In this post I share my recent experiences using Bartercard, explaining how the value of a currency is always determined by the traders, not the issuers of a currency. This has ramifications all round but directly affects traders using the Bartercard currency system, and currency owners/designers who think that they can set the value of a currency ‘from above’. They can’t!
In a previous post I detailed some of the sales and marketing errors that I highlighted in Mistakes of the Monetary Reformers, my free eBook. I explained how when traders are given real motivation to use a particular currency (in my example I used the payment of commissions as a ‘carrot’) then the promotional activity moves away from the system owners to the traders. This inverts the Alternative Currency business model which is currently based along the lines, “build, then sell it” – a very hard task!
The closer a currency can reproduce the real world, the more likely it is to be used. I’ve explained this along the lines that if you’ve got what people want then they’ll use it, or buy it. Just as ‘available’ girls have no need to sell themselves when a shipload of sailors arrives in port, likewise when a currency meets the needs of the traders, it’s the traders who will make it happen.
The same thing occurs in nature when a flower has pollen and honey in season, it simply makes it available and the bees tell the bees. In marketing this is called viral replication – it’s a multiplication process, where one becomes ten then ten becomes a hundred and a hundred becomes a thousand. Active selling on the other hand is much harder work and is an addition process, where one becomes two, and two becomes three, four, five and so on.
Most Alternative Currencies do not provide what people want, thus they all struggle to gain traction.
The way the business (in this case a currency) is structured determines it’s success. The key point here is that in a well-structured business/currency it is the people who make it happen NOT the leaders.
This also applies with valuing a currency, the point of this post – it is ALWAYS the traders who value a currency, no matter what the currency owners may think or say. Here’s a recent example of how this works in the real world from my engagements with Bartercard in New Zealand. By way of a background, I live in Samoa; I had transferred funds from Universal Currency to Bartercard New Zealand and sought to use those funds. New Zealand is my country of birth, and it is Samoa’s closest trading partner so while Australia is bigger and could offer more opportunity for spending the Bartercard credits, New Zealand is easier.
I slipped an email to a senior account manager listing the items that I was interested in and followed his instructions. You’ll note that at the outset, I warned him that I could be a little prickly if things go wrong and suggested that he appoint one person to look after my requirements (I hate getting bumped around juniors, especially with international communications). He chose to look after me himself, clearly a wise man!
I actually need two sets of business cards and some signwriting vinyl. Can you arrange for a trade coordinator to contact me? I’ve a few other requisites that we could put your way. If I have one point of reference this will help me and not bury you with minor stuff, but that’s up to you.
I can be a little prickly if things go sour so it might pay to put someone who has had a bit of experience onto the case I think!
Business cards – on going
Signwriting vinyl – all colours on going
Mens shaver – one off immediate
Sugar cane press/roller – one off immediate
Small electric solar fence set – less than 1km4″ single rubber mattresses – multiple immediateSheet steel, galvanised 1.15mm – a decent quantity on goingStorage and shipping of all sorts of things to Samoa – on going
Business cards – on going – yes we have BC options here and I will look into this and come back to you
Signwriting vinyl – all colours on going – yes we might have BC options here, could you please give me some more specs?
Mens shaver – one off immediate – this is not something we can get on BC
Sugar cane press/roller – one off immediate – this is not something we can get on BC
Small electric solar fence set – less than 1km – this is not something we can get on BC
4″ single rubber mattresses – multiple immediate – yes we have BC options here and I will look into this and come back to you
Sheet steel, galvanised 1.15mm – a decent quantity on going – this is not something we can get on BC
Storage and shipping of all sorts of things to Samoa – on going – this is not something we can get on BC
Things looked good – three items were a possibility; we struck out on five [challenging] items.
I engaged with the trader who offered business cards for $175.00 + GST but I didn’t buy immediately. I later got an LinkedIn request to connect from him, and followed his links back to another website/business of his selling business cards for $99.00+GST. While Bartercard doesn’t like this practice and they try hard to stop it, this is common practice within Bartercard members, they determine their ‘Bartercard Price’ and trade in the cash economy with another price.
Here is Bartercard’s problem . . . they, as the currency owners are desperately trying to force their members to trade at the same price in their economy as the members do in another economy BUT the members know full well the real value of the Bartercard Trade Dollar. In this case the provider of my businesscards valued the Bartercard Trade Dollar at 56 cents in the dollar ($99.00 divided by $175.00 = $56.57, thus 56%). Bartercard of course wants its currency to be viewed ‘on par’ with the NZD and will quite naturally do anything it can to give the members that impression.
As I’ve shared previously, the Bartercard Dollar is actually probably only worth 20c in the dollar (or less) due to rampant inflation caused by hidden debt in their house account going back over two decades but most people don’t know or care about this. Most traders (like me) simply assess what they can get with what they’ve got and do the business. I bought the businesscards for the inflated price by the way and never said anything, neither to Bartercard nor the vendor. The vendor actually did everything right – he set up a product and price under one brand and made the offer. The fact that he has another brand with the same product and another price is beside the point EXCEPT for someone like me who asks questions and investigates things! The second example where we can see the traders determining the value of the currency against the wishes of the owner of the currency came with TWO different members who required a part-trade. Now Bartercard’s rules are FULL TRADE OR NO TRADE. This means that members cannot ask for partial payment in cash.
Both the mattress supplier and the signwriting vinyl supplier sought part payment in cash. Here’s one of the replies with the critical point highlighted:
I have attached for you a full Trade Price list.
You can find the pricing details of the film you require at the bottom of page 8 (3M 50 Series), I will attach a second PDF with the colour range in another email as the files are too big to send at once (please note we only sell the Black and White in the Matte Range). We have a minimum purchase length of 1 metre and sell only by the metre.
We are able to deliver to an Auckland address for export and pricing will exclude GST. We will need a Purchase Order request on company letterhead listed with your business address overseas.
Regarding Barter Card payments, we can only accept 25% of the total invoice through Barter Card.
If you have any questions, please feel free to contact us.
Good service, good product, price OK . . . but accepting only 25% in Trade killed the deal for me, and I replied:
Thank you [name] but I have been given Bartercard credits and wish to use them as the form of payment. Cheers anyway
The mattress people did the same. Once we’d Skyped and gone through the sales process the Commercial Sales manager informed me that:
“We only accept Bartercard to 25% of the invoice.”
I replied the same as I did to the signwriting vinyl vendors,
“OK sorry about that, this kills the deal for me. Thanks anyway!”
and hung up.
I do not begrudge these guys decisions at all. I’m not a member of Bartercard so I have no right to complain. Of course I politely informed Bartercard as a courtesy and will probably have to go to Australia to find something of value for my credits, which is all fine.
The point is this . . . Bartercard has a serious tension between its members valuation of the currency and what it presents to the world. “One Trade Dollar equals One NZD” is the marketing claim. It doesn’t, not in the real world. In some ways the guys who were willing to accept 25% of the sale on Bartercard valued the currency at 25c*, which is probably a pretty safe bet. They guy who valued it at 56c was probably doing OK because he had a good margin in the product he was selling.
Only Traders Ever Determine Value
In my book Mistakes of the Monetary Reformers I explain that it is the traders who ALWAYS determine the value of a currency – ALWAYS – and it is an error to think otherwise. The significance of this is that most Alternative Currencies (Cryptos and some time banks are different) peg their currency to a Legal Tender currency but a true currency should be floating, with the traders determining its value.
This is a tradeoff between ease of use and retaining value. Pegging to a devaluing currency manipulated by hidden powers forces a currency value up and down on paper, but it is always traders who determine the true value of a currency AT THE POINT OF TRADE.
Traders want stability. A currency that gives traders the freedom to determine it’s value will be exactly that – stable. Manipulation of a currency (such as with Bartercard’s rampant inflation and their rules to attempt to plug the gaps and stem the tide of devaluation) is a path to self-destruction as traders use other currencies that they trust.
In this, Alternative Currencies are no different to the Legal Tender economies, where (if they can) traders and investors select the currency that they wish to use at the time of trade.
Thanks for swinging by and reading. I trust it all makes perfect sense now!