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Is Bartering the Right Currency in Economic Downturns?
While bartering is where economies began it is not where economies are now. The general concept of bartering services seems like a relatively simple and straight forward way of doing business. What happens when you need a service, but the company you need the service from does not provide a service that you need? Sure you can still exchange service, but what do you end up with. Would it be an equitable trade?
There once was a time that if you needed medical supplies you went and traded a nice plump chicken and the doctor gave you the medicine that you needed. In its simplest form it seems so reasonable, yet if all the people decided to trade chickens the doctor would become very rich in chickens and very low on medical supplies, unless those that supplied the doctor were willing to exchange with the same currency of chickens.
This type of bartering only works if the person that receives an item or service for exchange can then turn around and exchange that item or service for exactly what they need.
Understanding this principle there are international companies that will help connect needs with wants and they do it in fake currency exchanges. Let’s just say Company Want needs to have a new windshield, Company Pane provides windshield installation. Now Company Pane is not willing to completely absorb the cost of the glass, so the only expense Company Pane will barter is for the service. In this case Company Pane would only charge Company Want for the windshield, the rest would be exchanged in a fake currency.
In these situations Company Pane now has a currency that can be exchanged for a service or product that they need. However, once again Company Pane is stuck in a network of companies that may or may not have the exact thing that Company Pane needs for its business.
In short, the only way that bartering is effective in economic downturns, or any other economic condition for that matter, is when the currency is truly convertable to any product or service required.
I’ll leave you with this thought. If I was the doctor and I received a bunch of chickens in exchange for the medicine that I provided, when I would need to go the grocery store and buy milk, it would not have been an equitable deal unless the checker takes chickens.
In the end we all have basic needs of shelter, food, water, and clothing. Bartering will only get you so far, and only when my mortgage company starts accepting chickens will bartering be a completely equitable trade.
15 Responses to “ Is Bartering the Right Currency in Economic Downturns? ”
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I think that bartering will continue to gain popularity as long as the economy is struggling the way it is. There are several good sites where you can barter and http://barterquest.com is one of them, to get back to your point about value, BarterQuest asks the poster to give an estimated value to ensure that the parties are going into a fair trade.
I agree Barter is not the answer to every thing but it is an option. With starting up this new local directory site I am taking on a fair chunk of Barter deals. Seems a lot of Bizs are sitting on inventory yet cash poor and are willing to part with stuff yet not cash.
I of course need cash also yet rather then no deal I will except stuff. If it gets to crazy maybe I can turn stuff into cash on E-Bay.
I always liked the term “Real Goods” when (or maybe I should say if) the $ tanks real goods will still have a value. Some say it makes more seance to invest in non perishable food then the stock market or even Gold. If DOO-DOO hits the fan, well you still can not eat Gold and Stocks or $ are not worth the paper they are written on (which could be true as we speak),food will be the Gold and you can Barter for other Real Goods.
Nice Post- Clay
Daniela & Clay,
Don’t get me wrong. I still think there are times when bartering works. However, just like Clay is finding out there are times when you need to pay the bills and the only thing they want is cold, hard cash.
Now, there is the flip side that if cash devalues too much it will no longer be the choice instrument of exchange. Who knows maybe it will go back to precious metals, and stones.
The lesson in all of it is that you need to be exchanging in the preferred currency so that you can be less restricted on what you need to purchase.
Thank you so much for the feedback! It is great to hear different sides to this debate.
As far as trading with precious metals, and stones. Some would say if you have a big enough stone you can have all the precious metal you want. Just kidding that’s the Mad Max view on economics.
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I was just reading through this again, was on your site to get the address to create a link on FB, you can thank me later LOL, but I like how you refer to barter bucks as fake currency. Then you look at the U.S $, make you wonder which is more fake.
You do have a point. The U.S.$ is just as vulnerable to be considered a fake currency, and the reality of bartering is that it agitates those that collect taxes because it is harder for them to get a piece of that pie. In the end it really is about making sure that whatever currency you choose to barter in, be it the U.S. $ or a chicken that it is a currency that you benefit equally from using.
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