How Human Response To A Messed Up Global Economy Part 2

By Lawrence

iStock_000011803244XSmallContinue from part 1

Bartering Destroys Multiplying Effects

Banks facilitate a efficient means for money to freely floating among its users. Banks are supposed to help the multiplying effects in economy by making loans and short term borrowing for the other 99%. It is no longer true as many people already pointed out that the major banks are hoarding cash for their own speculations in various financial markets. Hence the economy at large has not benefit from the helicopter free money from the central banks at all.

In this sense, bartering comes into prominence is a direct result of the banks not doing their job.

The advantage of bartering is the elimination of money in the transaction. Do not underestimate this subtle difference because it changes the nature of the transaction completely. When fiat money is not involved, the transaction cannot be tracked because no one can tell if the transaction has happened.

Governments Hate Bartering

For classic second hand market where you exchange the belongings does not really concern the governments. The value of these transactions are small in comparison to the economy as a whole. For most countries it is perfectly fine to do that with no tax consequence. Even for countries with tax code trying to milk money off these exchanges cannot really enforce these laws efficiently.

Now, imagine that you make a deal with your barber – he will style your hair in exchange for your time to diagnose the computer problem he has. In this situation, since fiat money is not involved, there is no money exchange from one hand to another. There is no banking involved. It stops the multiplying effect right there. Notice the exchange of services in this case cannot be taxed. The aggregated effect is a smaller footprint of fiat money in the economy and the government is about to lose tax dollars in every front – sales tax, income tax, etc.

Currently governments do not really care about this development. As long as the banking system is as broken as it is, politicians and central bankers will have an excuse to keep printing money there as if they are doing their jobs. What they fail to realize is that their actions and the way banks are behaving is feeding the whole world to ditch fiat money. The people in power are forcing the rest of the world to drop the use of fiat money.

Even if the governments understand their mistakes and stop pumping money into the big banks, it is too late to reverse the damage to the fiat money based economy. Once people have tried the modern bartering system, there is no going back. The benefits totally outweigh the minor inconvenience. A major part of the global economy will go hidden (or underground if you prefer the term) from the governments forever.

Suppression Of Bartering

At this point it should be clear why governments always prefer big businesses over small businesses because big businesses seldom barter. That’s why in countries where bartering becomes very powerful the governments will find ways to shutdown these bartering organizations. The usual excuse is that these bartering organization were making illegal tenders. Illegal because these alternative money compete against the fiat money printed by the governments themselves.

The creation of some kind of standardized representation of credit is a normal extension of old style bartering. It makes it easier to exchange goods and services among the members in the bartering group. Hence creating a legal angle for the governments to punish or shutdown the bartering groups based on the use of non-government money.

The modernized version of bartering can now eliminate the need of the credit system in two ways.

First, physical form of such credit is no longer necessary as the transfer of credit can be done through the Internet. Thus eliminating the legal issue of printing a form of money tender.

Second, it is now possible to dynamically evaluate the goods and services in terms of time. In this situation all transactions will be transacted in the floating rate of time value based on a specific type of labour work. In this case even the virtual concept itself cannot be challenged legally because it is not a form of money. The balance you have in the bartering system is simply the amount of manual labour measured in time which you have committed to the system.

Without the need of a pseudo credit system, governments can no longer accuse bartering groups of creating and using illegal tenders. The legality issue of mass scale bartering will always be a muddy issue going forward. For now, the bartering proponents have the upper hand.

  • geosing November 14, 2013 at 5:18 pm

    The movement to avoid the fiat is interesting, but for it to make a difference, it needs to be organized in some fashion, usually through the internet. Otherwise it can only work in small, rural communities, which are fast disappearing in the developed nations. When the world moves back to basics – without gadgets, fast food, long commutes and so forth, perhaps this can make a difference. Although I am not underestimating the frustrations with fiat money and systematic wealth transfer and wealth destruction by the new oligarchs – but for the movement to make a difference, a fundamental shift in attitude, life style and values must happen among large segments of the population. This can happen, but may take several generations and total economic collapse. I don’t see it happening in the US any time soon.

    I used to raise fresh vegetables organically. It was not even possible to give them away for free, leave alone barter for them. What you have may not be what the person who has what you want wants. So you need an exchange. Even an internet based exchange needs to survive to serve its users. Once such an outfit has a system and a user community, in comes the IRS or a similar body requiring 1099-B reports and whatnot and forcing fiat on you.

    I am familiar with barter economy, having grown up in one – where one could literally live without money and many in fact did. It was practical because life was simple, wants were few and devoid of technology. 🙂

  • Lawrence Chan November 14, 2013 at 10:10 pm

    I get what you mean. Governments do actively trying their best to destroy bartering of all forms.

  • MidKnight November 14, 2013 at 10:29 pm

    Good piece Lawrence. I agree with much said there. I’ve recently moved to a more rural part of the country and there is quite a lot of bartering going on – it was quite a surprise. Much of what geosing says above does limit its usefulness currently.

    Hmmm….I wonder if a point of sale bitcoin could be helpful in that regard….

    • Lawrence Chan November 17, 2013 at 3:36 pm

      If bitcoin is put into the mix, governments can brand the bartering / co-op into a business and stamp it with disapproval. =(

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