This post discusses the valuation of a Trade Dollar (or Trade Pound or whatever) using the concept of ‘Fair Market Value’. It follows my 2017 revelations of a 6.9 million NZD fraud within the BBX currency; years of mentioning the massive [off-balance] Bartercard trade deficit and a recent court case I was involved in where an ex-Bartercard member defended repayment of his trade debt (in cash on par) on the basis of Fair Market Value and more. I quote from three Australian court judgments and discuss the issue.
Trade Dollars are the unit of measure within a commercial trading network, typically using the name barter or variants. An alternative currency, they are generally ‘pegged’ to the local currency for convenience so that in NZ for example one Trade Dollar is deemed equal to the NZD by the currency issuer, and in Australia one Trade Dollar would be deemed to equal the AUD. This trade-off exposes the alternative currency badly as I explain in my book Mistakes of the Monetary Reformers but that is a side issue for today.
Fraud occurs regularly in the alternative currency scene as issuers of a currency will undermine the backing of their currency, an immoral (IMHO) practice that is [incredibly] even endorsed by the International Reciprocal Trade Association (IRTA) to a certain level, for currency management reasons. “Only cook the books by a little bit and this is good for the currency,” they say. Yeah right!
Undermining or debasement of a currency can be achieved easily when the members trust the currency provider to manage their debits and credits without any transparency or independent oversight. The basis of any Mutual Credit trading currency (the purest and natural form of money) is that the Debits will always equal the Credits within any currency. A balanced system with equal credits and debits is the theoretical and essential basis of any honest monetary system.
When a currency (any one – trade or Legal Tender) is perceived as less valuable than its face value, it should be devalued, however in practice this act is rare, for it acknowledges failure within the currency management. The constant battle that any currency issuer fights against is to protect the perceived value of their currency. That’s why all wars relate to not only power, BUT MONEY as well.
Backing, supposedly like gold, land, other physical assets or debts to the system from other traders (essentially someone’s word that they are ‘good for it’) needs to either exist, or at least be believed to exist in order for people to continue to want to use the currency. Technically though, backing is only ever trust – a human phenomenon – trust that somebody somewhere sometime will be ‘good for it’.
When the issuers of a currency (usually also the managers) help themselves to the real value in the system, you end up with many members in credit, less in debt to the system and debasement of the currency is natural. We also call this more technically, inflation. Obviously the crooks who have the real value by way of misappropriated (i.e. ‘stolen’) goods and services will attempt to perpetuate their profitable con-game as long as possible, usually collecting monthly fees along the way, not only their [reducing] fees on turnover.
Such is the case with the two biggest frauds in the Australasian region – BBX and Bartercard. Members with credits (sometimes very substantial ones) are loathe to either close the systems down or assist in their closing even though they know the currency is devalued because this will of course deny them any chance to recover their losses from unwise past business decisions that have exposed them. Even a remote possibility of finding a ‘bigger sucker’ to offload their credits onto is generally enough to keep their comparatively small monthly fees heading into the con-artists’ pockets.
Central to any argument with shonky operators who attempt to deceive their members is the value of a currency. Issuers of trade currencies such as BBX and Bartercard legislate the value of their currency in a signed agreement prior to opening up the trading network to a new member. This declaration of value is best seen in Bartercard’s Clause 3.1 of their Rules of the Trading Program December 2014, an agreement that has been widely recognised (and used) as a blueprint for other trade exchanges in the West. It legislates by fiat, (i.e. by declaration) that their currency unit the Trade Dollar equals one local dollar:
3.1 Nature. A “Trade Dollar” is an accounting unit (notionally equivalent to one Australian Dollar) used to record the value of goods and services traded. Trade Dollars are not legal tender, securities, debentures or commodities. In these Rules, one Trade Dollar is the equivalent of one Australian Dollar and vice versa.
All of us however know that with the passing years most currencies devalue thus we operate on Market Value when trading. We will inflate the selling price or pay more in Trade Dollars than we would in cash (or local currency) dollars.
Thirty years ago the Bartercard Trade Dollar had a Market Value of close to on par with the NZD, for example. Twenty years ago the Market Value would have been between 50c and 80c in the NZD. A decade ago it would have fallen to 20c to 30c in the NZD and there is good grounds to believe that the true Market Value is currently a lot less than that now.
Courts use the phrase Fair Market Value (FMV) and there has been more than one case where judges have acknowledged the reality of a given currencies debasement.
I quote now from three judgments presenting this issue, all from Australia, two relating to Bartercard’s currency although the brand or jurisdiction matters less in a court environment that the legal issues being discussed.
Bartercard Trade Dollar (1997) = 60c
The Queensland Court of Appeal in 2000, in QCA00-445 Bartercard Ltd v Myallhurst P/L & Anor QCA00-445 noted:
14. The use of transaction vouchers other than between members is discouraged by cl 15 of the rules. The evidence suggests however that some money value attaches to credit entitlements, and that a credit entitlement of $130,000 might be sold for up to $78,000 in real currency.
While this fact was never used by the lawyers effectively in that case, it was an early acknowledgement that there was indeed such a thing as Market Value, and this came from a very high legal authority.
The conclusion is that the Bartercard Trade Dollar in Australia had a Market Value of 60c – in 1997! Whether this was FAIR MV or not is another and an untried issue but it was clearly not valued on par.
Contrabart Trade Dollar (2103) = 26c-50c
The Supreme Court of Queensland in 2013, MacFarlane v Heritage Corporation (Aust) Pty Ltd & Ors QSC03-350 had this to say about the value of a Contrabart Trade Dollar:
69. A trade dollar is not equal in value to a dollar. There are in the evidence two clear examples of the comparative value of trade dollars to dollars. The first is [example 1]. The arithmetic suggests that the defendant’s thought a trade dollar was worth about 26c. The other evidence is [example 2]. On this occasion the comparison shows a trade dollar to be worth about 50c.
It will be seen in reading the entire judgment that the judge clearly favoured the evidence of the aggrieved party and that the currency issuers were labelled more than once as crooks, “[They] are shrewd and sharp witted traders who have made good use of trade exchanges and trade dollars to profit”, direct-quoting one specific judicial analysis.
I have found this to be the same with the principals of many trade exchanges – in particular those that I have exposed.
The conclusion from this case is that the Contrabart principals were crooks and there is evidence before the courts that their currency was not worth on par, actually worth ‘somewhere in the order of’ 38c. Subsequent events though have shown that in fact it was worthless . . .
Bartercard Trade Dollar (2014) = 17.5c
In this third more recent case (Kay v Habermann  QCAT 17) QCAT14-017 I quote the Judge’s assessment extensively as it details the issues of Fair Market Value quite thoroughly. First though to the actual valuation:
50. This evidence shows that to these parties, the value of the BarterCard dollar at the time of the transaction was in the range 10% to 25% of the Australian dollar, depending on how the BarterCard dollar was to be used. In the circumstances I think a fair value to assess the value of the BarterCard dollar to these parties would be 17.5%.
Of note here is that this case represented an employee of Bartercard (at the time) who was attempting to sue a member with a combined cash conversion. Incredibly, in 2014 or probably long before the Bartercard Trade co-ordinator stated that he purchased the Bartercard Trade Dollars for 10c [cash] in the [trade] dollar, and then attempted to sell them at 15c in the dollar.
Tell the world about this please! There’s your proof of the message from this blog for years!
Little wonder then that the judge acknowledged the existence of FMV, even outside of any valuation activity! Note also that this is the same currency that the issuers of the currency claim is actually worth on par!
The value of the BarterCard dollars in the circumstances of this case
 It would appear that the main impediment to settling this dispute has been the difference of opinion as to the value of 30,000 BarterCard dollars in Australian dollar terms.
 The Applicant’s position at its highest is that each BarterCard dollar is worth one Australian dollar and that judgment should be entered in the sum of $25,000 (Being QCAT’s jurisdictional limit in such cases) plus costs.
 Renegade contends that each BarterCard dollar is worth much less than one Australian dollar and that if it is liable on the loan, it should have to pay a lot less than $25,000.
 The Applicant relies on the Australian Taxation Office’s document “Bartering and barter exchanges”. This explains that for the purposes of GST the ATO will accept a parity rate where that represents a fair market value of the goods and services provided.
 However, the ATO also states in this document:-
As a general rule, when valuing the payment arising from barter or countertrade transactions, we will accept a fair market value as adequately reflecting the money value or arm’s length value, as applicable. In most cases we will accept as a fair market value, the cash price which the taxpayer would normally have charged a stranger for the services or for the sale of the goods or property.
 An assessment of the fair market value of goods and services purchased with barter dollars is a rather different assessment of the value of barter dollars themselves, not attached to any particular transaction.
 It seems to me that the value of the barter dollars needs to be assessed based on their trading potential and value to the parties themselves. This value is likely to vary between participants in the scheme. For example, the value of barter dollars to a business with little desire or reason to purchase any goods or services available for purchase with those barter dollars, would be limited. To a business with greater barter dollar activity they would be worth more. Equally a debt of barter dollars owed by a business whose scope to obtain them was limited, would be a greater liability than a debt of barter dollars owed by a business to whom they were freely available.
 Potentially, barter dollars could be worthless if no use could be made of them at all. For example, if the account had been suspended as in this case.
 Valuing the 30,000 barter dollars as at the date of the hearing produces an unfair result as a result of the account suspension and I propose to value them as at the date of the loan transaction.
 There is evidence that the value of the motor cycle was thought at the time of purchase to be about $15,000, and it is said actually to be worth $8,000 because of compliance problems which have emerged. Yet 60,000 BarterCard dollars were paid for it.
 On or about 2 July 2012 the Applicant visited Renegade’s premises and discussed how Renegade could repay to him the 30,000 BarterCard dollars. He explained to Mr Habermann that he had provided 50,000 BarterCard dollars to the seller of the motorcycle, so that the seller of the motorcycle now had enough BarterCard dollars to purchase some land.
 The Applicant told Mr Habermann that he had purchased those 50,000 BarterCard dollars “at 10 cents in the dollar”. In other words he had paid $5,000 for them. He also told Mr Habermann that he had sold the 50,000 BarterCard dollars to the seller of the motorcycle at “15 cents in the dollar”, in other words he had sold them for $7,500.
 The Applicant then said that the loan of 30,000 BarterCard dollars could be paid off by a payment to him of 25 cents in the dollar, a sum of $7,500. Mr Habermann declined this offer, bearing in mind what the Applicant had just said about purchasing BarterCard dollars at 10 cents to the dollar.
 On 7 December 2012 the Applicant spoke directly to Mr Nugent and said he would accept $10,000 in cash or 30,000 in trade dollars. This was followed up by a text on 27 February 2013 sent by the Applicant in which he said he was willing to accept repayment of $10,000 otherwise he would be suing for $30,000.
 This evidence shows that to these parties, the value of the BarterCard dollar at the time of the transaction was in the range 10% to 25% of the Australian dollar, depending on how the BarterCard dollar was to be used. In the circumstances I think a fair value to assess the value of the BarterCard dollar to these parties would be 17.5%.
 Had I been permitted to make an order therefore, I would have ordered the Respondent Renegade to pay the sum of $5,250 to the Applicant.
I would note that the judge has noted a difference in value of the currency at different times, to different people in different circumstances. This is simple logic that belies the story pedelled by the Barter industry and most monetary reformers that the valuation of a currency can be set by fiat. It can’t be – ever. Traders are the only ones who can ever establish FMV and they do so at the point of a trade. This is another fundamental error that alternative currency experts should consider long and hard. Again this issue is documented in my free online book Mistakes of the Monetary Reformers.
Proving the Point
Contrary then to the declaration of value to be on par by fiat, is the simple, legally common and accepted concept of Fair Market Value.
This acceptance that there is a concept of FMV does not though automatically mean that a court needs to or will override a contract entered into between the issuer of a currency and the user (Member) of that currency. If you, as a user of a currency have signed a contract that you have, do and will (forever) agree that a (for example) Bartercard Trade Dollar is equal to a unit of local currency before you can use it formally, you will need to explain how the currency issuer has breached contract. You will also need to show how their breach of contract affects your position adversely and prove that in court.
The issue to consider with your legal team is how a currency that is clearly debased can be held to have a value on par. The currency issuer will say, “The contract you signed, says this!” even though FMV may say otherwise.
So then who wins?
In the recent case in Wellington I’ve previously mentioned, we claimed that Bartercard had an implied responsibility to maintain the value of the Bartercard Trade Dollar on par through their management of the currency. When they entered into the original contract, it was reasonable to expect that if they required their member to accept that their currency was to be used on par that it would be – kept on par.
It wasn’t, thus we have a breach of contract by Bartercard.
An interesting admission came from one of Bartercard’s key witnesses under examination in open court for which transcripts are available – he admitted that a core part of his job was to ensure that the currency did not devalue, and that was why the company did a range of various things to prevent currency devaluation.
With proof that their currency has a FMV less than on par, this is proof positive then of failure to honour their part of the original contract. It’s not rocket science – it just requires proof that the currency has a FMV less than that declared and initially agreed to and the currency issuer has serious questions to answer. You have three examples of this above, let alone a plethora of members and ex-members all surely prepared to give anecdotal evidence of inflation.
Logic and fairness though is not always enough in court . . . the legal concept that addresses this when it comes to defending any claim from a currency issuer is called “The Doctrine of Penalties”. Essentially, in the English based legal systems – UK, CA, AU, NZ etc, any contract that attempts to enforce a penalty is rendered invalid, for the issuing of penalties is reserved for the courts.
If a currency issuer claims that you owe them say, $X,XXX.XX as per a contract but the actual FMV is only $X.XX then the difference can arguably be viewed as a penalty, thus is legally unenforceable.
There are other issues that dodgy operators can be taken to court for – deception is the biggest – when principals like BBX’s Touma Girls or the Smiles in Suits at BPS Technology know full well that the currency is devalued, especially if they were the thieves themselves, this is actionable and usable.
When trade coordinators confess to buying trade dollars at 10c in the dollar, and they cherry-pick the best physical items for their own cash-conversion; or when they perpetuate the lifecycle of a dying exchange at their member’s expense, it can be a huge can of worms – no a hornet’s nest – of opportunity.
Fighting in Court
Most people will do anything to avoid lawyers and legal bunfights. They may be seen by many as wise or prudent, but this plays into the hands of those who bully others using the legal systems.
I love a good fight, yes, really I do! I will work as hard as I can to speak reason and to do things the smart way but when crims, crooks & crazies want it, I’ll be there in court scrapping as hard as I can to bring common sense, justice and reason through the court systems.
Remember that bullies use the legal system to their advantage, and especially if they have their own legal teams or (as in may barter situations) they don’t have to pay cash for their legal services.
I was only 16 years old when I took a 70+ year old dentist to court after two out of three fillings fell out within the next week. “Mr Smith, you have the evidence!” the judge said and the old man had to pay me back.
Yes, admittedly it is a rare and happy day when the law and justice coincide but it is possible.
I have met Bartercard in court more than once. I have yet to lose. In the High Court of Auckland I defended a claim from these crooks that I was breaching their rules by trading outside of their system. In a scheduled three day case, the judge ‘got it’ inside two hours and told them in no uncertain terms that they didn’t have a case. Good job!
I’ll never forget the advice my lawyer gave me at the time . . . “Dennis, he said, you don’t need a lawyer. Go and do it yourself. Tell the court the facts; give them all your evidence and they’ll get it sooner or later!”
I stood there in court with my knees knocking and stumbled my way through the first hour trying to ask questions the proper way until the judge got sick of interruptions from the other lawyer saying, “Objection, your Honour! That’s not a question!” before he himself started asking the Bartercard Manager at the time how things really worked in their shonky operation.
Oh it was a sweet day when that lawyer got his butt kicked out of court and Bartercard had little choice but to settle.
I hope that this post has given you good reason to have hope, especially if you are facing injustice at the hands of say, a barter company that is out to squeeze you over the value of their devalued currency. Thank you for swinging by today.