Could Bartering Replace Currency?
Posted on 05. May, 2010 by Forest in General, Saving Money & Finances
With the recent economic scare, the conspiracy theories that the dollar will crash and people looking for better ways to conserve their hard earned green backs is it at all possible that at some point bartering could replace money?
Before I get a barrage of people questioning my sense I want to state that I very much doubt that bartering will replace money unless we have a huge nuclear meltdown or something of equal measure. However I do think that bartering is an effective way to get goods and services and basically cut out the middle man, we should be looking to increase these exchanges and find ways to get things done, feed, clothe and whatever else we can without spending cash.
The concept of bartering obviously isn’t a new one and it’s still being actively used by many local communities around the world above currency. Currency has the effect of fixing prices but in a barter system I feel that you could get better perceived value for your services and goods as the prices are negotiable and can change per transaction. Bartering in the USA often takes form in bartering clubs or LETs schemes (Local Exchange Trading Schemes). In most cases they both allow you to earn credits to swap with other goods and services in your club.
There is also of course the direct swaps that happen daily between friends, family and local communities. Last year whilst I was in Vermont a friend of my partners had a local guy over to help fix her air conditioning. He took payment by getting fed and taking some scrap metal to be recycled. The transaction wasn’t seen as a barter as such by either party but it saved them both money and benefited them both t a satisfactory level. It’s common for these kinds of transactions to happen, you fix someone’s computer then come round and help paint the garage etc etc etc.
So why don’t we all start to do this a little more often?
Imagine actually taking your skill and finding ways to use it to get things done that you would normally pay for? I would gladly exchange weekly computer lessons for some fresh homegrown veggies…
If you advertised in a local neighborhood newsletter to start or dropped leaflets through people’s doors, formed a neighborhood barter group or joined an established club you could start saving money in exchange for some of your time. If you have a sought after skill this could be very profitable for you!
Problems with the barter system…
Under US law bartering is actually taxable (they don’t miss a thing do they?). I find this a little outrageous to be honest and can’t see how they could possibly keep track but it does seem they do try. Heavy use of bartering may require you to need an accountant. This article on The Taxation of Bartering sheds a little more detail on the subject. Also if you barter more than you earn money then you may simply not have the cash to pay these taxes!
Your skills may not be needed enough. If you plan to use bartering to decrease a dependence on hard cash then you need to be able to offer something that will be in enough demand to keep you going. Juggling lesson’s may raise a few local’s eyebrows but you will quickly run out of willing people to barter with. Tangible services or goods are probably most sought after. Things like carpentry, home made food products and maybe even personal training could all be good types of things to start with.
You may lose all your spare time. Your weekends and evenings could quickly disappear as you commit to more and more barter exchanges. Also it’s unlikely that you will be bartering by the hour so an estimated 1 hour job could take you 3 and your value for the exchange will have dropped dramatically. This could lead to disagreements by both parties an.
In straight swaps there are no guarantees. You may be offered some protection by a barter club but between you and another person it could be an issue that is unresolvable. If they do some bad work that does not show up for a few weeks the transaction is already done and dusted and you have no backup.
…So back to the question, could bartering replace a significant amount of our monetary transactions?
Yes I think bartering is a completely viable method for keeping more of your hard earned cash in your bank. Every time you save on spending with a barter transaction that is cash that can go to paying off debt or move over to a savings account.
Bartering can become very social and help draw a community together. It also strengthens the communities economic position as a whole as instead of ordering outside services and goods things are rotated within the community. This may help everyone be a little richer and slowly encourage everyone to get involved in local exchanging.
What do you think about this idea? Is bartering viable on a large scale? am I just babbling? Do you barter?
Please, please leave a comment if you have anything to say.
Thanks for reading.
Forest.
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39 Responses to “Could Bartering Replace Currency?”
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May 10, 2010
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krantcents: I started teaching whe I was 55 years old. I am v...
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Jeremy: I think the media plays a big part in that. US me...
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Forest: Thanks for the comment Jeremy. I guess you are rig...
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Daniel
05. May, 2010
The reason I think it’s not viable is because there are SO many people and many of them do their jobs but don’t have anything extra to give. Some people have side jobs, but not too many. For those who hustle on the side, part, but definitely not all, could be done via bartering.
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Forest
07. May, 2010
I agree, it’s not viable for everyone and also not everyone will want to do it…. But I do think it could become more widespread and a productive way to save money and put more straight to debt.
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Jeff
05. May, 2010
I enjoy the bartering process. We use it in my pizza job. We exchange pizza for pop and beer at the local party store. We exchange pizza for drinks at a few local bars. The owners of these businesses are all small business owners and love to trade instead of pay.
I believe it can work for little things, but feel that at some point the value of your time will not offer the benefit of keeping the cash. Time can be more important than money for many people. Although the numbers are have probably fallen a bit in the past 5 to 10 years.
.-= Jeff´s last blog ..Net Worth – April 2010 =-.
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Forest
07. May, 2010
That’s awesome and exactly what I am talking about…. You don’t pay premium on the drinks and they don’t pay premium on the pizza and you both get something you may have paid for for free.
Time is always the problem but if you enjoy the thing you are using to barter with it may not be so bad…. My friends dad is a massage therapist in a rural area and I know he actually does much of his work in exchange for goods rather than cash…. It also saves him time as he does not need to go shopping so he can afford to do these barter trades during his normal work hours.
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simple in france
05. May, 2010
Argh! Just lost my comment–will repeat:
I think bartering is useful even if there hasn’t been a nuclear holocaust
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Here in France, I was recently part of a SEL (système d’échange locale) where you could trade hours of your time (or of you loaning out your equipment) for points–basically a local currency. Then you could redeem this ‘currency’ with anyone else in the group. We had a catalog so people would know who was available for what and the barter didn’t have to be direct–which was really cool. And then you could just send out emails to the group requesting certain things–I saw everything from babysitters wanted to a work crew to help with olive harvesting. Very cool stuff.
.-= simple in france´s last blog ..Your Favorite DIY’s–frugal? entertaining? both? =-.
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Forest
07. May, 2010
There are so many things I love about France! They are proving that many socialist style movements do work on a wider scale…. It’s not about losing control to the government as much as people assume! I think these kind of schemes actually give you some freedom from the systems that control our lives!
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Ingrid@Morestylethancash
05. May, 2010
When I was in the antique business there was a lot of bartering between dealers but most of them involved some cash as well. (You would trade a Victorian settee and $25 for a colonial campaign desk for example).
I do know trades people that will barter occasionally but only with people they know very well.
Even if you decide to start up a small business to barter with you will probably find some people will still want pay for your goods or service because it is faster and easier for them.
.-= Ingrid@Morestylethancash´s last blog ..Frugal or Greedy – 7 Warning Signs to Look Out For =-.
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Forest
07. May, 2010
Cash is here to stay but you can mix the two as long as you keep track. That’s cool that such barter’s work well in already established industries.
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Dr Dean
05. May, 2010
One of the advantages of bartering, is both sides win. If you don’t have anything the other guy wants, however, you are out of luck!!
But, i agree-we will see more of it, if hard times persist!
.-= Dr Dean´s last blog ..iPad: One Million Units-I Guess I Am The Stupid One! Or Am I? =-.
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Forest
07. May, 2010
Agreed, I guess that’s why wider spread bartering skills with point based systems work well as you can do more than direct exchange.
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kerry
05. May, 2010
I think bartering can’t replace money. But it’s useful sometimes to avoid paying for things you want! There are very good Websites out there, which offer a platform for bartering. I like barterquest.com, though…
If you anything, which could be of value for somebody else, then it’s clever to try bartering – good way to save money, I think!
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Abigail
05. May, 2010
I think it’s pretty rational to tax bartering — even if I don’t love the idea.
We receive money for our goods/services so that we can go buy other goods/services. That money is taxable. So bartering really just skips the middleman, which means we’re still receiving a net benefit, just as if we were receiving money.
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Forest
07. May, 2010
For the most part it is fari and does make sense as you point out. However in very rural areas where the major part of many people’s lives is bartering they don’t actually deal much in cash…. Maybe the government should allow barter taxes to be paid with a barter
…. 20 hours lawn cutting at the white house!
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LeanLifeCoach
05. May, 2010
Nice work on the site, it seems every time I stop in it looks better and better!
Have you not ever traded a 6-pack for help moving? Last year I traded some woodwork for some help moving a piano. I don’t think it is likely to replace currency but I am open to using it more. What do you have to trade?
.-= LeanLifeCoach´s last blog ..Are You Married To A Gambler? =-.
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Forest
07. May, 2010
Thanks Coach, I still have some things to add in…. Working out how to hide ads from you regular readers to give you an even cleaner read.
Yeah trading with friends is awesome…. I love working for beer
. Using it more will mean trading for different things and a more fair swap (most of the time the hours overdo the worthwhile of the beer but the real payment is satisfaction of helping a friend).
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Money Funk
06. May, 2010
Bartering used to be really popular in the late 80′s, early 90′s. I remember my aunt getting comp’d at this Mexican restaurant in exchange for doing some interior design.
And I think it would be great if it picked up again. I do see it more commonly listed on Craigslist, but it’s not thru a Barter system.
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Forest
07. May, 2010
Maybe some of the people who were heavily involved could better leverage the net to make a simpler system and pull more people into the idea… It would be great.
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Daddy Paul
06. May, 2010
I lived in a neighborhood where we all bartered. I worked in an 8 track tape factory. We kind of had a club. I traded tapes for bread, paint brushes, soap, and beer. It got kind of tiring drinking Blatz and Schlitz but the price was right. I could buy tapes with labels for next to nothing.
.-= Daddy Paul´s last blog ..The low risk portfolio =-.
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Forest
07. May, 2010
Ha ha, trading for drinks could eventually bring a neighborhood to it’s knees
….. Even so that is awesome, what happened to it all? Are they still bartering like this there?
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Jesse
06. May, 2010
Great thoughts on the subject, it reminds me of the old John Travolta flick, Phonamenon. He basically sets up a barter between half a dozen people to get something he needs done. It’s really a great way to save some cash if you have a sought after skill, and some time.
.-= Jesse´s last blog ..Linkworthy: Simplicity, Ignorance, and Stay at home Moms =-.
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Forest
07. May, 2010
Thanks Jesse, I have not seen that movie, I may have to watch it but I seem to remember it looking a little sappy…. But I was a teenager so my opinion on movies has changed.
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Jesse
07. May, 2010
It’s a bit sappy, yea but has a great mix of government conspiracy, medical anomalies and hints of alien life. A little love story tops out the list and John Travolta’s performance was unforgettable
.-= Jesse´s last blog ..Announcing Give Your Stuff Away Day =-.
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Forest
07. May, 2010
Thanks Jesse…. You should tweet film reviews, that was an excellent little review
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Saving Money Today
06. May, 2010
My friends often use the barter system when one of us needs some help moving, painting, etc. When one of them helps me, my wife’s meatballs and chicken parm is usually the payment they receive in return. And the promise to return the favor when they are in need.
.-= Saving Money Today´s last blog ..Is Facebook Keeping You Poor? =-.
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Forest
07. May, 2010
That’s awesome and you all save so much cash that way….. The food sounds like fair payment, the way to my heart is definitely through my belly!!
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John
08. May, 2010
Over the years of using barter so successfully, I must comment and recommend it for businesses. I have had accounts at eight different barter companies over the last 15 years. The one that I feel is the most beneficial of them all is TransMedia Trading Company, for several reasons. 1. There are not a lot of cash fees (no monthly/annual cash fees, no cost to join) 2. The work in reciprocity with hundreds of other barter companies around the world through IRTA and relationships they have with barter brokers. 3. Personal service
There are other great barter companies out there serving local markets, there are many poor ones doing a bad job. Check for participation in the IRTA directory (www.irta.com) for a reference as well.
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Forest
08. May, 2010
Thanks John, I just wanted to see if you work for Trans Media Trade or if you are a genuine customer of theres? Only asking as you entered their website as your URL…. Thanks for stopping by
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FinEngr
11. May, 2010
I would say its not currency that fixes prices, but profits.
Bartering acts as the “ground-truthing” to bring prices more in line with costs – thus controlling profits.
Could look at a variety of industries, but the transition seems to follow this format:
1. Set profits within industry
2. Industry grows, profits widen
3. Bloated with profits, new biz model sees opportunity
4. Industry realign prices to reflect new profit standards
Think about it this way. What if businesses were only allowed set profit, like taxes. Would you still need to barter the price? Only if they find a way to reduce costs and widen their profit margin again.
.-= FinEngr´s last blog ..Yakezie Weekly Round-up: Mother’s Day Edition =-.
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Forest
12. May, 2010
Hey FinEngr, thanks for the analysis there, I guess often barters are based a lot more on time spent rather than profit gained.
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Aury (Thunderdrake)
19. May, 2010
Entering into self employment and solo small business, I’ve been quite interested in the advantages of barter. You can exchange a service for example, and get some needed computer parts from another person for pennies on the dollar. It’s a lot more versatile than living paycheck to paycheck.
In spite of all this economic downturn and hyperinflation running rampant here in the western world, I don’t see currency being replaced entirely. There’s going to be a couple minor advents that make it enjoyable again, I’m predicting, but currency as an instrument of trade, has always been the most efficient. Moreso than precious metals, I think.
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Forest
20. May, 2010
Exactly…. Bartering is cool as even two parties with no money can still work out a way to trade with each other! If your paycheck is all spent one month you could still barter to get by…. Hopefully though you can avoid this!
Currency will never go I don’t think, it’s too ingrained in everything we do.
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Simone Mueller
21. Jun, 2010
i agree with forest and i believe that currency is very important but i also think that bartering is a very good idea, even it is an old system. I am using barterquest.com and i have to admit that it works great and its free
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Forest
23. Jun, 2010
Hey Simone, absolutely, not used BarterQuest but hear they are good. Thanks for taking the time to comment.
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Daniel
23. Jun, 2010
I’ve switched over to bartering recently for most of anything I can get without having to shell out cash. There are a couple sites out there to use, to connect with people who are looking to trade/swap items or even services (carpentry work for auto work, etc). One of the sites I use is Baarter.com -
http://baarter.com
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Forest
11. Jul, 2010
Hey Daniel, thanks for your comment and well done on your bartering.
I’ll check out Baarter.
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Khaleef @ KNS Financial
08. Sep, 2010
Forest, I think bartering is a great idea! This seems to work best in rural areas and with small business owners. I would gladly prepare someone’s taxes or have an advising session in return for something that I value!
As to your question, I don’t think it can completely replace currency in a developed nation. Too many of us rely on goods & services that are produced globally, and it would take a major shock in order to reverse that.
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Forest
09. Sep, 2010
Hey Khaleef, I think swapping knowledge is one of the most valuable things we can do. With no dependence on money it could help empower the poor.
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