Tag Archives: IRTA

Beyond Money—Learning the basics of value exchange

We need to get beyond the confusions and obfuscations that surround the concept of money.

To do that we need to distinguish between what money is, i.e., its essence, and what money does, i.e., its functions. Conventional definitions of money, the ones that are universally taught in schools and universities, tell what money is supposed to do, not what it is.

The essence of money is credit. It is the issuer’s i.o.u. or promise to reciprocate, i.e. to provide real value to the market and accept his currency back as payment for it.

With that in mind, we can begin to make sense of money and effectively address the problems that arise from conventional forms of money.

Conventional thinking lists money as having these functions:

  • Medium of exchange—what we use to pay one another.
  • Store of value—what we use to save our temporary surplus.
  • Measure of value—what we use to quantify the market value of all the things that we buy and sell.

But, as I have argued for almost 30 years, these are separate and distinct functions that need to handled by distinct and different means. (For more about that see my book, Money and Debt: A Solution to the Global Crisis, Part III).

Let’s focus on the exchange function, for this is the fundamental and proper role of money, and this is where attempts to solve our global financial and economic problems must begin. Anyone who has studied my work will know that I have thoroughly articulated these concepts in my books and my various presentations. But theory and practice develop together, each informing the other, and finding ways to improve the process requires that we look at both.

Over the past several decades, numerous innovations in the exchange function have emerged, including virtual commodities like Bitcoin, LETS systems, community currencies, and commercial trade (“barter”) exchanges.

Of these, the greatest market success has been achieved by commercial trade exchanges which enable their member businesses to buy and sell without using conventional money. Rather, trading is enabled by using the members’ own credit in a process called credit clearing which simply offsets debits from purchases against credits from sales. (For a more complete description of how this works, see my book, The End of Money and the Future of Civilization, especially Chapter 10).

Over the past 40 years, much has been learned from the operation of commercial trade exchanges, and while they have achieved some modest levels of success, they have barely scratched the surface of the potential market for credit clearing services. It remains for exchanges system designs and procedures to be optimized and standardized and for local exchanges to be networked together into a vast moneyless marketplace.

The trade exchange industry has two trade associations that have been instrumental in helping practitioners to share information and in promoting standards and best practices. These are the International Reciprocal Trade Association (IRTA) and the National Association of Trade Exchanges (NATE). But over the past year a new voice, Bartertown Radio, has emerged that seeks to disseminate the knowledge and wisdom of practitioners to a wider audience. Its mission is to provide an “Educational Program for Business Owners, Entrepreneurs, Barter Exchanges, Owners or New Owners of Barter Exchanges or anyone interested in Alternative Economies.”

Broadcasts are archived and can be accessed on demand at the Bartertown Radio website. Particularly relevant is the April 18 broadcast featuring Richard Logie, a man with 20 years of experience as a trade exchange operator and software platform developer. During that interview, Richard shared his experience and knowledge about a wide range of topics including the factors he considers in allocating credit lines to exchange members, how tax issues are dealt with, and ongoing efforts to establish and enforce good standards of operation. That interview with Richard will be continued next Saturday, April 25 at 11 AM Eastern time (UTC-5). Be sure to tune in at http://www.blogtalkradio.com/educate4barter/2015/04/25/richard-logie-part-2 .

Other archived broadcasts that may be of particular interest are the April 5 interview with industry leader, Harold Rice of the American Exchange Network, and the interview with yours truly from December 13, 2014. Besides operating his own trade exchange company for almost 40 years, Harold Rice has provided consulting services for entrepreneurs and other exchange operators. He is a fount of knowledge about the details of exchange operation and has special expertise in accounting and tax issues.

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Excitement mounts over upcoming IRTA Convention!

The International Reciprocal Exchange Association (IRTA), the premier association of the commercial “barter” industry, has been for more than forty years promoting the interests of small and medium sized enterprises by assisting its member trade exchanges to provide them with liquidity and effective opportunities for moneyless trading.

Since 2005, IRTA has been reaching out to the wider grassroots community of researchers, developers, and organizers of private currencies and complementary exchange mechanisms and has broadened its advocacy to include them.

The upcoming 34th Annual International Convention of the IRTA in Las Vegas will provide a unique opportunity for social entrepreneurs and monetary activists to further consolidate programs of cooperation with the well-established commercial “barter” sector of the moneyless exchange movement. The Convention will be held from Sept. 19 thru 21 at the Venetian Resort in Las Vegas.

Along with IRTA President and experienced trade exchange operator Annette Riggs, and Rob van Hilten, Executive Director of QOIN, a consultancy for community currencies, I will be a panelist in a Saturday session (September 21) titled Understanding Diverse Exchange System Models: From Bitcoin and Berkshares, to Transparent Credit Clearing Networks. This session will consider three basic topics of discussion:

Bitcoin, the good, the bad, and the ugly.

The benefits and limitations of cash-based local currencies.

The emerging global exchange network.

There is still time to register for this important event. You can get details about the convention program and secure your place by visiting the IRTA website at http://www.irta.com/.

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Interest and the Role of Trade Exchanges

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.