BARTERING

Bartering

Barter is a type of trade where goods or services are exchanged for a certain amount of other goods or services; no money is involved in the transaction. It can be bilateral or multilateral as trade.

It is a word frequently used as a synonym for 'negotiate/negotiation', but this usage is incorrect.

A common form of barter during colonial times was tobacco. Also bushels of grain and wampum were
popular forms.

Barter trade is common among people with no access to a cash economy, in societies where no
monetary system exists, or in economies suffering from a very unstable currency (as when
hyperinflation  hits) or a lack of currency.

A disadvantage of using bilateral barter is that it can depend upon a mutual coincidence of wants.

Before any transaction can be undertaken, each party must be able to supply something the other party demands. To overcome this mutual coincidence problem, some communities have developed a system of intermediaries who can store, trade, and warehouse commodities. However, the intermediaries often suffer from financial risk.

To organize production and to distribute goods and services among their populations, many
pre-capitalist or pre-market economies relied on tradition, top-down command, or community democracy instead of market exchange organized using barter. Relations of reciprocity and/or  redistribution substituted for market exchange. Trade and barter were primarily reserved for trade between communities or countries.

Barter becomes more and more difficult as people become dis-possesed of the means of production of widely-needed goods. For example, if money were to be severely devalued in the United States, most people would have little of value to trade for food (since the farmer can only use so many cars, etc.)

In finance, the word "barter" is used when two corporations trade with each other using non-money financial assets (such as U.S. Treasury bills). Alternatively, the standard definitions of money could be seen as being too narrow and needing to be expanded to increase near-money assets.



From Wikipedia, the free encyclopedia

The Cash-Strapped Turn to Barter

Interesting article on barter to share:

The Cash-Strapped Turn to Barter

Jill Connelly for The New York Times

 

WHO NEEDS DOLLARS? Ken Lineberger of the Wine Tailor increased his sales using a bartering service.

Top, Joyce Dopkeen; Bottom, Jill Connelly for The New York Times

 

THIS FOR THAT Chris Keogh of New York agreed to paint a house for $5,000 — $1,000 in cash and $4,000 as a credit in a bartering system. Ken Lineberger of the Wine Tailor winery, in Rancho Cucamonga, Calif., found a client online who drove 100 miles to buy six cases of wine. 

New money is not flowing to Main Street. Since October 2007, there has been a decline of almost 30 percent in loans approved for small businesses, the Small Business Administration reported.

Companies short on cash are often forced to let workers go, and in October alone companies with 50 or fewer workers eliminated 25,000 jobs, according to the ADP Small Business Report.
“During recent history, we have seen these businesses adding jobs while larger-size businesses shed them,” said Joel Prakken, chairman of Macroeconomic Advisers, which prepares the report. This is the first decline in small-business employment reported by ADP since November 2002, he said, and the largest percentage decline since the economy was emerging from recession in early 2002.
In response, barter exchanges are working hard to sign up participants. The exchanges range from publicly traded entities like International Monetary Systems and the Itex Corporation to smaller operations like U-Exchange.com. Many are reporting double-digit increases in membership, as well as a bump in transactions.
At Itex, for example, registrations jumped 36 percent in October, said Steven White, the chairman and chief executive. The exchange, founded in 1982, has more than 24,000 member businesses.
Bartering has grown with the times and is now much more than “I’ll take yours, if you take mine.” Often, these days, multiple parties meet through online exchanges and amass credit that can be used for future transactions (more like “you take mine and I’ll take someone else’s later.”) Drawing on the reach of the Internet, many exchanges include participants from around the world.

What makes barter so appealing during an economic crisis? Barter specialists point to three attributes. First, a member business can find new customers and use excess capacity. Second, a satisfied barter partner often refers cash-paying customers to the small business. And third, the participants can conserve hard-to-come-by cash.

Ken and Angela Lineberger, owners of the Wine Tailor winery and retail store in Rancho Cucamonga, Calif., said sales would be flat this year had they not been active in the Itex exchange. Thanks to bartering, overall sales are up 8 percent, Mr. Lineberger said.
These are customers who wouldn’t normally seek out their wine, Mr. Lineberger said. “We just had a couple drive over 100 miles to buy six cases of our wine because they’re Itex members,” he said.

Itex customers pay the full retail price, he added; they are not discount buyers. The Linebergers use Itex dollars they accumulate in sales to pay for pest control, electrical work, accounting and legal services. “It’s nice to move those over to Itex,” he said, because it frees cash. They also use it for vacations and other personal transactions.
For tax purposes, barter is treated like ordinary sales, and its value must be reported. The barter exchanges record all transactions and report them to the Internal Revenue Service. Of course, informal bartering among small companies and independent contractors has gone on for decades, and some report the revenue and pay taxes, while others prefer to operate within the underground economy.
Bartering is estimated to generate more than $3 billion through exchanges in the United States, said Robert B. Meyer, who edits BarterNews.com, a trade publication. That does not include corporations that barter directly, he said. Official tallies are hard to come by, he said, because there are more than 250 exchanges and the systems are decentralized.
Hundreds of exchanges are available online, some national and some regional. Some charge membership fees and annual fees, while others do not. Often, there are transaction fees of up to 6 percent.

Small-business owners should do the normal due diligence when looking for an exchange, said David Wallach, president of the International Reciprocal Trade Association’s global board. For references, check with people or businesses in your area that use an exchange, and before entering into a transaction, vet your potential partner with the Better Business Bureau. The association, a nonprofit group that promotes barter and trade, has a test for businesses, “Is Barter for You?,” on its Web site (irta.com).

Chris Keogh, who runs his own construction firm, Jade Stone Construction, in Pearl River, N.Y., just completed his first barter transaction through International Monetary Systems (imsbarter.com).

“The construction business has always been feast or famine,” said Mr. Keogh, 47, a native of Dublin who has been in the New York region for 22 years. During a recent bad stretch, Mr. Keogh was scrambling to drum up new customers through advertising, Craigslist and even roadside signs. I.M.S. Barter saw the Craigslist post and contacted him. After he researched the company, Mr. Keogh said, he decided to give it a try, agreeing to paint a house for $5,000 — $1,000 in cash and $4,000 in I.M.S. trade dollars.

Mr. Dalsimer subsequently referred Mr. Keogh to two new customers. One of them will provide Mr. Keogh’s next project, painting a two-bedroom apartment in Somers, N.Y., in another part-cash, part-barter arrangement.

“You have to be careful how much you trade,” he said, because you don’t want your business to become dominated by bartering. And each side of a transaction carries that 6 percent fee, cutting into profit. Experts recommend that a business use barter for no more than 5 to 15 percent of sales to avoid crowding out cash business.

Many barter exchanges offer credit to members who have been turned away by lenders in the real economy; in its recent credit-line review in October, International Monetary Systems issued $2.7 million in trade credit to its network of 18,000 businesses, adding to an existing $55 million in established credit lines, said Krista Vardabash, its director of marketing.

“We base our credit on the products and services that the member businesses have to offer, not on their cash accounts or how they look on paper,” said Donald Mardak, the chief executive.

To be sure, bartering is not mainstream, said John C. Moore, a founder of U-Exchange.com. Still, traffic at the site, which is run by Mr. Moore and his co-founder, Barb Di Renzo, has spiked 70 percent this fall, he said, with an influx of participants from Spain, South Africa, Britain and the United States.

One new member at U-Exchange is R House Construction, owned by Rich Rowley of Tacoma, Wash. In a recent post on U-Exchange, he offered new home construction, remodeling, home repairs, real estate work orders, home maintenance and commercial improvements. In exchange, Mr. Rowley is looking for vacations, real estate, homes, land, dining, medical care, dental care, a boat, a motor home, groceries, gas, entertainment, a ski pass and tickets to Mariners baseball games or Seahawks football games.

So far he has had no takers, but he said he remained optimistic. “We have to learn to adapt to the changing landscape,” Mr. Rowley said. “Part of that is bartering. The exciting thing is this is another part of the puzzle that gets us to where we’re going.”

His wife, Kathy Robinson, came up with the idea of bartering as their business dropped off, said Mr. Rowley, who usually builds two houses a year and sells them. This year, he sold only one house; the other remains empty.

Even if the U-Exchange post does not work out, Mr. Rowley said, he has arranged privately to do renovation work on a vacation home in Ocean Shores, west of Seattle, while he and his wife stay in another beach home. “We really like to travel,” he said. “We don’t want to be denied that just because the economy is going south.”

BUSINESS 2 BUSINESS

FYI:

 

Business-to-business barter through a trade exchange is an effective way to get value out of your spare capacity and downtime. Members of the exchange network use trade dollars as the form of currency, providing companies a strategy to increase sales and save cash.

The U.S. barter market makes a staggering $12 billion annually. In other words, $12 billion worth of goods and services are traded every year without any currency changing hands.  The World Trade Organization estimates that 15 percent of the $5.62 trillion made in international trade is conducted on a non-cash basis.  

 

 

CNN - Report-New Rules of bartering

NO CASH

No need to use your cash! Start trading today to get what you want and need and save money by using trade dollars! Call Trade International Exchange and we will show you exactly how it is done!

Call (855) 900-8439 (TIEX)

INTERESTING PORK BARTER

Business-to-consumer bartering can also involve nonprofit organizations trading with consumers. For example, in 2000, Lindenwood University, a private institution located near St. Louis, launched a "Pork-for-Tuition" bartering program whereby the school agreed to accept full-grown hogs as tuition payment from cash-strapped farm families struggling to put their children through school. The hogs were subsequently slaughtered at a nearby processing plant and served in the school cafeteria as bacon, sausage, pork chops and ribs. The Pork-for-Tuition bartering program served as an effective retention tool for students who were at risk of dropping out of school. 

 

(ref. The Wall Street Journal)

A Backyard Cabin for Barter

Hiroko Masuike/The New York Times

 

McKendree Key opens up a cabin in her backyard to lodgers who repay her by helping to fix up the main residence.

By REBECCA ROTHBAUM

McKendree Key

Hiroko Masuike/The New York Times

The interior of the cabin.

For a little more than a year, Ms. Key, a 34-year-old New York artist and M.F.A. student at Hunter College, has been bartering stays in the outbuilding behind her 1899 brick row house in Brooklyn in exchange for help fixing up the main residence. The cedar-shingled one-room structure, which until recently had been her studio, was built in 2009 on the footprint of an old garden shed. She furnished it with a quilt-covered bed and framed botanicals, and guests are treated to the clucking of her three chickens, which roost nearby.

Recently, Ms. Key, who is also an owner of the ArtShack, a Brooklyn organization that runs art classes for children, discussed the arrangement, which she calls the Den Transaction. She blogs about it at dentransaction.blogspot.com. 

Q. HOW DID YOU COME UP WITH THE IDEA OF THE DEN TRANSACTION?

A. I own this house, but I don’t have any money to put into it. It’s a real fixer-upper. Space is such a commodity in New York, especially. I just kind of put those two things together and thought I could have people stay here and have help. It was a total experiment.

 

HOW HAVE PEOPLE FOUND YOU?

 

Posting photos on Facebook and other social media was really helpful. I also posted it on this artist’s residency Web site Trans Artists, but I think I need to take it off because I’m getting enough people through word of mouth. I like the idea of not booking it up for years.  A lot of people e-mail me last-minute. 

WHAT HAVE BEEN THE BEST BARTERS?

I’m a single parent. I’m a student. I own a business and a house, and I make my own work. So I have a lot going on. Some of the most helpful things have been people cooking for me and my daughter, and fixing things and gardening.

One person who comes to mind is Akemi Martin, who cooked traditional Japanese food for me for a week. Every day I got home and there was an amazing, delicious, healthy spread. I just felt like the luckiest person in the world. 

ANY WILD ONES?

The aunt and uncle of a good friend of mine stayed here over Christmas while they were visiting their family in New York. They’re sending me a chick from Montana, which is where they live. 

ARE YOU LOOKING FOR ANY SPECIAL SKILLS?

 

I’m going to put together a wish list soon. The stairs are really old and falling down, like, inside the house. There’s a wall I want to knock down there. I need a new kitchen. Where do I stop? 

AS MUCH AS IT FILLS A PRACTICAL NEED, YOU ALSO SEE THE DEN TRANSACTION AS AN ART PROJECT.

 

All my work stems from architecture. I’m interested in how and why we create the spaces we live in and function in. A lot of my work is about meshing public and private spaces. The cabin strikes me as the most private space that you could have. But it’s in this very public realm. Of course, the yard is not public. But it’s a dense urban environment. You’re living among other people. 

WOULD YOU EVER RECREATE THE DEN TRANSACTION IN A MUSEUM OR GALLERY SETTING?

 

No, no, no. It can’t be done. “Site specific” is kind of an outdated phrase, but it’s about the experience of coming here. It can’t be recreated. I like to work in a specific space and respond to that and the politics around that space. Every space has a set of politics swirling around it. 

YOUR DAUGHTER IS ALMOST 6. WHAT’S HER REACTION TO ALL OF THIS?

She loves it. Having interesting people come through is priceless. When Akemi was cooking, we would help her, and she just learned so much. 

DID SHE ASK, “WHY IS THIS WOMAN IN OUR KITCHEN?”

No, she calls them the “den people.” She’s used to it. She’ll ask me, “Who’s coming for dinner tonight?” It’s weird if it’s just us.