Paper short abstract:

This paper examines community currencies known as LETS. It describes how social pressure can curb inflationary tendencies. The central problem addressed in the paper is whether a sovereign authority is necessary to manage monetary systems and what alternatives to monetary sovereignty might exist.

Paper long abstract:

This paper discusses social movements that advocate for the creation of community currencies and in so doing seeks to deepen anthropological understanding of what money is in general. The paper describes two community currency systems. First, it considers the Comox Valley Local Exchange Trading System (LETS) which was pioneered in British Columbia, Canada in the 1980s and 1990s before widespread availability of the internet. Second, the paper discusses its contemporary online descendent, Open Money. Both systems enable network members to create currency as they need it out of the promise to repay other network members at some future point in time. In so doing, these systems operationalize the “token theory” of money and call into question the “commodity theory” on which most central bank monetary policy rests. This process does so in abstract terms rather than in empirical ones. There are no formal restrictions that prevent a member of one of these currency networks to create as much money as they want (potentially leading to inflation), yet in practice members of these networks largely avoid overpromising. The paper argues that instead of sovereign decree, the networks rely on social pressure to prevent individuals from making too many “promises to pay.” This raises the question of sovereign power in monetary systems: whether a sovereign authority is necessary to manage monetary systems and what alternatives to monetary sovereignty might exist.