What is a Barter?

A barter (or bartering) is an exchange between two parties using goods and services for payment instead of currency.

Barter Example

The barter system enables two parties to exchange goods or services based on mutually perceived value.

To illustrate, a plumber can fix a baker’s sink, for which the baker would normally have paid $100 for the service. Instead, the baker gives the plumber $100 worth of his baked goods.

Another example would be a photographer agreeing to photograph a dentist's wedding pictures in return for some dental work of equal value.

These transactions do not involve any exchange of currency; however, each party benefits from the transaction.

Why a Barter Economy Matters

People have bartered for goods and services since the dawn of civilization. Historically the barter system has been employed in times of financial crisis when currencies are unstable or when there is no common currency.

In addition, bartering is especially useful for parties that don't have a strong cash position that would normally be used to pay for goods or services.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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