MAKING ENDS MEET: BACK TO BARTERING
LVRJ: People adopt ancient practice of swapping stuff to cope with recession
For wife and husband Amanda and Shannon Barr, marriage brought with it a whole set of new, and sometimes expensive, responsibilities.
But it didn't come with additional finances.
"We needed things, but we didn't have money," says Amanda Barr, who married her husband five years ago. "We noticed other people needed things, but they didn't have money."
Instead of going without, they turned to an ancient custom that, over the past few months, has become increasingly popular across the nation: The Barrs started trading their stuff for other people's stuff.
At first, they bartered with people they encountered through work or friends. Recently, the couple have joined a growing number of people who are using Web sites such as craigslist to offer their services or goods in exchange for anything of value.
According to a craigslist spokeswoman, the site has seen a "significant growth in our bartering section as craigslist users get creative to keep their cash in their wallets during this troubling economy."
In November, 1,681 Las Vegans posted ads on craigslist offering trades. That's up from November 2007 when 1,081 ads were posted.
The Barrs placed an ad in December offering mechanical work, housecleaning, welding, yardwork or massage to anyone who had a Barbie Power Wheels Jeep to trade. It was to be a gift for their 3-year-old daughter, one they couldn't afford to buy. They haven't found any takers, yet, but Amanda Barr says they've had many past successes.
"It's actually worked out really well," she says. "We helped people move last week and they said, 'Whatever we don't fit in the van, you guys can have.' "
They have traded for tools, dirt bikes, four wheelers, home goods and other items.
Wendy Mackin has a 65-inch HDTV. She bought it three years ago for $7,000 but wants to replace it. For two weeks, she tried to sell the TV but had no takers. Finally, Mackin offered it on craigslist in exchange for an exterior house paint job, landscape work, irrigation repair or other outside work.
The response was strong and immediate. She negotiated a deal with a licensed painter.
"People ... are losing their jobs" and don't have cash to spend, so it's no surprise that they're turning to bartering, says dentist Greg Moritz of Alpha Dental.
He started bartering about 18 months ago through IMS, a barter network. A few months later, Moritz posted on craigslist offering dental treatment for items of value.
"The office was a little bit slow" when he started trading, Moritz says. "I thought if I could get IMS money, it might help out with overhead. I didn't know what I could do with it."
Barter networks are slightly different from direct trading, says David Heller, a locally based broker for the barter network ITEX. It's still trading because cash is never involved, except when paying the broker fee.
Members of the trade exchange use ITEX dollars to buy goods and services from other members, Heller explains. For instance, a graphic designer might go to an eye doctor who is a member of the barter network. The eye doctor doesn't need design work but he can use the network "money" paid to him in order to purchase something from a different member.
Moritz has traded on his network for advertising, printing and other services related to his practice and estimates that he pays about 15 percent of his overhead with barter money. A skeptic turned believer, Moritz not only recommends barter networks to business owners but considers it a necessary tool for uncertain economic times.
Moritz also has made direct trades with patients for things such as new tile in his office, a paint job and even maintenance for the office fish tank. That can be a good deal for a skilled worker with little dental insurance.
"Sometimes, I look for opportunities where I know it might be difficult for people to get good treatment because the treatment plan is too expensive," says Moritz, adding that implant work can cost thousands of dollars.
People have offered things he can't use, such as karate lessons, haircuts, repair work and massages. Moritz trades when he can but there is a limit, he says.
Bartering can be traced back to ancient times, but was replaced by a more efficient economy based on money, notes Keith Schwer, director of the Center for Business Economic Research at the University of Nevada, Las Vegas.
In the past, it took too long to barter, because people had to search to find something they wanted for something they had. The Internet eliminates some of the inconvenience of bartering, Schwer says.
"I suspect in this soft economy, people say 'I may be out of a job but I can raise some revenue by doing these things.' They have the time to do it. Some people may have found this is a way to add to their current economic status."
What is Money? Money is a good that acts as a unit of account, a store of value and a medium of exchange.
Before the development of a currency, bartering was the primary means for people to obtain the goods and services needed and the practice was used for many centuries around the globe... Bartering had its flaws however - lets say you raised/traded cows, but wanted to buy apples, but the apple trader, you quickly find out, is a vegetarian and has no use for a cow. You now have to find someone who will trade your cow for something the apple trader may want to trade you apples for... A difficult/cumbersome process...
The bartering practice was eventually replaced by commodity money (i.e. trade in beaver pelts, corn, gold, etc) in advancing economies, as many of these items were widely desired, durable, portable and easily stored, yet this practice too was soon abandoned and replaced by commodity currency (e.g. currency backed by gold or silver) - main reasons for transition were: institution of banking systems, ease of currency divisibility, easy to carry, widely used/accepted, etc.
In recent history, when it became apparent to the world that the US was bursting at the seams with new debt and printing far more money - to finance the Vietnam war and new social programs - than we had in available gold reserves (backing our currency), foreigners united and demanded our gold reserves (in lieu of dollars) for payment of US debt. President Nixon panicked and took us off the Gold standard in 1971... Thus the beginning of the US Dollar as a "Fiat" Currency.
In a fiat monetary system, money isn't backed by anything. Instead the only thing that gives money its value is its relative scarcity and the faith placed in it by the people who use it... However, due to the fact it is backed by nothing, unlimited money can be created (printed out of thin air) - thus spawning monetary inflation.
For those of you who don't know, consumer inflation is merely the "end-result" rise in prices caused by a net expansion of a nations money supply - causing more money to chase the same number of available goods and services - leading to a supply/demand imbalance and driving prices higher (by devaluing a currency).
If you consider all the Gvt bailouts of late, where do you think all this money came from? We as a nation certainly didn't have it saved up... Yup, we printed it ALL and we will continue to print more until the cows come home.
Forget about the mere $700B, Congressionally approved, Paulson banking-system bailout plan... Thus far we American Taxpayers are on the hook for $8.6 TRILLION in Guarantees and bailouts (Depiction of 2008 Gvt Bailout figures) and this figure doesn't even account for Obama's new stimulus plan and/or the next major bailout crisis looming on the horizon. Yup folks, the dollar is soon-to-be toast..
Now think back to the above definition of what money is: I think we can all honestly say that monetary inflation (caused by excessive fiat printing) prevents our currency from being a "store of value" and savers today are robbed of future purchasing power through currency devaluation - caused by the hidden tax of inflation. Chart below illustrates how inflation has robbed the dollar of value over the years - and this chart only goes to 2000.
I can only imagine 1) as nationwide unemployment skyrockets this year and 2) the gvt monetary printing presses shift into overdrive and 3) then later as the gargantuan US Treasury bubble bursts - causing interest rates to rise and the dollar to swiftly fall in value (spawning a massive new consumer inflation wave), the bartering practice highlighted in the article above will become much more mainstream - as millions strive to better their miserable falling lifestyles.
I also foresee a day when the events above cause people lose faith in their banks and currency and once again resort to making transactions in commodity money (gold, silver, food, etc).
Yes folks, our once seemingly "neatly-boxed" little world is quickly changing, yet we cannot become complacement and will soon need to realize that we too need to change - in order to better cope... Bartering and Commodity money will be some of the necessary tools in our toolbox that will be essential in the years ahead.
For a better understanding of the issues impacting the US Dollar please see this article: Dollar, Faltering Foundation of US Economic Strength
For a better understanding of Money, Inflation and the issues impacting our economy today see: US Economic Outlook 2008-11 (created in May 08)
For my outlook on 2009 see: Economic Tsunami of 2009