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ID-9-5 For example. January 8th, 1986
For example.
Joe cuts firewood. Peter is a welder, and he wants wood but has
no money. Joe doesn't want any welding. That's usually where it
stops.
However, if Joe and Peter are members of the LETSystem, then Joe
delivers the wood, and Peter picks up the phone. He dials the
LETSystem office and says - "Hi, this is Peter, No. 48, please
acknowledge Joe, No.83, $75. for firewood."
Joe's account balance increases and Peter's decreases by $75. In
turn Joe employs the carpenter, the carpenter has a haircut, gets
some clothes made, buys food from the farmer. The farmer now has
a way to pay for a welder, so Peter gets to work again.
And so it goes. The unit of exchange, the green dollar, remains
where it is generated, providing a continually available source
of liquidity. The ultimate resource of the community, the
productive time of its members, need never be limited by lack of
money.
Margaret needs the brakes fixed on her car. She is billed for
parts and taxes in federal dollars, which represent the essential
outgoing costs involved, and pays the balance in green dollars.
The same procedure takes place when businesses trade within the
LETSystem. For the retail merchant, a LETS exchange works like
this: A customer buys a $30 pair of shoes; price to a LETS
member could be $20 cash, $10 in green dollars, credited to the
merchant's account. This credit can then be used by the retailer
in dealings with other LETS members, businesses, or individuals.
Each retailer has total control over the store's pricing system
to include collection of taxes, overhead, and markup.
Any business can use green dollars to improve its trading
position without causing cash flow problems or any disruption of
its normal business.
Suppose a business is barely meeting overheads, has no cash to
spare and sees no way to use green dollars for business expenses
or stock replacement. Any trade using green dollars should then
be arranged so that all marginal cash costs of that trade are
met in cash, and further, that cash is also paid to meet tax
commitments, both sales tax and income tax liabilities deriving
from profits. This strategy avoids all risk and the only concern
is whether the yield to the business justifies the time taken to
serve the customer. Few transactions in the normal run of
business offer such high after-tax returns to shareholders.
Landsman Community Services Ltd. ID-9-5 Page 1
ID-9-5 For example. January 8th, 1986
Example: A retailer whose wholesale costs are 70c in the dollar
of sales, can afford to retail to LETS members at 15c in the
dollar in green even with a personal tax rate of 50%. If the
tax rate is less, more can be offered: up to 30% in green.
Example: A restaurant-owner with food costs averaging 40% and a
personal tax rate of 50% can offer meals at 70% cash and 30%
green dollars.
Example: An accountant with low management costs of, say l5% may
be able to profitably offer services at up to 85% in green
dollars.
In many cities in North America there are already commercial
agencies offered similar services to businesses as those offered
by a LETSystem. These are, however, all organized on different
principles, and charge users initiation fees of at least $300
with a commission of about 8%, in cash, on all transactions.
Despite such high costs and many limiting regulations, businesses
find it profitable to use these services. (In Vancouver,
Bartercard ITEX has over 700 members.) LETSystems offer the same
services at less than a tenth of the charges of the average
commercial system and, access a far greater customer base. We
anticipate that a business currently using a commercial system
will open a parallel account with the LETSystem in its region.
If a business is meeting its overhead and has cash available, it
can afford to cover costs in cash and make sales fully in green
dollars. In that case, considerably more vigourous marketing
opportunities exist and the ultimate limitation will be the
capacity of the business to spend its revenue.
As more goods and services become available for green dollars,
businesses will be better able to absorb costs in green, thus
expanding their capacity to sell in green. This will eventually
raise the applicability of green dollars to that of a full local
currency. The effect of a local currency will be to protect
local producers from being undercut by imported goods, and thus
provide a more stable environment for developing the local
infrastructure. The agricultural sector will be one of the
principal beneficiaries of this monetary "skin".
Charity groups and service clubs who have found fund raising
difficult during a recession, will be able to raise donations
more easily in green dollars. Donors will be comfortable in
contributing funds which must return to their income,
particularly since their other expenditures are not thereby
limited.
Some users of LETSystem will be people with full-time, cash-
paying jobs. They will use it for the benfit of a zero-interest
line of credit which, incidentally, supports their local
community. They will generally balance their accounts by selling
cash for green dollars to other members.
Landsman Community Services Ltd. ID-9-5 Page 2
ID-9-5 For example. January 8th, 1986
This exchange mechanism will allow the LETSystem administration
to convert the charges collected in green dollars to cash as
required. If this component of the economy exceeds 0.1% it can
meet all the cash requirements for the administration of the
LETSystem.
All regional economies can be considered to be organisms with
internal processes and with transfers in and out across their
boundaries. The level of activity at which a LETSystem will
stabilize in any particular community will be determined by the
relative strength and needs of those two processes.
Landsman Community Services Ltd. ID-9-5 Page 3
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