Trade Systems

Bartering is a system of trade that was once much more widespread. Bartering involves at least two individuals discussing their Personal Values for an object or objects with the intention of coming to an agreement on what each is willing to lose in order to gain the other’s object. This could involve sheep, pigs, other livestock, or other goods. As a result, no two trades would ever have the exact same Actual Value, just as no two pigs or sheep are exactly the same.

Actual Value for objects can vary more widely in the barter system than in the currency system.

The currency system involves issuing many units of something, such as paper bills or metal coins, that maintains an Actual Value that is static on a normal day-to-day basis. The most commonly known currencies are those of our home countries - a $1 bill or a $0.25 coin, for example.

Currency has traditionally relied upon a Centralized financial system, whether that’s a central bank or a government. What this means is that a governing body comes together and issues the units of currency while largely controlling or influencing the policies and regulations surrounding it. Centralized financial systems tend to concentrate governing power into the hands of those who issue the currency.

Currency’s strength is that it makes it possible to determine an Actual Value much more efficiently than through bartering alone.If I am trying to determine the Actual Value of my fresh oranges, and there are five people selling oranges for between $3 and $6, then I know my oranges are most likely going to sell for somewhere in that price range. Bartering can be used in conjunction with currency. This is often called haggling.

Multiple trade systems can coexist within a society, with multiple methods of conducting trades (or transactions) of value simultaneously depending on the situation.