means is that HOURS 
notes are backed by the commitment of each participant to accept 
them; if participants refuse to accept them, for whatever reason, 
their value diminishes.  Conversely, the more people that agree to 
accept them for a greater variety of goods and services, the more 
the value of the note increases.  (This is also true of LETS trading 

	Every so often (eight months, equivalent to two issues of the 
directory, in Ithaca) participants are sent a renewal form.  This 
form assures that both personal information and Œoffers/requests¹ 
are kept up to date.  Continued inclusion of outdated offers and 
requests is an excellent way to frustrate traders and destroy the 
credibility of the system as a whole.  In return for filling out and 
returning the renewal form, participants receive a pre-agreed 
upon amount of HOURS notes (four HOURS in Ithaca).
	To tighten the money supply, HOURS administrators can:

*	specify offers for which HOURS will not be paid (if, for example, 
there is an over-abundance of shiatsu massage therapists)
*	reduce or eliminate the number of HOURS paid to new sign-ups 
and/or renewals
*	reduce the percentage of HOURS which can be given out as 

	To expand the money supply, the opposite occurs.  
Administrators can:

*	specify offers for which additional HOURS will be paid (if, for 
example, there is great demand for plumbers)
*	increase the number of HOURS paid to either new sign-ups 
and/or renewals
*	increase the percentage of HOURS which can be given out as 

	Undoubtedly LETS proponents are unsatisfied with this 
explanation.  ŒYes, but how do they know when to 
increase/decrease the HOURS supply and by how much?¹  There 
simply is no secret formula.  In informal discussions, 
administrators ask key participants (those whose trading volume 
is significant) if they have more HOURS than they can spend.  If 
the answer of a single organisation is yes, then the first step is to 
help them to spend their HOURS (as outlined in 1.2  Integrating 
Business, The HOURS Environment).  If several organisations have 
a surplus of HOURS, then steps are taken to tighten the money 
supply.  In this respect, HOURS administrators are much like US 
Federal Reserve Chair Alan Greenspan‹they make a best guess 
and hope that severe problems do not arise.  In small systems, 
where the money supply is slowly expanded and carefully 
monitored, there should not be unmanageable supply problems.  
Indeed, in those systems spoken with, this is the case.  However, it 
would be fair to assert, that if an HOURS system reached a 
significant size and the HOURS supply was expanded beyond the 
demand for goods and services, there is nothing in place to check 
inflation or waning confidence.  This stresses the need for a 
transparent process of money supply manipulation and competent 


The term Œdemurrage¹ is used to describe charges which are 
levied on positive account balances--in effect, a negative interest 
rate.  The concept originates from Silvio Gesell¹s assertion that 
money is a public good which serves the function of exchange.  
This justifies a fee being levied on its use.  Money should not 
serve as both a medium of exchange and a store of value at the 
same time.  

In his book entitled, ³The Natural Economic Order², 
published in 1913, Gesell outlined his ideas for monetary reform.  
He developed a Œstamp scrip¹ system which was intended to 
increase the velocity of currency circulation by encouraging 
participants to spend rather than save15.  A note, or Œscrip¹, was 
designed which had 52 spaces on the reverse side, one for each 
week of the year.  The face value of the scrip would only be 
maintained if a stamp, costing 2 per cent of the face value of the 
note, was affixed to the space on the back corresponding to a 
particular week.  Participants spent the scrip quickly, in order to 
avoid paying the costs of the stamp, thereby preventing hoarding.  
Stamp scrips were in common use in Gesell¹s time and gained  
popularity in Europe and North America during the depression in 
the 1930s.

Currently the Talent system (see 1.3 Multiple Community 
Trading), which draws inspiration from the writings of Gesell, 
levies a 0.5 % monthly charge on positive account balances.  
Furthermore, Talents notes are printed with an expiry date, after 
which the note is worthless.  Those holding the note as the expiry 
date approaches must exchange the note for a Œnew¹ one; this 
provides the incentive to spend the note rather than go through 
the inconvenience of redeeming it.

Thomas Greco, author of ³New Money for Healthy 
Communities², disagrees with Gesellians that fees should be levied 
on creditors only (in the form of a demurrage charge); he insists 
that they should be levied equally on debtors and creditors (in the 
form of a regular administrative charge).  Greco claims that when 
a local currency or scrip is properly issued and its supply is not 
artificially restricted, there should be no incentive for hoarding.  
The demurrage which the stamp or an expiry date represents is 
therefore unnecessary16.  In similar fashion, other LETS 
proponents argue that there is no need to punish creditors 
because local currency is not scarce.  Therefore, others do not need 
the credit that someone else has created‹they can create it for 

It could be argued that demurrage charges introduce 
unnecessary complexity.  They may be seen as a disincentive to 
join a community currency system‹essentially,  fining those who 
successfully save money.  Noppes, another system which uses 
demurrage fees based on Gesellian thought, tries to mitigate this 
risk.  The positive account ceiling beyond which demurrage is 
levied is based on a participant¹s previous twelve months¹ trading 
volume.  The more trading a business does, the higher its ceiling 
and, therefore, the less likely it is that demurrage fees will be 
levied.  The presence of a limit on negative account balances and 
charges on those who exceed it, means that debtors and creditors 
both pay a user fee for money in the Noppes system17.

Having considered the arguments for and against 
implementing demurrage charges, their use might be considered 
where problems have arisen due to hoarding (in fiat systems), 
slow circulation or an overabundance of positive account balances 
(in mutual credit systems). 

2.3  Inflation
Tying the Community Currency

In North America as well as in Europe, virtually all 
community currency systems have tied their currency to the 
national currency, mainly to make it easier for members to value 
their transactions.  Tying also simplifies accounting and tax 
calculations for participating businesses.  According to the LETS 
design manual,  the LETS currency (often called ³Green Dollars²) 
must be tied to the national currency if it is to be officially called a 
LETSystem18.  HOURS systems are less strict about this 
requirement.  National currency equivalents are given as a 
guideline, however, members are encouraged to determine their 
own prices outside of the market system.  A Kingston HOUR, for 
example, is equal to twelve dollars Canadian.  

Tying the local currency to the national currency has one 
significant implication.  If buyers and sellers expect the parity to 
be maintained, the value of a community currency must follow the 
ups and downs of the national currency.  Some might argue that 
this is not a problem as the value of the community currency unit 
depends on the availability of goods and services, and, therefore, 
the purchasing power of the local currency remains constant 
(remember, local currency is not scarce).  However, as Richard 
Kaye argues, if those in credit see the value of what they have 
done in the past depreciate, this will limit the total of goods and 
services they will sell to others for the purpose of savings, which 
in turn will limit the contribution the LETS currency can make to 
the local economy.  Kaye concludes that, ³ beating inflation 
requires a monetary standard²19.  Inflation was not perceived as 
a problem in the LETS visited, however the Dollar, Pound, and 
Franc have been relatively stable when compared to the Peso, 
Baht or Rupiah.

Trying to avoid these potential instabilities requires the 
creation of an independent standard for valuing goods and 
services.  One option is to tie the local currency to the value of a 
single good or a basket of goods.  Although it can be expected that 
the value of this basket stays relatively stable over a long period 
of time, whenever there is an increase in the value of this 
commodity (or commodities) relative to wages this will cause a 
slump in trade.  

Alternately, the local currency could be based on an hourly 
wage rate as decided by the community.  This way the money 
supply will be limited only by what people credibly promise to do 
for each other rather than by the availability of a single 
commodity or basket of commodities or other products. The 
standardisation through an hourly wage is practised in very few 
LETS in the UK but, certainly, the concept appeals to many 
systems.  In most LETS, wage levels are already higher than 
market levels. 

Most community currency systems development groups 
state in their promotion leaflets that it is up to members 
themselves to decide how they want to value goods and services. 
Conceptually this seems the most ethical way of dealing with 
prices as these prices would better represent community norms 
and values.  However, the inexperience of community members in 
valuing what they buy and sell independently of the market 
makes this option difficult, at least in the near future.  It is the 
authors¹ belief that the independent valuation of goods is a long 
process requiring education and practical experience in local 

In ³Hometown Money², Paul Glover agrees that one way to 
deal with inflation is to calculate prices independently in HOURS, 
however, ³Šthis could succeed only to the extent that needs can be 
fulfilled locally.²20  If most goods and services continue to come 
from outside the community, then an independent valuation is 
meaningless‹prices will still have to be paid in the equivalent to 
inflationary US dollars.  The other option put forward by Glover is 
to, ³Šdeclare the Ithaca HOUR equal to a 1991 US ten dollar bill.²  
While solving the problem of inflation, this solution would be 
difficult in practice;  periodically, an inflation coefficient would 
have to be calculated.  For example, rather than the present use of 
ten dollars as a guideline, one HOUR¹s nominal value might equal, 
say, $US12.60, although the real value would remain equal to ten 
1991 dollars.  This would complicate pricing decisions, particularly 
where split-pricing is involved.

There is another, less visible, exploitative relationship to 
which a tied system is susceptible.  In a one-to-one  relationship 
between the local currency and the national currency the two 
currencies are in a market relationship, with various rates of 
exchange.  If the convertibility advantage of the regular currency 
were played off against the limited utility of the community 
currency, the result could be that buyers who have nothing to 
offer except community currency as a payment medium would 
have to compensate for this disadvantage by offering a higher 
price.  To illustrate:  a bakery sells bread for 100 dollars in regular 
currency and for 110 dollars at a currency proportion of 80:20.  
The application of this arrangement will very quickly lead to the 
parallel currency coming into disrepute as a Œpoor people¹s 
currency¹ liable to exploitation, unattractive to hold21.

Internal Inflation

Apart from the inflation caused by external pressures on 
community currencies, there are internal factors which play a role 
in the valuation of the community currency unit.  Several system 
administrators have tried to stimulate trading by issuing extra 
credits beyond those generated from taxation (see also 2.1. Fiscal 
Tools).  In a LETS, this internally generated inflation can be 
defined as the excess of debits over credits.  This excess, an 
Œartificial injection¹ into the community currency system, can be 
stated as a percentage of the total monthly trading volume as 

=    central account end-of-month balance  (debits over credits) 
                       total trading volume for the month

This influx of  unbacked money has the potential to raise 
false expectations as energy available has been created where in 
fact none can be expected.  Furthermore, influxes of  unbacked 
money often to go to some people and not to others; this can 
create animosity, which was the experience of VicLETS in Victoria, 
British Columbia22.  Despite these risks, there is no conclusive 
evidence that unbacked injections must lead to currency 
depreciation.  This depends largely on the confidence in the local 
currency.  If confidence declines and community currency prices 
begin to rise, administrators should certainly try to balance the 
accounts through taxes or at least check the growth of the surplus 
by eliminating local currency grants.

Depreciation does not have to be caused by money supply 
led inflation.  A further cause can be an insufficient supply or 
diversity of goods and services available for trade.  If members 
find themselves unable to spend the local currency units they 
earn, they may lose confidence in the system and, consequently, 
the value of the local currency may be adversely affected.