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June 20, 2006

Written by Bob Meyer, Editor of BarterNews

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From the desk of Bob Meyer...       06/20/06

Bartering Gift Certificates—A $55 Billion-A-Year Industry—Is Expected To Grow Dramatically

The possibilities for barter deals in many areas of the economy continues to escalate. One example is the gift card and gift certificate arena.

Of U.S. shoppers, 74% buy at least one gift card or gift certificate annually...their yearly usage has been growing 11% to 15% since 1993. In effect, few things are more popular, especially during the holidays, than a gift certificateCunless it’s from a store you don’t like.

Enter the secondary gift card/certificate market. We recently talked with Mary Jane and Michael Kelly, who launched www.swapagift.com in 2003 to provide a way to redeem or trade gift cards in an open market. Today they have 20,000 users.

Their site offers the consumer an inexpensive, effective means of bartering unwanted cards for other ones they would prefer. The site makes use of a proprietary matching mechanism that automatically identifies matching gift cards, facilitating the barter process.

Ms. Kelly shared how some people use the site:

1) Contractors obtain their supplies by acquiring Home Depot and Lowe’s gift cards.

2) A broken engagement saw a man stuck with an engagement ring putting his Zale’s gift card on the site.

3) A woman who owns a kennel and dog rescue service buys the PetSmart gift cards.

4) Sales people who are awarded gift cards can exchange them for  desired cards, or cash out at 70 cents on the dollarCthe price at which Swapagift will purchase cards.

The largest single deal ever made on the site? It was a $10,000 Best Buy gift card won in a cigarette sweepstakes. With a balance of $6,500 on the card, after several purchases, the owner cashed in the card.

As this huge $55 billion industry will continues to grow, we can expect the inter-trading of gift certificates/cards to expand dramatically.

Here & There. . .

International Monetary Systems (OTCBB:INLM) as officially changed the name of its operating subsidiary, heretofore known as Continental Trade Exchange, to IMS Barter. CEO Don Mardak says the change was made to avoid confusion, and to further the company’s uniformity and branding efforts.

Further information on IMS can be obtained at their web site: www.internationalmonetary.com.

Small Business Television Network (SBTV) is using barter transactions and synergistic marketing to reach the small business market in a cost effective manner. The company has barter ad agreements with Fortune Small Business and Victoria magazine, and is negotiating deals with both Inc. and Entrepreneur.

They are also working on content deals with non-publishing advertisers such as Cisco Systems, where they would run a piece on SBTV about them. Cisco can then use the segment on its web site, which will further publicize the network.

Here’s a great "If Only" story:

In 2001, Yahoo boss Terry Semel met with Google’s two young founders, Larry Page and Sergei Brin, for dinner and talk turned to a possible deal between the two Internet companies.

Semel, the former movie mogul, said he was intrigued by the possibility, even though the founders confessed they didn’t have much of a plan about how their company would make money.

The pair said their company, which was just getting off the ground, was worth $1 billionCbut added they didn’t want to sell. Semel checked in with them a week or so later. They told him Google still wasn’t for sale, and that the price had jumped to $3 billion.

Semel replied, "You still have the same business you had two weeks ago, right? Which adds up to nothing." From Semel’s perspective, Yahoo couldn’t and didn’t buy the company.

Since that encounter, Google has gone public and become the darling of the investment community. Its current market valuation is around $115 billion, and its market cap is approximately $44 billion.

All back issues of “From the Desk...” can be accessed by clicking here.

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(Dollars vs. Derivatives - An Open Letter)

Dear Mr. Meyer,

In response to your opening letter of the 6/13/06 Tuesday Report, wherein you described derivatives as having an "important purpose" and offering protection from risk, I must say that I bristled in dismay as you went on to describe small business barter-generated trade dollars as yet another form of these derivatives.

I have another name for these so-called derivative instruments: synthetic financial aberrations.

To quote you:

"Sophisticated investors use .... derivatives, to hedge risk. Those who don’t understand derivatives often claim that they are merely speculative instruments and akin to gambling."

Au contraire mon frere! 

Credit derivatives do not truly provide protection against risk and default because the institutions who issue these instruments are actually in precarious financial positions themselves, and thus sell the derivatives because they are desperate for the cash flow. 

In truth, in our current economic environment, a credit derivative is mainly used to provide the "accounting-fiction" that certain mostly worthless assets on a company's books still have value. 

Derivatives, which are therefore nothing but huge side bets, comprise the exponentially-growing sludge core of a rampant global casino economy. And resultantly, the most dangerous element is a huge derivatives "casino-bubble".  

At present there exists in excess of $150 trillion in outstanding derivatives contracts, which is several times the GDP of the entire world economy. The staggering implication of this, quite simply, is that the world economy is thoroughly bankrupt!

Thus the derivatives market, overall, is designed to hide the bankruptcy of the system by providing "virtual assets" with which to cover-up its gaping holes, as well as garnering cash flow from selling mafia-like protection to companies ravaged by mafia-like market manipulations.

As Thomas Greco, Bernard Lietaer, Elisabet Sahtouris and other revolutionary thinkers of this current and most dangerous financial era have written, alternative currencies -- including small business trade dollars, local exchange trade systems, time-based currency schemes, consumer direct-trade Web platforms, and other emerging signs of a planetary paradigm shift in our relationship to money -- offer a way out of this horrific collapsing monetary trap within which the world economy currently finds itself enmeshed.

I have been an avid reader of BarterNews and the Tuesday Report for years, and your well-intentioned comparison between financial credit derivatives and exchange-managed trade dollars was not lost upon me, but let us not make the mistake of confusing the currency of the future with a monstrous mistake from the past.

Seen in the correct light, derivatives are a symptom of the disease for which barter is the cure!

Very Respectfully,
Lynnea M. Bylund
President
The Barter Catalyst Initiative
Catalyst House, Inc.
E-mail: lynnea@catalysthouse.com


Our Web Site Has Added A Search Tool For You

Ever wondered if a certain topic, person, or organization has been written about on the Barternews.com web site? Now you can easily find out, as we’ve added a search tool. It will quickly give you the answer to your questions, in 3 easy steps that take about 12 seconds!

At the top right of the page, just under where you sign up for the Tuesday Report you will see a little Google box. It is where you can (1) type in the name of a subject, company or person. Then (2) click the button for www.barternews.com to search the site, followed by (3) hitting the search button.


Bartercard’s Man In New Zealand, CFO Michael Parsons, Doing Bang-Up Job

Bartercard, the world’s largest trade exchange now doing an estimated $1.2 billion annually, operates in 14 countries around the world. One of their early expansions occurred in New Zealand, when founding director Kerry Gordon stepped off a plane from Australia in 1992.

Under his arm was Bartercard New Zealand in a shoebox of files and four floppy discs. The following year, Bartercard New Zealand Ltd. was established as an independent franchise.

In 1997, the Australian shareholders purchased the company back. Then in 2001, Tony Falkenstein’s Red Eagle Corporation acquired 90% of the New Zealand operation, with the remaining 10% held by Bartercard International.

Last year Bartercard New Zealand turned over $185 million in barter transactions, involving 5,500 businesses countrywide. Such figures show that Chief Operating Officer, 32-year-old former Wall Street trader and expatriate Canadian, Michael Parsons is doing an exceptional job.

But according to Parsons, more can be done. “One of our biggest challenges, if not the major hurdle, is the fact that explaining the Bartercard concept isn’t done in five minutes. We need the time to sit down and talk to business owners, to help them really understand how Bartercard can work best within their business.”

Parsons says his goal is to have every business owner realize and understand that a structured barter system is a profitable and valuable option for their business. Case in point, is the immensely varied services offered through the 540-page Bartercard Directory, which include individual trade listings as well a display advertising.

One growing area is property exchanges, as Baby Boomers are beginning to plan for retirement. More than $50 million in real estate sales have taken place among New Zealand members, with over $15 million of that figure being paid in Bartercard trade dollars. Currently there are 79 properties listed on www.bartercardproperty.co.nz.

Overseas travel is another area where Bartercard excels. From their travel desk in Tauranga, they moved over $600,000 last year. The main destinations were Australia, Rarotonga, Fiji, Thailand, Britain and Hong Kong.

Entertainment services available through Bartercard New Zealand range from accommodations at boutique B&B’s, to five-star international hotels, car and limousine rentals, restaurants and bars, as well as a host of other leisure activities.

For more information: www.bartercard.co.nz.


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Broadway Now Bartering With Marketers

Product placement in the movies has been around since 1951 when Bogart and Hepburn starred in the classic, The African Queen. Hepburn’s dumping of Gordon’s Dry Gin overboard was the beginning. Film legend Joan Crawford carried the torch forward in The Caretakers, when she came head-to-head with a Pepsi trade show display at a psychiatric-ward picnic.

Now the theater, the oldest form of entertainment, is bartering with marketers to monetize their unusual draw...affluent attendees. (Theatergoers’ average annual household income is $96,100.)

In the 2005-06 season more than 12 million saw Broadway shows, spending $862 million on tickets. And millions more see off-Broadway shows, as well as traveling and regional productions.

Trading Can Help Offset Costs

Broadway producers spend $165 million on expenses for new productions, as a Broadway musical can run between $10 million and $15 million to produce.

One way to lessen the cost is product placement, where marketers barter their products in exchange for exposure. Producers see such trading efforts as a viable way to offset the costs of play props and opening-night parties.

Evian, for example, supplies bottles of water for use as props. In return the firm gets the on-stage exposure as well as credit in Playbill, the pamphlet that theater ushers give to each audience member.

Some marketers have provided live commercials. The tourist group Visit London produced short pre-show skits for theaters that encourage people to visit the British capital. Participating theaters were then promoted on its web site.

Sprint tied in with an off-Broadway production about scheming stockbrokers in a barter agreement, providing cellphones and PDAs as props. Spirits marketer Jose Cuervo worked with Playwright Neil Simon wherein a character drink their tequila instead of scotch.

Fruit drink Snapple made its off-Broadway debut with the Snapple Theater Center in Times Square. Other stage-naming rights include the American Airlines Theatre and the Cadillac Winter Garden Theatre.

Novelists Bartering Between The Lines, Too

Product placement popping up in novels? Yes, according to Jane Smiley, an author of many novels. Her most recent work is titled Thirteen Ways of Looking at the Novel.

Smiley says writer Sean Stewart and his book packager, Jordan Weisman, have added a little product placement in the novel for adolescents they will soon be publishing.

As a result of their willingness to alter a few details for Cover Girl cosmetics, they’re getting advertising and promotion space on a web site directed at adolescent girls. In addition, the initial print-run of their book has burgeoned from 30,000 to 100,000.

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Global Economic Boom Driven By Free Trade

The investment firm of Bridgewater Associates has been tracking the economies of 60 nations around the globe and reports that not one of them is in a recession—the first time that has been true since 1969.

Today’s boom sees the soaring economics of China, India, Russia and Brazil, and other emerging nations, increasingly setting the pace and overshadowing the slower growth of the U.S., Europe, and Japan.

The trend is being driven by free trade which has created millions of jobs in the emerging nations, fueling their stunning new wealth.

The simplest yardstick of economic success is the growth in real gross domestic product, or how fast its total output of goods and services is rising after inflation. For the developing world, that growth is expected to be 6.9% this year—more than double the 3% pace of the developed world, according to the International Monetary Fund (IMF).

The breakaway growth of the developing world is why the global economy overall is on track to post its fourth straight year of 4%-plus expansion, the IMF estimates. The last such streak was in the early 1970s.

Germany World’s Largest Exporter

No industrial nation has so successfully harnessed the opportunities offered by an interconnected global economy as Germany. This country of 80 million has been the world’s largest exporter of goods every year since it overtook the U.S. in 2003.

In 2004, the most recent year for which the Organization for Economic Cooperation and Development provides comparable data, German companies exported just under 780 billion euros (about $1 trillion) worth of products, nearly as much as Britain, France and the Netherlands combined. Germany’s trade surplus was six times that of China.

Exports have become the main driver of German growth, with 9 million jobs depending directly on exports which generate 40% of gross domestic product.


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