Read this if you are a member of a trade exchange and can’t spend your trade dollars.
You probably joined your trade or barter exchange with the promise they would help you move dated inventory, fill vacant appointments, sell time-sensitive inventories of ad space, tickets, seats, etc. and it worked! You sold, sure enough, but now you can’t find much or even anything to buy with your new-found profit. Prices are inflated if there is something available.
Likely the owner of the exchange, the exchange employees, or some other “insider” bought a fair portion of what you sold, right? They also “helped out” many of their other members the same way. Maybe the operator of the exchange extended credit on bad risks who spent it and left. Either way, the result is always the same. Everybody wants to buy, nobody wants to sell, so nothing is available to buy. That is commonly called “gridlock”, and it is a far to common phenomenon.
Now the exchange has you over the barrel. You can’t leave because you will loose your trade dollars, so you are stuck paying monthly fees in cash to hold them. You might “only” pay $10.00 to $20.00 per month to keep your several hundred to several thousand trade dollars “alive”. (Often the exchange does not accept it’s own trade dollars in payment of fees. They want CASH.
The exchange with only 150 members paying only $15.00 per month is taking in $2250.00 USD monthly without lifting a finger! With 300 members his take is 4500.00 in cash. Why change anything? It’s working for him! It would be fine if his customer (you) got something for the money, but …
What do you do about it? Hope? Wish? Cuss? Walk away? Sue ’em?
What I’ve seen is members gradually give up and quit throwing good money after bad, and when the cash revenue to the exchange no longer covers it’s cash costs, they shut the doors. Everybody looses. Everybody cusses barter. “Stay away from those barter exchanges, they don’t work. They just cost you money.” they say.
Here is the good news. There are exchanges that operate on sound financial principles.
You can transfer you trade dollars to a different exchange. All you need is an exchange willing to do it! One that uses sound principles, of course. No sense hopping from pan to pan. Pull your account balance report, typically the same as your monthly statement, and shop it around with other exchanges that don’t have problem deficits. Find one that charges a portion of the fees in trade dollars, since that is the prime indicator of the mindset required to avoid deficits and to deal with them as they arise. When you have a transfer deal made, (or even before you do if you are brave enough, or sick enough of paying for nothing), close your unspendable account.
When the exchange that is receiving your account sets it up, they will, in essence, pay you the amount agreed on from a special account for the purpose, their “transfer account”, debiting it and crediting your new account. The effect is that they are assuming your old exchange’s debt to you. They are “buying” your future business.
Why does this work? How can it work? Won’t this just wreck the good exchange?
Let me answer these question with an explanation of the key differences in the two exchanges. We’ll call them “BadX” and “GoodX”.
BadX thinks of themselves as “marketers” and they set out to get your stuff sold, even if they have to buy it themselves. They think of money as value, and they carry this flawed definition over to their trade dollars. They are driven to generate cash fees so if they can broker a deal between members, they get fees from both, but if they can’t, and they buy “the stuff” themselves they still get half the fees, yours. They think of “priming the pump” as spending TD into circulation giving members some money to spend. (and collecting a fee in the process!)
In a nutshell, BadX thinks their TDs are really valuable to their members, but they don’t want them themselves. One guy told me something like this: “Why would I want to charge fees in trade dollars? I can make all the trade dollars I need anytime I need them!” Needless to say, that exchange was soon gone, closed, disappeared. So did the owner.
GoodX thinks of themselves as financial services providers, and they set out to provide a sound money system. They shoot for a system that can compete with the national currency (dollar?) in as many ways as possible. They understand that the money isn’t the value, but is only an accounting for value exchanged. They understand this stuff I’ve been talking about. They deal with deficits simply and easily by charging part of the fees in their trade dollars, which helps keep balance, and usually reduces the cash cost to the members – that’s an extra bonus!
In a nutshell, GoodX understands that money (TD) is just a record. They know that growing deficits will eventually kill their business. They also know how to redeem the deficits they do encounter. They want their own trade dollars. They think of “priming the pump” as drawing members balances down so they need to sell, thereby loading the exchange with lots of stuff to buy! Instead of spending the exchange’s own credit line, they want members to spend theirs. That’s the idea, interest-free credit lines.
While it’s not necessary for an exchange to “open the books” for member audit, it is good policy. It keeps a bit of pressure on the exchange management to “keep it clean”.