Barter economies are the earliest form of a monetary system in place. A barter economy is an exchange based economy in which goods or services are directly traded for other goods or services. A barter economy also does not have a common form of currency so all trades must take place for other goods or services.
It is a known fact that in recent times, barter economies have assisted in counteracting unemployment, the exploitation of laborers, and economic insecurity. Internet is directly attributed to further spreading barter economic systems.
There are a few limitations with barter economies to be mindful of. In order for the actual barter or trade to occur, the two people involved need to want the goods or services that the other has. This is called a double coincidence of wants and trade does not occur unless this is present. Next, there is no common measure of value due to the lack of a common currency. The values of goods and services are not as easily measured in a barter economy. If a person does not have enough goods to cover the value of the goods or services that they wish to receive. then a transaction cannot occur. When this happens, it is called the indivisibility of certain goods. There is also a lack of standards for deferred payments. This also refers to the economy’s lack of common currency or value; however, the debt could always be broken up based upon the actual number of units of a product and then eventually used for payment. Finally, there is difficulty in actually storing wealth. If the economy is based on perishable goods, then it is extremely impractical to store the goods.
Barter exchanges support businesses and consumers in a local economy. It stimulates businesses by transferring the goods or services available for other goods or services with more value because it is not as accessible to the business. Also, you essentially conserve cash and can reduce your use of traditional banking with a lower dependency on the government. Bartering is not as susceptible to inflation either when the values of the goods or services are agreed as equal. Bartering even allows to sell services or goods to customers with little cash flow.
Advantages of Barter System
- Barter system is the simplest system of trade without any complex problems
- Since goods are produced to meet the needs of society there is no question of unemployment.
- Problems of foreign international trade doesn’t exist under the barter system
- Due to the less possibility of storing commodities, there is no problem with the economic power.
- To meet the needs of society natural resources are utilized ideally.
Disadvantages of Barter System
- Since there is no medium of exchange, the needs of two users must coincide.
- All the goods cannot be divided equally. The problem arises when a big commodity is exchanged for a small one.
- Difficulty in storage of wealth
- Payments are noted in terms of specific goods and services
- Goods and services cannot be transported easily from one place to other.
How to begin the Bartering process?
- Find out what you need
- Identify your trading partner
- You need a better idea of what you have and what you are looking for in return.
- Take some negotiation strategies to score a great deal
- Search for your next exchange after a proper plan.
What are the rules of Bartering?
- Ensure the exchange by meeting your trading partner for a safe exchange
- Always be curious about what you are doing
- Consider all goods and services you need to trade without missing the opportunity
- Be doubtful at necessary situations and try to avoid bartering in such cases.
- Don’t barter your thing if you really don’t want to it will make you regret it.
- Try to test the items before you barter, there are no guarantees in such cases.
What all things can be bartered?
- Personal Services
- Technologies (old/new)
- Medical Items
- Homemade Items
How to Barter?
- Identify your resources: Identify the items you need to barter with and offer services.
- Put a price tag: Check online how much does buyers paid for similar items and obtain an accurate rate.
- Identify your needs: You need a clear picture of the thing you are looking in a barter exchange.
- Search your trade partner: Find a barter partner after knowing what you have to offer and what you need in a barter situation.
- Make the deal: Get the agreement you need for the deal and make sure about what goods and services will be involved with date of exchange.
How taxes work for barter exchange?
- Record Keeping
To keep money for businesses, exchanges use their own trade dollars if they don’t have place to spend it.
- Tax Reporting
The barter service provides a record for all income you received from transactions.
Read more about How do barter network works?
Our software that models a barter economy is called iScripts eSwap. eSwap allows you to sell or swap various items. eSwap can be used to establish niche markets and has been effective in trading rare goods. You can try the iScripts eSwap live demo at Demo page