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LETS typically focus on one region or community and allow transactions among its members. This is intended to stimulate local economic activity and enhance social cohesion.
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The system works as follows
- Participants list the goods and services they can offer. This may include handmade products, special skills or expertise, or general labor.
- These goods and services are traded in a local currency created by LETS, rather than in regular currency. This allows participants to purchase goods and services from other participants using the currency.
- Transactions are generally based on credit, and borrowing and lending are usually regulated by community rules.
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The main advantages of LETS are
- Stimulate the local economy: Local currency is used locally and encourages the exchange of local products and services.
- Strengthening Communities: LETS provides opportunities for people to connect and support each other.
- Mitigating the effects of financial crises: Local currencies may help protect local economies from general financial system problems.
- Equal access: LETS allows people with little cash to exchange goods and services.
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However, LETS also face challenges and problems. They include difficulties in administration and organization, determining appropriate values, lack of liquidity, and lack of participation.
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