How Does it Work?
In a LETS System, everyone gets an account, much like a bank account, which keeps track of trade in a locally-defined currency, often referred to 'green dollars' or 'barter bucks' or some other name that reflects the culture of the community in which it is established. Reflecting the long history of codfish as Newfoundland currency, we have called our local currency 'COD'!
One does not have to have COD in one's account before spending. Everyone's account starts at zero, and everyone gets a COD credit limit, which means that each account can go into the negative, up to a certain amount set by the administration.
The value of one COD is the same as the value of a Canadian Dollar. Members charge the same amount in COD for goods and services as they ordinarily would with regular money, though members can charge any portion of a transaction in both cash and COD, (to cover cash expenses, or to account for taxes, for example. More information on taxation and LETS is located here.)
Members list goods and services offered and needed in an online directory, much like the Yellow Pages. Members contact other members when they wish to conduct a transaction. Members pay other members in COD and keep track of transactions through an online account, much like an online bank account.
Here's an example: The farmer, the baker, the candlestick maker.
The farmer needs to buy bread. The baker charges 10 COD for a loaf, and accepts 100% COD per transaction. Since this is the first transaction that these members have performed, when the farmer pays 10 COD to the baker, the farmer's account is now at -10 COD and the baker's is at +10 COD.
The baker needs candlesticks. He contacts the candlestick maker to purchase 50 dollars worth of candlesticks. The candlestick maker accepts 50% cash and 50% COD. The baker pays $25 in cash and 25 in COD. Once the payment has been made, the baker's account is at - 15 COD, and the candlestick maker's is at +25 COD. Since the candlestick maker charges GST, $7.50 is also paid to him in cash.
The candlesticks maker needs vegetables. He purchases 50 dollars worth for 50 COD, since the farmer accepts 100% per transaction. The candlestick maker's account is now at -25 COD, and the farmers' is at +40 COD.
And on and on it goes!