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Home » A Barter Economy – Part One

A Barter Economy – Part One

A Barter Economy – Part One

When it comes to barter economics, there is a key phrase, and that is “universal desirability.” If you possess anything that has universal desire, then you hold powerful bargaining chips. In theory, you can trade for some of what you need or want.

History

History has shown that in times where social and economic structures are so broken down that the public has little confidence in the government, then there is a corresponding deterioration of societal reliance on the official currency. Individuals start looking for other trading avenues, like usable services or goods, or even the currencies of other nations considered more stable. This has happened time and again in history.

old worthless currencyAfter WWI, Germany’s currency was practically worthless. A second example would be the worthlessness of Confederate currency following the Civil War of the United States of America. Conditions like these wreak havoc on the economy of a nation. In situations where the state of order is replaced with anarchy, it is common to see governments that are less than functional, and the usual currency destabilizes. Individuals begin looking for trade mediums that are more universally acceptable.

Precious Metal Coins vs Paper Money

Precious metal coins or any money that can be exchanged on-demand for precious metal are known as commodity currency. Fiat currency is money that really has no intrinsic value, and copper clad coins and paper money you can not redeem for silver or gold.

Prior to the 20th century, silver and gold coin had been a standardized trading medium for gold coins to barterhundreds of years among civilized nations. However, the 20th century brought with it complicated world economics that put pressure onto the booming industrial states to give up monies that had relatively static value. Fiat currency was flooded into the quickly growing economies, only supported by the public’s confidence in their government. Due to a variety of distinct factors, fiat currency is something whose value can fluctuate.

The money we have in circulation right now has no actual intrinsic value. 1964 was the last time that circulation coins were minted in silver. Paper bills likewise are not any longer gold or silver certificates. If the government were to no longer be supported by the populace, then no one would have any reason to keep trading anything using American currency. The money-based economy would possibly get replaced with an actual barter economy. Alternative standards of value would be looked for as potential trading mediums.

A Barter Economy

Of course, bartering presents itself as a rather awkward commercial system. Consider an example of someone who wants to get a knife. He might have a few extra tires he is offering for trade, but he has the problem of trying to find someone that wants tires but also has a knife to trade to get them. There might be someone with an extra knife he can give up, but what if he doesn’t need tires? What if he needs something the first person does not have? If the economy is based on money, then selling and buying are a lot more reliable.

It is a logical assumption that assorted commodities with universal desirability should be the ideal bartering stock in such an economy. Any goods that last a long time should also have more potential trade value or possibilities than something that has a narrower shelf life. Availability and portability are other factors to consider. Anything that is hard to move, easy to get, or common is then less universally desirable, and possibly harder to trade. Supply and demand conditions affect values of services and goods, even inside a barter economy, just like they help or hurt prices in economies based on money.