Barter

Market actors use barter as a replacement for money as the method of exchange in times of monetary crisis, such as when currency becomes unstable (such as hyperinflation or a deflationary spiral) or simply unavailable for conducting commerce.

Nevertheless, economists since the times of Adam Smith (1723–1790) often imagined pre-modern societies as examples to use the inefficiency of barter to explain the emergence of money, of "the" economy, and hence of the discipline of economics itself.

Markets emerged, in his view, out of the division of labour, by which individuals began to specialize in specific crafts and hence had to depend on others for subsistence goods.

[10] Everyday exchange relations in such societies are characterized by generalized reciprocity, or a non-calculative familial "communism" where each takes according to their needs, and gives as they have.

The haggling that takes place between strangers is possible because of the larger temporary political order established by the gift exchanges of leaders.

From this, he concludes that barter is "an atomized interaction predicated upon the presence of society" (i.e. that social order established by gift exchange), and not typical between strangers.

The increasingly low value of bank notes, and their lack of circulation in suburban areas, meant that many Venezuelans, especially those living outside of larger cities, took to trading over their own goods for even the most basic of transactions.

[19] Additionally, in the wake of the 2008 financial crisis, barter exchanges reported a double-digit increase in membership, due to the scarcity of fiat money, and the degradation of monetary system sentiment.

Modern barter and trade has evolved considerably to become an effective method of increasing sales, conserving cash, moving inventory, and making use of excess production capacity for businesses around the world.

A successful example is International Monetary Systems, which was founded in 1985 and is one of the first exchanges in North America opened after the TEFRA Act of 1982.

In turn, the barter company provides each member with the current levels of supply and demand for each good and service which can be purchased or sold in the system.

Organized barter increases liquidity for member companies as it mitigates the requirement of cash to settle transactions, enabling sales and purchases to be made with excess capacity or surplus inventory.

Considering the quantity of transactions depending on the supply-demand balance of the goods and services within the barter organization, member companies tend to face minimal competition within their own operating sector.

[citation needed] Producers, wholesalers and distributors tend to engage in corporate barter as a method of exchanging goods and services with companies they are in business with.

[22] These bilateral barter transactions are targeted towards companies aiming to convert stagnant inventories into receivable goods or services, to increase market share without cash investments, and to protect liquidity.

"[23] This alternate currency eliminated price variability between markets, as well as the role of merchants who bought low and sold high.

It became the basis of exchanges in London, and in America, where the idea was implemented at the New Harmony communal settlement by Josiah Warren in 1826, and in his Cincinnati 'Time store' in 1827.

[24] In England, about 30 to 40 cooperative societies sent their surplus goods to an "exchange bazaar" for direct barter in London, which later adopted a similar labour note.

Michael Linton this originated the term "local exchange trading system" (LETS) in 1983 and for a time ran the Comox Valley LETSystems in Courtenay, British Columbia.

In LETS, unlike other local currencies, no scrip is issued, but rather transactions are recorded in a central location open to all members.

In business, barter has the benefit that one gets to know each other, one discourages investments for rent (which is inefficient) and one can impose trade sanctions on dishonest partners.

The trade-credit must not only be known and guaranteed but also be valued in an amount the media and advertising could have been purchased for had the "client" bought it themselves (contract to eliminate ambiguity and risk).

In the United States, Karl Hess used bartering to make it harder for the IRS to seize his wages and as a form of tax resistance.

[38] Other examples are El Cambalache in San Cristobal de las Casas, Chiapas, Mexico[39] and post-Soviet societies.

[40] The recent blockchain technologies are making it possible to implement decentralized and autonomous barter exchanges that can be used by crowds on a massive scale.

BarterMachine[41][42] is an Ethereum smart contract based system that allows direct exchange of multiple types and quantities of tokens with others.

Bartering solutions can be submitted to BarterMachine which will perform collective transfer of tokens among the blockchain addresses that belong to the users.