Surviving Life without Cash: The Persistence of the Barter SystemFebruary 18th, 2013 by Aaron Koo
Many people have said that my outlook on the future economic health of the world is so negative. I agree, in that they believe that I believe it’s negative. The thing I try and tell those people is that it’s not negative as much as it is unfamiliar and scary. And this quickly becomes not so negative after it becomes familiar. The things to understand are that whether things go one way or another, being prepared is never a bad thing. So to that end, I want to familiarize people with the barter system.
The Richest Used to Be the Strongest
Now, let’s fast forward to when the primal instincts of man had a bit of time to settle down and where fighting all the time and killing things to eat just wasn’t something people wanted to do anymore. It essentially became an ancient equivalent of trading the food in your lunch box, except it was more like “I’ll trade you a goat if you make me a fence.” There you have the barter system.
The Emergence of Currency
The reason you didn’t see bartering very often was that it was difficult to have a common measure of value. It really came down to how badly someone wanted something and what they were willing to do or give up to get it. It was also hard to have a system for deferred payments.
Initially, deals like this were carved onto clay tablets that inscribed the deal. One tablet would say “I am owed 1 goat for the 1 wagon full of stone I gave you.” These tablets were actually the first forms of currency. Then, along came the gold standard, which simplified the whole system. You could owe it and you could associate a common value to it. Then, of course, came paper forms of legal tender. It’s easy to see how the richest went from being the strongest to the people who simply had the most.
Bartering Is Still Here
Although it is very outdated, bartering only seems that way because people have become so accustomed to the use of cash. However, bartering is still in use today and will be until the end of time. Money only added a layer of formality to the barter system, but the value of bartered deals and cash still depend on the ultimate currency… trust.
We trust that we’re getting a good deal. We trust that $100 will be able to buy us a certain amount of groceries. As time goes on and that trust diminishes, we need more of it to make up for our lack of confidence. I suppose that’s the main reason we typically give a lot of credibility to those who are wealthy. If a billionaire promises to pay us $1000, there’s a lot less doubt in your mind that you’ll get that money than if a broke person made the same promise.
As Relevant Today as Ever
In order to survive in a world where barter is the way, it’s essential to have assets built up. Have a garage full of nails or bricks. Maybe own a farm. Or perhaps have the knowledge and skills that are in demand. This is very similar to dealing in cash, only that you don’t always get exactly what you want, when you want it.
With the emergence of barter exchanges, the idea of getting what you want, when you want it has been considerably improved. Using credit instead of dollars, companies can deal with other companies while saving cash and moving inventory when needed. Even though this is of little relevance to the laymen with everyday transactions, bartering is still a valuable skill to have and one that could potentially be essential.