Mutual Guarantors

I read Thomas Greco's 'The end of money and the future of civilization'. He talked about mutual guarantor groups, which are common in microcredit loans. This idea had natural appeal because it's more about trust in people than arbitrary formulae, and it has predecessors in many cultures and works very well.

When we shifted Community Forge onto the gift-funding, we had to tackle the problem. Most LETS systems now give users free credit (without credit, there is no debit) on the basis that they have paid their bank-money subscription. This is a high risk, but at least there is some exchange taking place. If Community Forge has no intention of providing a bank-money system (only donations) then our system would be incomplete without some basis for issuing credit. So this is what I came up with.

Each currency that needs guaranteeing will have what I am calling a shadow currency. Members guarantee each other by paying each other in this currency. Periodically the computer calculates how much you are 'good' for, say, three months income (this is arbitrary but it matters less because it's one level removed) and shares that between all the people you've given the shadow currency to. This means that

• everyone is guaranteeing everyone else, up to a common limit determined by the system administrator.
• my credit limit will fluctuate as a function of how much the people who trust me are trading.
• I can decide who in the system I trust.
• New members can have a positive balance, but they have to earn the trust of existing members
• When an account defaults, the balance can be made up by all the people guaranteeing that account, in due proportion.

example

I join the system for FREE but maintain only a positive balance. By making friends and influencing people, I persuade people to give me a trust-token. I may have given them units in exchange, bur mine aren't worth much until my turnover accrues. After the calculation I see that the trust-token from Adam is one of 10 he has issued, and he is good for 50 units, and Beth has issued 20 and she is good for 200 units, so my credit limit becomes 5 + 10 = 15.

A week later, Adam is good for 60, but Adam has issued another token. Beth is now only good for 190, but I've got one of Charlie's 10 tokens, who's good for 100. My credit limit has shifted to 5 + 9 + 10 = 24.

Is this a good idea? Can anyone explain it more elegantly?