I barter from time to time. It requires trust, patience, persistence, and impeccable record keeping to make it really work.
I recently encountered a client that has “Leveraged Trading” as one of their business models. For service we performed, we had options to choose from various well-known products, seminars, and hotel stays. It’s a glorified form of bartering. Since they barter with all of their clients, they have extreme variety in what they can barter — almost like using currency.
Often times, the barter is only between two people or two companies — Time for time, or value for value, one to one ratio, kind of bartering.
With “Leveraged Trading”, the horizon of bartered items expand, and we were even able to transfer a bartering agreement to a subcontractor.
According to their website, “In [our] skilled hands, barter becomes “leveraged trading” — a strategic financial tool that enables corporations to capitalize on under-utilized assets, realize up to full value for products and services, and develop new, profitable business opportunities including new areas of distribution.”
Bartering does work well, when there is a surplus of inventory and a shortage of cash, like what’s happening now, or what happened with real estate in Downtown after 9/11.
Back in 2004, we bartered our graphic design services in exchange for a nice corner office next to the NY Stock Exchange. The building owner donated an entire surplus floor of a skyscraper to a non-profit. The non-profit had 4 staff, and 10,000 sq. ft. So they bartered it out to small businesses that provided services for them.
Would bartering solve our economic crisis or is it a symptom of a failing economy?
Fiat money, government notes not backed by gold or anything, do not have a history of creating long-term economic stability. US dollar became a fiat currency back in 1971. It’s been almost 40 years, and right now, we are experiencing its crash landing. This article sums it up better than I can, and aside from the pitch (or a public service announcement?) to buy gold by the writer himself, it is a nice, short historical overview.
Here’s a little excerpt from the article by Richard Greene:
“The main reason that the masses ignore the inevitable failure of fiat money systems, such as that which is employed by the US and virtually the rest of the world today, is because just prior to their demise, they have more recently been remembered for generating a widespread period of prosperity that has enriched its supporters, if not the masses as well.
The fundamental flaw in a fiat money system can be summed up as human nature. When the going gets rough, the rough start printing. Governments cannot be trusted, to not print too much money when it is not linked to a scarce commodity such as gold. How much is too much money? There are many debates about that but the unqualified answer is when the system is brought down. It should be obvious to even the casual observer that we have reached a point in time where even the slightest economic disappointment is met with a deluge of additional paper.
…A brief perusal of history will show that when a nation went on a gold standard it was the beginning of a very long period of that nation thriving. When a country went to a fiat currency there was a period, as long or longer than 30 years, in which it thrived even more. However, during that period of prosperity on a fiat currency, excesses began to build. Once they have built up to extreme levels, it is a very dangerous time. When levels of debt become too excessive, an increasing amount of the rewards of production; profits, must go to servicing debt. When the servicing of debt consumes all of the profits of production, it finally consumes production itself. This is the real culprit for the loss of jobs domestically. As more of the economy shifts from real production of goods, to the pushing of various forms of paper, citizens lose jobs and live in more dangerous times. We have reached that time.” (note: This article was written in 2004!!!)
I’ve heard something about The Wizard of Oz being a story about staying on the gold standard — “Follow the Yellow Brick Road”…
Meanwhile, the system of bartering, or “Leveraged Trading” will be a survival tool for many of us who can not wait for the government to figure something out, or have enough gold to hoard.
