Tag Archives: commercial barter exchange

Commercial Trade Exchange Architecture and Operations—A Conversation with Chip Davis and Charlie Davis by Thomas H. Greco, Jr.

Recently, I came across an article about what seems to be a significant development in the commercial trade exchange industry. Published on February 15, 2018, the article, TradeAuthority rebrands as Moxey with new digital currency, national expansion plans, tells about the expansion and rebranding of a commercial trade exchange heretofore known as TradeAuthority. Operating for the past several years in the Gulf Coast region of the southern United States, TradeAuthority has developed along lines somewhat different from most other trade exchange companies. I’ve had some peripheral knowledge of TradeAuthority for a long time but after reading the article I decided it was time for me to reach out to its founder, Chip Davis, with the intention of gaining a more detailed picture of how they operate and their plans for further development and expansion. The company, now named Moxey, is a network of 14 autonomous member-owned local trade exchanges, member ownership being a unique feature in the commercial trade exchange industry.

The key players in the Moxey enterprise are Chip Davis, founder of TradeAuthority and current  Executive Vice President of Moxey, Charlie Davis, President of Moxey, and Warren Sager, Moxey Vice President of Operations.

Some Key Questions 

In my message to Chip Davis, I posed the following questions:

  • What degree of autonomy do the various (14) exchanges in your network have?
  • Is it possible for a member in one exchange to buy/sell directly with a member of another exchange in the network? Does your platform provide that functionality or does the trade need to be pre-arranged with brokers in the two exchanges?
  • Is there a single Moxey ledger for the entire network or does each exchange have its own? If the latter, how are accounts reconciled among the exchanges, and how often?
  • Do you participate in UC? [UC is “Universal Currency,” a credit currency that many trade exchanges use to enable their members to buy goods and services from members of different trade exchanges.]
  • What are the factors you use to allocate lines of credit? How are they weighted? Are all exchanges in the network required to apply the same algorithm in allocating credit lines to their members?
  • You say, “Moxey intends to be a better Medium of Exchange by removing the concern of inflation.” How does it do that?
  • Is you online portal a complete marketplace that includes offers and requests? Vendor and client background? Reputation ratings?
  • When using the app or online portal, is approval of the transaction immediate?
  • You also say, “It also removes the extreme deflationary dangers that can exist in a purer form of money such as gold.” Can you explain that?
  • What additional functionality will be achieved by using blockchain? “The major thing behind all currencies is a trust and transparency in knowing the currency is strong and blockchain technology will allow an additional level of transparency,” says Warren Sager, Moxey vice president of operations. “It will allow our currency to become stronger and more trustworthy.” But that does not address the transparency of the credit allocation process. Please comment.
  • The trade exchange industry seems to have been for some time on a plateau or slow growth trajectory. How do you see moneyless trading alternatives evolving over the next few years, and how much of an increase in scale do you anticipate?

You can read Chip’s and Charlie’s answers, and our full conversation by clicking here. –t.h.g.

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The Financial Times discovers mutual credit clearing

Journalist Edward Posnett, in an article that appears this weekend in the Financial Times magazine, describes the origins and operations of Sardex, a mutual credit clearing exchange that I visited last month and reported on here.

Posnett’s article, The Sardex factor, is fairly well written and begins with the subtitle: When the financial crisis hit Sardinia, a group of local friends decided that the best way to help the island was to set up a currency from scratch. You can read the full article here.

While I consider Sardex to be among “the best of the breed” and a trade exchange model worth replicating, it is by no means unique. Posnett’s article is well worth reading but I fault it on two counts, first for ignoring the scores of similar commercial trade exchanges that have been operating successfully around the world for the past several decades, and secondly for failing to emphasize the crucial importance of the value proposition that mutual credit clearing provides—the provision of liquidity to a local or domestic economy, independent of the banking system and without the disruptive and destabilizing imposition of interest.

There are several well run commercial trade exchanges but as I said in my interview at Sardex, most trade exchange operators are too complacent and satisfied with their modest levels of business success.

The ‘special sauce” that seems to make Sardex stand out is the underlying values and social mission of the founders. Their primary purpose in launching their credit clearing exchange was to help improve the local economy of their home island. I hope that will continue to inspire their operations and development in the years to come.

They have tried to assist entrepreneurs in six or seven other regions of Italy to replicate their design and operations, but told me that the results have been disappointing. I’m speculating that it may be for lack of that “special sauce.” If that’s the case, then successful replication will require that they work selectively with social entrepreneurs who share the same values and mission of serving the common good.

That seems to be quite a rare breed right now, so these people will need to be nurtured through a process of selection and education–perhaps somewhat akin to what the Jesuits have historically done. The need is for people who have the right values, strong motivation, and technical competencies to create the new socio-economic paradigm.

The interview that I gave at the Sardex offices during my visit focuses on The Changing Picture in Complementary Currencies and can be viewed in the post below or on YouTube at https://youtu.be/epOebHTQpDI. The pictures that I took are in my online photo gallery at, https://picasaweb.google.com/112258124863172998784/201508SardiniaItaly?authuser=0&authkey=Gv1sRgCILAwtjOyOetvAE&feat=directlink.

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Thomas H. Greco interviewed on Bartertown Radio

My December 13 interview by Bob Prentice and Sandra Harshman on Bartertown Radio considered moneyless trading in general then zeroed in on what needs to be done to take credit clearing and private currencies to scale. To stream it or download it, click here.

Stop Chasing the Buck and Change Your Luck

Cashless trading based on credit clearing is moving into its next stage of development, the optimization and scale-up stage.

Established groups and associations are beginning to recognize the importance and urgency of disengaging from conventional structures of money and banking, reclaiming “the credit commons,” and reorganizing the exchange of value under local community control. One such association is Green America, formerly known as Coop America, which has recently established  The Green America Exchange  as a way of offering cashless trading opportunities to members of their Green Business Network.

GAEx uses the GETS trading platform which has been developed by Richard Logie, a long-time commercial trade exchange operator and leader in the industry. While the GETS software is proprietary, it seems to have the functionality needed for cashless trading within the exchange. According to Logie, the platform also has the capability needed for networking similar exchanges together into a larger more widespread trading community.

In response to a request from the Green America administration I’ve written the following article for posting (in four parts) on the Green America Exchange blog. For your convenience, I’ve also posted it below.–t.h.g.

Stop Chasing the Buck and Change Your Luck

Thomas H. Greco, Jr.

Most small and medium sized businesses (SMEs) these days are having a hard time financially–sales are down, costs are up, and bank credit is unavailable, all of which is symptomatic of the stagflation that besets the American economy.

Our present predicament is no accident of nature, nor is it a temporary condition; it is the expected result of a flawed system of money, banking and finance. We have allowed the banks to control our credit and charge us interest for the “privilege” of accessing some of it as bank “loans.” The fact is that the dollar regime, like every other political currency, collectivizes credit. It is the people’s collective credit that supports each national currency, but the allocation of that credit is determined by forces beyond popular control, and an inordinate proportion of it is used to fund the war machine and to enrich corporate fat cats, all to the detriment of peace, equity, and the common good.

But we need not be victims of a system that is so obviously failing us. We can learn to play a different game. It is possible to organize an entirely new structure of money, banking, and finance, one that is interest-free, decentralized, and controlled, not by banks or central governments, but by businesses and individuals that associate and organize themselves into cashless trading networks. This is a way to reclaim “the credit commons” from monopoly control and create healthy community economies that can enhance the quality of life for all.

In brief, any group of traders can organize to allocate their own collective credit amongst themselves, interest-free. This is merely an extension of the common business practice of selling on open account—“I’ll ship you the goods now and you can pay me later,” except it is organized, not on a bilateral basis, but within a community of many buyers and sellers. Done on a large enough scale that includes a sufficiently broad range of goods and services, such systems can avoid the dysfunctions inherent in conventional money and banking and open the way to more harmonious and mutually beneficial trading relationships that enable the emergence of sustainable economies and promote the common good—a true economic democracy.

This approach is no pie-in-the-sky pipedream, it is proven and well established. Known as mutual credit clearing, it is a process that is used by scores of commercial “barter” companies around the world to provide cashless trading for their business members. In this process, the things you sell pay for the things you buy without using money as an intermediate exchange medium. Instead of chasing dollars, you use what you have to pay for what you need. It’s as simple as that. Unlike traditional barter, which depends upon a coincidence of wants and needs between two traders who each have something the other wants, mutual credit clearing provides an accounting for trade credits, a sort of internal currency, that allows traders to sell to some members and buy from others. According to the International Reciprocal Trade Association (IRTA), a major trade association for the industry, “IRTA Member companies using the ‘Modern Trade and Barter’ process, made it possible for over 400,000 companies World Wide to utilize their excess business capacities and underperforming assets, to earn an estimated $12 billion dollars in previously lost and wasted revenues.”

Perhaps the best example of a credit clearing exchange that has been successful over a long period of time is the WIR Economic Circle Cooperative. Founded in Switzerland as a self-help organization in the midst of the Great Depression (1934), WIR provided a means for its members to continue to buy and sell to one another despite a shortage of Swiss francs in circulation. Over the past three quarters of a century, in good times and bad, WIR (now known as the WIR Bank) has continued to thrive. Its more than 60,000 members throughout Switzerland trade about $2 billion worth of goods and services annually.

Now the Green Business Network of Green America, is offering that kind of opportunity to its membership through Green America Exchange, GAEx. While still in the formative stages, Green America Exchange has the potential to become, not merely a lifeboat for SMEs in difficult times, but a model for a new paradigm in business.

The challenge for any network, of course, is to achieve sufficient scale to make it useful. The bigger the network, the more opportunities it provides for cashless trades to be made. In the early stages, it may require some help to find those opportunities, but as the members discover each other and become aware of what each has to offer, the value proposition becomes ever more evident and more businesses are attracted to it. Like Facebook, Twitter, My Space and other networks that are purely social, cashless trading networks will eventually grow exponentially –and that will mark a revolutionary shift in political as well as economic empowerment. It will be a quiet and peaceful revolution brought on, not by street demonstrations or by petitioning politicians who serve different masters, but by working together to use the power that is already ours—to apply the resources we have to support each other’s productivity and to give credit where credit is due.

Through participation in an exchange network that is open, transparent and democratic members enjoy the benefits of:

  • A reliable and friendly source of credit that is interest-free and community controlled.
  • Less need for scarce dollars.
  • Increased sales.
  • A loyal customer base.
  • Reliable suppliers.

What will it take to make mutual credit clearing networks go viral the way social networks have? That is the key question, the answer to which has heretofore remained elusive. While the WIR has been an obvious success, it seems to have been intentionally constrained and prevented from spreading beyond Swiss borders, and while commercial “barter” has been significant and growing steadily, it is still tiny in relation to the totality of economic activity.

As they are operated today, commercial trade exchanges are self-limiting and typically impose significant burdens upon their members. These include onerous fees for participation, exclusive memberships, limited scale and range of available goods and services within each exchange, the use of proprietary software, and insufficient standardization of operations which limits the ability of members of one trade exchange to trade with members of other exchanges.

Virtually all commercial trade exchanges are small, local, and operated as for-profit businesses. Small scale, local control, and independent enterprise are all desirable characteristics, but when it comes to exchanging valuable goods and services, something more is needed. What the world needs now is a means of payment that is locally controlled but globally useful.

Here are the things that I think are needed for cashless trading based on mutual credit clearing to go viral:

  1. Members need to offer to the network, not only their slow moving merchandise and luxury services, but their full range of goods and services at their usual prices. This will assure the value of the internal trade credits and make them truly useful.
  2. Like any “common carrier,” trade exchanges should make membership open to all with little qualification.
  3. Lines of credit (the overdraft privilege) must be determined according to each member’s ability and willingness to reciprocate, measured for example, by her record of sales into the network.
  4. Trade exchanges must be operated for and by the members in a way that is transparent and responsive.
  5. Members must exercise their duties to provide proper oversight and supervision of those assigned to manage the exchange.

As soon as there is a model exchange that has mastered these dimensions of design and operation, its success will inspire others to follow suit and the rapid growth phase will begin, leading eventually to an internet-like global trading network that will make money obsolete. Perhaps Green America Exchange will become that model.

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Thomas H. Greco, Jr. is a writer, networker, and consultant, specializing in cashless exchange systems and community economic development. A former engineer, entrepreneur, and tenured college professor, he is widely regarded as a leading authority on free-market approaches to monetary and financial innovation, and is a sought-after advisor and speaker at conferences internationally. He is the author of many articles and books, including The End of Money and the Future of Civilization (Chelsea Green, 2009) and Money: Understanding and Creating Alternatives to Legal Tender (Chelsea Green, 2001). His blog, https://beyondmoney.net/, and website, http://reinventingmoney.com/, are valuable resources that provide detailed explanations and prescriptions for communities, businesses, and governments.