Barter is the oldest means of exchange, so it is natural for it to re-emerge when faith in currency declines.
Humans have an innate sense of the free market. Long before they become entangled in the monetary system, children freely trade among themselves guided only by their personal sense of value. Gauged by the terms of fair market value, the boy who swaps his baseball cap for a bullfrog got the short end of the stick. But the grin on his face says he got a bargain.
One needn’t look far to find true barter at work among adults as well. An electronics repairman fixes a friend’s TV. In exchange, the friend, who is an automobile mechanic, installs a new fuel pump in his car. While each may be have been able to do his own repairs, the other has the tools and knowledge to complete the task more efficiently.
Dollar value is rarely the basis for barter between individuals. In the example above both parties benefited by having more time. Often it’s a case of one man’s junk being another man’s treasure. By extension, barter on a corporate or even national scale fixes “prices” solely on each party’s perception of value at the time of the exchange.
Of course, a strictly barter system of global trade is prohibitively impractical. Instead of a direct exchange of item A for item B, item A is exchanged for item C in one transaction then item C is exchanged for item B in another. Item C is the medium of exchange. If the medium of exchange is stable and has universally agreed upon value, the net result is the same as barter.
Anchored by the petrodollar system, the dollar has been the medium of exchange since the end of WWII. Lately, however, the stability of the dollar is questionable and its value no longer has universal acceptance. Because of that, pressure is rising to replace the dollar as the basis of trade.
While gold and alternate currencies have been steadily taking the dollar’s place, many nations lacking sufficient reserves have turned to the barter system. Such interim measures, however, are not a solution.
Such a solution would come quickly in a free market, but there is too much at stake for the major economic powers. None-the-less, while they battle it out the people of the world will always have the barter system to fall back on.
Recommended for you: Gold IRA Rollover Guide and Silver Investments.
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