Barter

For other uses, see Barter (disambiguation).

A 19th-centure example of barter: A sample labor for labor note for the Cincinnati Time Store. Scanned from Equitable Commerce by Josiah Warren (1846)

Barter is a type of trade that doesn't use any medium of exchange, in which goods or services are exchanged for other goods and/or services. It can be bilateral or multilateral as trade.

Barter and money are different means of balancing an economic exchange. Barter is used in societies where no monetary system exists. When there is one, it is also used, especially in economies suffering from a very unstable currency (as when hyperinflation hits).

Transaction issues

• A transaction is possible when coincidence of wants of economic actors enables an exchange cycle between their bids: each party must be able to supply something another party desires.

• Some entities develop a system of intermediaries who can store, trade, and warehouse commodities, but who may suffer economic risk.

• Others develop a system with a virtual value unit ("barter dollars," or "trade credits," for example) to measure and balance exchanges, very similar to a monetary system.

• Multilateral barter is more complex to settle but allows trades that would not be possible with bilateral barter. However with the use of a singular platform - like a barter exchange, bartering amongst businesses is easily facilitated, even if the barter trade is done across borders.

History of barter

To organize production and to distribute goods and services among their populations, many pre-capitalist or pre-market economies relied on tradition, top-down command, or community democracy instead of market exchange organised using barter. Relations of reciprocity and/or redistribution substituted for market exchange. Trade and barter were primarily reserved for trade between communities or countries. It is also used when the monetary system failed to measure the economic value of goods.

Barter becomes more and more difficult as people become dispossessed of the means of production of widely-needed goods. For example, if money were to be severely devalued in the United States, most people would have little of value to trade for food (since the farmer can only use so many cars, etc.)

It is used on important transactions between firms or countries to exchange commodities, when monetary constraints are too expensive for the economic actors.

A well-known example of multilateral trade is the triangular trade.

On the west coast of the United States the Beyond Barter organization extends the concept to a system based on free sharing of services. Although there's no attempt to balance contributions in individual transactions, controls ensure that members are not overburdened.

Money used to be considered as simpler for small trades; but use of the Web has changed that perception, especially for Swapping.

In finance

In finance, the word "barter" is used when corporations trade with each other using non-money or "near-money" financial assets, such as U.S. Treasury bills.

Corporate Barter

Corporate Barter entails the use of a currency unit called a "trade-credit". That which the trade-credit represents, must be known and guaranteed (contractually) as a deliverable in order to eliminate ambiguity and risk. Trade-credits are redeemed with cash much as a consumer might use a coupon toward desired goods in a supermarket.

Corporate Barter can be a powerful financial implement used to provide full recovery of value to an asset with an impairment in values (book value to market value). In a well constructed barter transaction, Company A receives full book value for an impaired asset (x), in exchange for another asset (y) which Company B owns. The asset (y) is typically something (acquired capacities in commonly purchased goods or services) which Company B owns, which company A intends to purchase during the course of day-to-day business. Examples are things such as print, shipping, packaging, travel, etc. The result is a full recovery in value for asset-x for Company A by the conclusion of transaction term.

Often maligned due to shaky beginnings, todays barter transactions have come along way. Many companies have done, and currently engage in successful Corporate Barter transactions. Practices such as requesting references help to significantly reduce risk.

Swapping

Swapping is the increasingly prevalent informal bartering system in which participants in Internet communities trade items of comparable value on a trust basis.

While swapping is an excellent way to find and obtain items that are inexpensive, it relies upon honesty. A dishonest participant might arrange a swap, and then never complete their end of the transaction, thus getting something for nothing. This practice is called swaplifting, a pun on shoplifting. The victim's recourse is often limited to shunning the swaplifter, or taking him to small claims court.

Nonstandard uses of the word "barter"

As of 2007, it is popular (especially on UK daytime television) to use the word "barter" in place of "haggle". To Buy Or Not To Buy uses the word in one of their catchphrases: "Will you barter or scarper?" It is commonly understood that the guests on the show will be paying solely with money and not, for example, offering them part exchange on their A reg Ford Cortina.

See also

• Gift economy
• Hyperinflation
• International trade
• List of international trade topics
• Local currency
• Local Exchange Trading System
• Natural economy
• Private currency
• Reciprocity (cultural anthropology)
• Simple living

External links

• How to Barter
• Startups and Barter Trade
• Leading barter bank in europe
• National Association of Trade Exchanges