In the BrisLETS CES exchange there are account balance limits, ours are currently set at 2000 for both Credit and Debit balances for all accounts.  If we examine the account balances on our exchange we can see that most people’s accounts are within this range.  

According to the CES guidelines the aim of the game is for your account to hover around a zero balance.  When your account is in CREDIT it means that you have received more units than you have spent (giver), conversely when you have a DEBIT balance you have spent more than you have earned (taker).  Yet we see balances over these limits, (we also see deactivated accounts with Credit and Debit balances – more on this later in another article).  

As this is an accounting system, what are the implications of this?

Why are these limits set?

In a mutual credit system, money (yes MONEY) is created when it is needed, accounts are debited and credited in a seesaw fashion.

What happens when a limit is reached?

I would postulate that trading stops, until an offer/want is accepted, and the balance is restored to be between the limits. 

Here is an interesting interview from May this year with Michael Linton, founder of the LETS system  – https://www.youtube.com/watch?v=mlUuDvfrlkg at 20 minutes, one of reasons he says why LETS didn’t take off, is because of the ‘rules’ imposed onto the system.

CREDIT unlimited – Why limit trade if a person is willing to offer their goods and services to the community? If they cannot spend it in the community then the risk is theirs alone.  

DEBIT limit – One could argue that debits could also be unlimited as Michael Linton does, however as explained here – https://wiki.p2pfoundation.net/LETS there is no incentive for people to return their balance to zero. I guess a question could be, if somebody leaves the system in DEBIT, does it matter?  This means that a person has TAKEN from the COMMUNITY without the obligation to GIVE back to the COMMUNITY.  I would argue that it does matter, do we want to encourage a community of givers/takers or a community of givers and takers? 

As for setting a limit, I think that a 2000u DEBIT limit is appropriate for established members, maybe reduce the DEBIT limit for new members to 200u for 12 months.  This way risk is reduced.

PROPOSAL:  Remove the CREDIT limit of 2000 units, Introduce a new member DEBIT limit to 200 units for their first 12 months of membership.

Note:  New members need to show that they are active in the exchange with CREDIT balances in order for their DEBIT limit to be increased.  

Our next topic will be –  The Admin account and why it is special?   (A MMT perspective: https://www.investopedia.com/modern-monetary-theory-mmt-4588060

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