Posts Tagged ‘barter’

Interest and the Role of Trade Exchanges

June 30, 2010

As cashless exchange becomes an ever more significant portion of total transactions in the economy, the regulatory issue will become a greater concern. It is important that trade exchanges NOT be perceived as issuers of credit, so as to avoid running afoul of banking regulations and possible tax liabilities. Everything that trade exchanges do needs to support the position that the role they play is that of “third-party record-keepers” and that it is the members themselves who provide credit to one another.

Paul Suplizio, former Executive Director of the International reciprocal Trade Association (IRTA), has expressed it this way:

“This means members with positive balances are the issuers of credit and the exchange has only administrative powers, delegated by the members, to regulate credit extension.”

It can be argued that the credit clearing process is simply one of generalizing (collectivizing) the longstanding practice of businesses transacting trades with one another on “open-account,” i.e., selling to one another on credit and allowing some period of time in which to pay.

It has properly been a cornerstone of the trade exchange business that there is no interest charged on negative account balances and no interest paid on positive balances. Therefore it cannot be argued that trade exchanges are acting as banks or lenders of money.

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Posted in Basic Concepts, Exchange Design, Implementation Strategies | 3 Comments »

Vermont Business Exchange, an Emerging Force for Local Trade

April 16, 2010

The localization of an economy requires local control of credit. That can be achieved by participation in a local credit clearing association. There are many such business-to-business (B2B) exchanges that provide this service on a for-profit basis. Now the lines between for-profit and non-profit are beginning to blur as credit clearing services are teaming up with existing non-profit business organizations. One example is the Vermont Business Exchange which is now being launched in association with Vermont Business for Social Responsibility.

Watch this video of a recent interview in which Amy Kirschner explains the project history, vision, and current status.

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Posted in Developing Alternatives | 1 Comment »

Modern Trade and Barter – How It Works

September 15, 2009

IMS is one of the leading trade exchange operators in the United States. It’s a publicly traded company that has in about 24 years grown from one local trade exchange into a network of more than a dozen trade exchanges scattered around North America. The IMS website contains a five minute video that does a pretty good job of explaining how commercial trade exchanges work. View it here.

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Posted in Basic Concepts, Developing Alternatives, Exchange Design | 1 Comment »

How Might Credit Clearing Be Used to Make International Trade More Rational and Fair?

March 22, 2009

Clearing works at any level to settle claims – (1) among banks to settle claims arising from their clients’ check transactions, (2) among companies and individuals engaged in trade to offset their accounts payable against their accounts receivable, and (3) among nations to settle international trade balances. The first of these is well established and generally understood. The second is what occurs within grassroots mutual credit clearing systems (like LETS) and the commercial “barter” or trade exchanges that have proliferated around the world and are now enabling billions of dollars of cashless trading to take place every year. These private initiatives provide the inspiration and the prototypes that are now being scaled up and interconnected to make for more a efficient, secure, and equitable transaction infrastructure.

The third, which requires action at the highest levels of government, has been done on a bilateral basis (like barter) but the potential for multi-lateral clearing of trade balances has yet to be seriously considered. Is there sufficient vision, will, and independence of action at that level for anything useful to be done? That remains to be seen.

The present global financial order, which was largely established at Bretton Woods toward the end of World War II, is based on dollar dominance and exploitative initiatives that are managed through the intuitions that were forced upon the world at that time (the IMF and World Bank). I’ve not made a detailed study of the proposals that were made then, but according to a recent article by George Monbiot in the Guardian (UK), the Bancor proposal of John Maynard Keynes might deserve a second look. The article is titled, Keynes is innocent: the toxic spawn of Bretton Woods was no plan of his, and I encourage anyone who has an interest in this subject to read it. According to Monbiot, “The economist’s dream was blocked for an IMF serving the rich. Reforms proposed by G20 leaders are too little, too late.”

The details of the plan as described in the Guardian article may not be entirely to my liking, but it may be a good starting point for negotiations among a few enlightened governments to create an independent system for managing trade among themselves.  - t.h.g.

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Posted in Geo-politics, Global Economy, The Political Money System | 4 Comments »