Friday, September 27, 2013
Monday, September 16, 2013
TRICKS OF THE TRADE
Figure Out What You Want to Get and What You Can Give.
“Everyone has something to offer”
Save your cash and let us bring the bartering back
The first part is easy. Maybe you’re looking for a yoga class or
interior-decorating help. The challenge is working out what
goods or services you can exchange in
return. Tapping into your professional expertise or considering what you
studied in
college is an obvious place to start. But
also ask yourself:
- What would you sell if you were having a garage sale tomorrow? Is any of it worth trading?
- What hobbies could you teach someone?
- Could you craft something to swap? (A pair of hand-knit mittens? A photo book or a scrapbook?)
- Which common chores do you enjoy? (People have performed tasks as random as pulling weeds.)
Thursday, August 1, 2013
Buying Real Estate
Buying Real Estate
Real estate provides excellent opportunities to
invest Trade Dollars into real estate that will generate cash profits in
the long term. Real estate isn't a particularly liquid asset, but real
estate becomes more valuable over time and provides an excellent
inflation hedge and tax shelter. Since Trade Dollars come from selling
surplus or from additional new business and have a low incremental cash
cost, many investors find that they can be more aggressive in pursuing
investments such as real estate. Because Contrabart members can earn Trade Dollars without significantly affecting cash flow, investors can buy speculative properties and wait for values to go up. In some cases, it's even possible to walk away with a pocket full of cash.
Even if the investor is forced to sell at a paper loss, the sale can still represent a cash profit. Here's how it works. Let's say a business has an incremental cost of 35 percent in its Trade Dollars.
The business owner buys a property for $500,000 with 30% Trade Dollars (T$150,000 + $350,000 cash), so the total cash cost in the property is $402,500. If he sells the property for $455,000 cash, he has still doubled his cash investment while reporting a $45,000 loss on his taxes. The ATO doesn't care whether you pay for the property in cash or Trade Dollars. The reportable loss is still the same.
Trade Mortgages
You can still buy real estate, including property, homes, units, even though you don't have sufficient trade available to pay for it. Trade exchange members have recently purchased units in Sydney, townhouses in Southport, waterfront acreage at Hervey Bay, an office building in Brisbane, and a resort in tropical North Queensland. These transactions ranged from $300,000 to over $4 million. Typically, the buyer paid between 25-30% part payment in Contrabart Trade Dollars. Where the member didn't have sufficient Trade Dollars the balance was financed with a trade mortgage, just like in the cash world.
Contrabart makes interest free Trade Dollar mortgages available to qualified buyers of real estate, where the repayments are paid in Trade Dollars over a period of time of up to 5 years interest free. You provide your products or service to members and deposit the Trade Dollars into your account. Even better, Contrabart brokers refer the new business you need to make the payments, and online sales can enable you to pay off the property even faster. It's that simple.
A recent property sold was a luxury Townhouse in Sydney. The property market in Sydney was slow so the developer decided to sell the property accepting Trade Dollars as part payment. Because he had a need for the Trade Dollars, he was willing to take 30% of his equity in the Townhouse in Trade Dollars. The asking price was $500,000. The equity of $150,000 was paid in Trade Dollars; the balance of $350,000 was paid by obtaining financing with a bank mortgage.
An example of creative trading would be for the buyer to apply for 80% financing of the $500,000 and get a $400,000 mortgage to purchase the house. The seller only requires $350,000 in cash to pay off his indebtedness, leaving an excess of $50,000 cash that the buyer keeps. The buyer also makes a down payment of 20% of the trade mortgage, $30,000 in trade, leaving a trade mortgage of $120,000. This can be paid in product or service of approximately $2,000/month for five years interest free.
Bottom line is, the house can be bought for trade and cash, and the buyer walks away with $50,000 in cash and lives in or rents the house for five years. The house can then be sold for at least $500,000 plus capital gains of say 20% which would make the property worth $600,000. Pay off the remaining cash mortgage of approximately $400,000, and walk away with another $200,000 in cash.
If you are interested in creative trading that turns Trade Dollars into cash, let us know. Then the next time a deal comes along, you'll be the first to know.
GET THE BENEFITS YOU DESERVE
GET THE BENEFITS YOU DESERVE
Increase your buying power with revenue from new
sales and conserve your cash. Use your new found revenue to pay for the
products and services you want.There are many good reasons why more and more businesses worldwide are bartering their products and services, but underlying them all is one fundamental business motivation; businesses profit.
Airlines and restaurants can fill empty seats, hotels and resorts can fill empty rooms, printers can fill press downtime, professionals can fill empty time slots, health care professionals can treat new patients.
Business owners and professionals can then take this newfound revenue and reduce cash expenses or expand their operations.
Businesses across Australia and the world are taking a serious look at barter as a way to build their bottom line, and the rapid growth of the online barter industry can only mean that Australian business likes what today's barter industry has to offer.
Get these benefits and enhance your business potential by joining today:
INCREASE SALES: We market your business to other exchange member businesses in the online member directory, weekly email and through our Trade Brokers. Your business gets incremental sales from buyers looking for barter opportunities within the Contrabart network.
NEW CASH SALES: The number one source of advertising for small businesses is "word of mouth." If you do a good job for an Contrabart member, they will refer their cash-paying friends, customers, family and other businesses to you. Additionally, barter revenue from the incremental sales that we will bring you can be used for radio, television, print, direct mail, outdoor, online campaigns and other types of advertising to attract more cash customers and build your brand.
IMPROVE CASH FLOW: You can improve cash flow by increasing sales and reducing costs. Participating in a barter exchange does both! Barter enables you to pay for the products and services you need with what you have. When you hire a contractor, paint your office, or buy office supplies with Trade Dollars, you conserve your cash to pay other expenses. And, when you purchase using Trade Dollars, you pay for it with revenue from new sales - sales that you probably would never have had.
MOVE EXCESS INVENTORY AND FILL IDLE TIME: Every business owner has excess inventory, production, capacity or appointment time. That unscheduled appointment today has zero value tomorrow. When you join Contrabart, we provide you with new business to put your excess to use in profitable ways. We accomplish this by matching your product or service with businesses looking to purchase them on trade.
WHOLESALE BUYING POWER: With barter, the actuall cost of the products you purchase on trade is the wholesale cost of your Trade Dollars earned. Making sales with built-in profits makes the cost of your purchases more economical on trade. When you join Contrabart, you open the door to a new, cash-free way of handling every day business and personal expenses.
PROVIDES A COMPETITIVE EDGE: Contrabart members will patronize your business over the competition because your barter affiliation is an incentive to do business with you. Barter attracts new customers to your business, without affecting the existing cash sales already being generated by your company.
NO BAD DEBT: We eliminate collections. When you make a barter sale to a Contrabart member, you process the transaction using a touch tone phone or online postings to verify that the buyer has the Trade Dollars available to pay for their purchase.
COLLECT RECEIVABLES: A small business might find it difficult to pay you the cash they owe, but would welcome the opportunity to fulfill their obligation with payment in products or services. Contrabart members can then offer these goods and services to members for Trade Dollars which get deposited to your barter account for the balance you were owed. Your non collectable receivable just became revenue that can be spent on a variety of business expenses.
EMPLOYEES INCENTIVES: By using exchange member dentists, you can provide a much appreciated benefit to employees without having to pay cash for it. Barter is also a great way to offer contest prizes, bonuses, wellness programs and tickets - all available to you without using cash, and all based on your cost of the incremental business that we have brought you.
CONNECT, NETWORK, TRADE AND GROW
Sell excess inventory, capacity or production to a
new market of buyers locally & worldwide. Then, trade for the
Products and Services you want instead of spending cash to improve cash
flow and grow your business.It's simple. Barter companies are third party record keepers just like banks and credit card companies. When you join Contrabart, you get a barter trade account, which is much like your business cheque account at your bank except that deposits and payments to your barter account are made with Trade Dollars instead of cash. And, one Trade Dollar = one cash dollar.
Unlike direct trading, barter exchange members enjoy multi-party trading, so that when you provide your product or service, you are not limited to receiving the product or service of the person or company you traded with.
With your exchange membership, in addition to your cash cheque account at your bank, you will also have your barter cheque account. Each time you spend Trade Dollars instead of cash for the products, services, travel and advertising you need, you conserve cash. And, we will refer new business to you from new customers that you most probably would never have had.
With online e-commerce enabled multi-party trading, Mr. Green, the massage therapist, who earned $800 Trade Dollars by filling empty appointment slots with exchange members, can get a new sign for his business from Mr. Blue, the owner of local sign and printing shop, who can trade for office cleaning services from Miss Violet. Miss Violet uses the Trade Dollars she earned from cleaning Mr. Blues shop each week, to get a massage for herself and her husband, keeping them in tip top physical shape for her cleaning business.
Most businesses that join a barter exchange can anticipate getting 15% to 20% in additional new sales from buyers referred to you by the exchange that will pay you in Trade Dollars for your products, services, excess inventory or capacity. Then, use your new found revenue from those sales to pay for purchases instead of using cash. The cash savings goes right to your bottom line profits!
Get your share of this enormous business potential and Join today!
Thursday, July 11, 2013
MONEY AND MARKETS
Goods had value long before such a thing as money was known in the world. All the essential features of the valuation process are possible without reference to money. But the great bulk of the trade of the world is effected through the instrumentality of money (and credit), and prices are nearly always quoted in money terms. So, altho there may be valuation and even a certain amount of trade (and therefore prices) without the use of money, it is natural for us to look for concrete illustrations of trade and of price to the money transactions which are taking place around us all the time—the familiar purchase of a good for money. Moreover, while the explanation of the more complicated problem of market prices without reference to money is quite possible, it is simplified by having these prices expressed in money terms.
Richard E. Lucas
669 Alden Bldg. Unit 3 2nd
floor
Rizal Extension, Brgy
Cut-Cut
Angeles City, Pampanga
Philippines
TRADE BY BARTER
1. Advantage of trade.
Whenever two persons having valuable goods meet, there is a chance that
their valuations of goods at that time will not be the same. One person
may have more food than he needs at the time but be lacking in
clothing. If each gives to the other some of the good which to him has
smaller value, and receives some of the other good, in an amount which
to him is more valuable, each of the two parties will be the gainer.
This mutual giving is trade. Trade increases the range of choice open to
men. Each good that can be traded takes on a new importance, that of
procuring other things in trade. In addition to its own power to gratify
a desire, it gains a representative quality and appeals to desires with
the power of all the other objects for which it can be traded. It draws
its value from two or more sources, one source being its own direct
uses, the other sources being the uses of each thing for which it may be
traded. This led men to speak of value-in-use and value-in-exchange.
But it must not be thought that an object has to any one person two
values at once; for as each good had before but one value at a time to
any one person tho it had many uses, so when it gets the trading use, it
continues to have but one value at a time, as determined at the margin
of least urgent desire.
Readiness to trade shows a man’s desire to redistribute his goods in accordance with the principle of substitution. He virtually says: “Part of what I have I am ready to give for part of what you have.” The relative strength of his desire for the other good is expressed in part by the amount of his offer. When he makes this comparison and this offer, he enters into the social, economic relation of trade with his fellows.
2. Barter. Trade without the use of money or even the form of the money-expression, is rarely seen by the city boy to-day. Yet it has played a great part in economic history. In early societies the differing natural products of different localities were the most usual objects of trade. Salt, so essential to life, is on the whole plentiful, but it is found in comparatively few places, in rare springs, and in the salt seas, and was eagerly brought from great distances. Copper, when it took the place of stone as the material for weapons of defense or of the chase, was sought far and wide. Rare shells, feathers, jewels, and the precious metals appealed in early times to a universal desire for ornament. Products like these were in early times the objects of a rude sort of trade, which took the form of gift-making or of barter, accompanied by much higgling, in the simple efforts to adjust possessions better to desires. In the Middle Ages, outside the cities, which were very small compared with those of to-day, almost universally a “barter economy” prevailed or, as it has been called, a “natural economy” (a term taken from the German “Naturalien,” which means natural products, enjoyable things, as opposed to money). Natural economy, therefore, means that condition of society in which things are exchanged “in kind.” In the Middle Ages land was the chief form of wealth. Even princes were dependent on the products of land for their incomes. The peasants were “paid” (as we think of it) for their work by the grant of the use of land. The income of the landlords was in the form of “Naturalien” (wheat, chickens, eggs, etc., as well as labor), the kind and amount of which were fixed by contract or by immemorial usage. The use of money has greatly changed these conditions in Europe and America, but barter still is used in outlying districts, and in backward countries. It occurs more frequently than one is likely to think, in trade between savages and civilized traders, in rural districts, on the school grounds, between neighbors in horse trades and house trades, in multitudes of trades made by the help of want advertisements, and in many other cases.
The extent of the use of barter to-day does not, however, measure the importance to the economic student of understanding it. The true measure is the fact that without comprehending the process of barter it is impossible to comprehend much beyond the superficial aspects of developed markets and prices. The zoölogist studies the simpler forms of life, unicellular or little organized, as the best way to understand the higher organisms; so we must analyze the simplest forms of trade as a means to the comprehension of the most complex. Barter contains within it the elements from which develop all the forms of commerce.
3. Some trading terms defined.Buyer and seller are the two parties to the transaction, the two traders; the buyer being the one acquiring a good not in his possession, the seller the one giving up the possession of that good in return for something else. Either of the goods may be taken as the point of departure in thought, and either party to the trade may be then looked upon as buyer or as seller.
Price is the good given by a buyer in a trade. In barter either good may be looked upon as the price of the other. At present one of the two goods is most often money of some particular king expressly mentioned, or clearly implied. When money is used in a trade, its quantity is looked upon as the price, and the other good is looked upon as sold for, and bought with money. Price may be per piece of a conventional size, as per quart, bushel, yard, pound, or for the entire group of objects or amount bought, as the price of a farm, of an entire stock of goods, etc., as is likewise usually shown by the context. The other good, that for which a price is paid, may be called the sale-good.
4. The problem of price. Few words are more often on the lips to-day than price. If the price of a thing is high, the thing is dear; if price is low, it is cheap. What makes things cheap or dear? That question puts the price problem. It is a matter of every-day observation that when things are more plentiful than usual they are pretty sure to be cheaper; when they are scarcer than usual they probably will be dearer. Hens lay few eggs in the winter, but many in the spring. Apples are few on the trees and of poor quality one year, and plentiful the next. Rains are late and inadequate, and the crop of cotton in the South, or of corn in the Middle West, or of hay in the Northeast of the United States is small, and as quantity is small prices are high. Every one knows in this general way about prices and the reasons why prices change. Some men of business become astonishingly skilled in following and anticipating the changes in price of the particular goods in which they deal. But the purpose of the student of economics is not to learn the conditions that influence the prices of particular goods except as they may serve as examples, but rather it is to understand the general nature of all price movements and the principles determining all prices. The thoro pursuit of this purpose is a large part of the task of economic study.
5. Demand. The phrase demand and supply is very frequently used as an explanation of economic problems, without any clear conception of the meaning of the words. Let us examine the meaning and the difficulties of the phrase.
Demand conveys the idea partly of the intensity of the desire of a trader for a certain good, partly of his having something (a certain amount) which he is willing to give for it, and partly of the amount of goods which he desires to buy at the price. Thus we may define: demand is desire for a certain quantity of goods at a certain price, united with the power to give the amount of the price in trade for it. Real demand refers to actual trade, for demand is effective desire, desire backed by the price needed to induce the other party to trade. It is convenient, however, to speak of potential demand as the amount which buyers would be ready to take at some specified price.
The hungry boy looking longingly at the sweetmeats in the confectioner’s window, represents mere desire; not until the kind-hearted gentleman gives him a nickel does he represent demand for sweetmeats, and then only in case the sweets are the nickel’s worth that he most desires, and not then unless the confectioner is willing to part with the coveted article for a nickel. Demand is actual, desire for a sale-good is effective, only in reference to a certain price, the quantity of the goods which the seller will take for it. We may speak of the intensity of desire, but should say rather the extent (or amount, the number of units) of demand.
6. Supply. Supply is the correlative of demand in the phrase, demand and supply; it is the amount of sale-goods which sellers are actually ready to trade at a given price. Supply implies the existence of desire as surely as does demand. Indeed, supply may be defined as desire for a certain quantity of price-goods, at a certain ratio of exchange, united with the power to give sale-goods for them. Supply should not be confused with the stock in possession. The two may differ greatly, for at a given price a person may choose to offer for trade little or none at all of a good, even tho he has a considerable stock of it on hand. Demand and supply vary as the price changes, but in opposite directions. Demand varies inversely with price (rises as price falls), and supply varies directly with price (rises as price rises).
7. Limits of advantage in isolated barter. In barter the trade can take place only within certain limits of price permitting each party to gain somewhat by the choice. The number of units of sale-goods compared with those of the price (each in some specific unit, as pound, yard, gallon, etc.), expresses the ratio of trade (or ratio-of-exchange). When two farmers “trade even,” a horse for a cow, either the horse or the cow may be looked upon as the price of the other good, and the ratio of exchange is 1 to 1. But the fact that in trade one thing is equal to the other does not mean that in either trader’s opinion the values of the two things are equal. Indeed the very motive of the trade to each party is that he may get what is to him a more valuable for a less valuable object. To even up a trade something may be given “to boot” and one thing be traded for a group of things, as a gun for a boat and a set of fishing tackle, or on rabbit for a lot of 25 fish.3 It must nearly always be the case that there are several ratios of exchange at which a trader has more or less of a motive to trade.
Where there are only two (or a small number of) traders there is a considerable range for bargaining, or higgling. For example, the owner of the rabbit might be willing to take 20 fish rather than not to trade, and the owner of the fish might rather give 30 fish than go without the rabbit. It is not at all certain that in such a case the trade will be at a ratio arithmetically midway between the extremes. Higgling is illustrated by the old-time American horse trade, in which so much depends on “bluff”; in such cases it is as important to be able to judge character as to judge horses, for the bargain will be concluded at a ratio of price to sale-good which exactly balance the hope of gain and fear of loss by one of the parties. This same margin for higgling appears in most exchanges between two somewhat isolated traders, even in highly developed business.
The effect that duplicate and additional units of a good have on valuation (principle of diminishing gratification) is the most frequent cause of barter. The owner, in accordance with the principle of substitution, seeks to trade some of his stock of a good (those units which correspond to less intense, direct uses) for goods which he lacks entirely or values more highly. A hunter with a large pack will be glad to trade a part of his furs for a part of the farmer’s grain and fruit. He thus gives up the satisfaction of his marginal, less intense desires for furs to gratify his more intense desires for grain and fruit. But (having meat to eat) he would not, at any price, trade for food all the furs he has. Thus, when goods are turned to their trade-uses, new levels of actual valuations for each of the two kinds of goods result in place of those existing before the trade.
It should be clear from this chapter that any true trade must be mutual and voluntary. It thus differs from gift-making, stealing, extortion, taxation, etc. True trade is of mutual advantage to the parties, at least is believed to be so at the moment. It is this which makes trade rational. It is a mode of substituting more desirable for less desirable goods.
A popular idea very difficult to uproot is that if one party to a trade gains the other must lose. This idea was generally held in ancient times and in the Middle Ages, and seems to have been connected with the notion that value is something fixed in a good and unchangeable. This seems to have been one reason for the poor opinion held of merchants, tho the frequency of fraud in trade with strangers strengthened this opinion. But if goods having a small value may be given a higher value by being traded, trade and the work of merchants, peddlers, and carriers of all sorts, may be a value-increasing process.
Readiness to trade shows a man’s desire to redistribute his goods in accordance with the principle of substitution. He virtually says: “Part of what I have I am ready to give for part of what you have.” The relative strength of his desire for the other good is expressed in part by the amount of his offer. When he makes this comparison and this offer, he enters into the social, economic relation of trade with his fellows.
2. Barter. Trade without the use of money or even the form of the money-expression, is rarely seen by the city boy to-day. Yet it has played a great part in economic history. In early societies the differing natural products of different localities were the most usual objects of trade. Salt, so essential to life, is on the whole plentiful, but it is found in comparatively few places, in rare springs, and in the salt seas, and was eagerly brought from great distances. Copper, when it took the place of stone as the material for weapons of defense or of the chase, was sought far and wide. Rare shells, feathers, jewels, and the precious metals appealed in early times to a universal desire for ornament. Products like these were in early times the objects of a rude sort of trade, which took the form of gift-making or of barter, accompanied by much higgling, in the simple efforts to adjust possessions better to desires. In the Middle Ages, outside the cities, which were very small compared with those of to-day, almost universally a “barter economy” prevailed or, as it has been called, a “natural economy” (a term taken from the German “Naturalien,” which means natural products, enjoyable things, as opposed to money). Natural economy, therefore, means that condition of society in which things are exchanged “in kind.” In the Middle Ages land was the chief form of wealth. Even princes were dependent on the products of land for their incomes. The peasants were “paid” (as we think of it) for their work by the grant of the use of land. The income of the landlords was in the form of “Naturalien” (wheat, chickens, eggs, etc., as well as labor), the kind and amount of which were fixed by contract or by immemorial usage. The use of money has greatly changed these conditions in Europe and America, but barter still is used in outlying districts, and in backward countries. It occurs more frequently than one is likely to think, in trade between savages and civilized traders, in rural districts, on the school grounds, between neighbors in horse trades and house trades, in multitudes of trades made by the help of want advertisements, and in many other cases.
The extent of the use of barter to-day does not, however, measure the importance to the economic student of understanding it. The true measure is the fact that without comprehending the process of barter it is impossible to comprehend much beyond the superficial aspects of developed markets and prices. The zoölogist studies the simpler forms of life, unicellular or little organized, as the best way to understand the higher organisms; so we must analyze the simplest forms of trade as a means to the comprehension of the most complex. Barter contains within it the elements from which develop all the forms of commerce.
3. Some trading terms defined.Buyer and seller are the two parties to the transaction, the two traders; the buyer being the one acquiring a good not in his possession, the seller the one giving up the possession of that good in return for something else. Either of the goods may be taken as the point of departure in thought, and either party to the trade may be then looked upon as buyer or as seller.
Price is the good given by a buyer in a trade. In barter either good may be looked upon as the price of the other. At present one of the two goods is most often money of some particular king expressly mentioned, or clearly implied. When money is used in a trade, its quantity is looked upon as the price, and the other good is looked upon as sold for, and bought with money. Price may be per piece of a conventional size, as per quart, bushel, yard, pound, or for the entire group of objects or amount bought, as the price of a farm, of an entire stock of goods, etc., as is likewise usually shown by the context. The other good, that for which a price is paid, may be called the sale-good.
4. The problem of price. Few words are more often on the lips to-day than price. If the price of a thing is high, the thing is dear; if price is low, it is cheap. What makes things cheap or dear? That question puts the price problem. It is a matter of every-day observation that when things are more plentiful than usual they are pretty sure to be cheaper; when they are scarcer than usual they probably will be dearer. Hens lay few eggs in the winter, but many in the spring. Apples are few on the trees and of poor quality one year, and plentiful the next. Rains are late and inadequate, and the crop of cotton in the South, or of corn in the Middle West, or of hay in the Northeast of the United States is small, and as quantity is small prices are high. Every one knows in this general way about prices and the reasons why prices change. Some men of business become astonishingly skilled in following and anticipating the changes in price of the particular goods in which they deal. But the purpose of the student of economics is not to learn the conditions that influence the prices of particular goods except as they may serve as examples, but rather it is to understand the general nature of all price movements and the principles determining all prices. The thoro pursuit of this purpose is a large part of the task of economic study.
5. Demand. The phrase demand and supply is very frequently used as an explanation of economic problems, without any clear conception of the meaning of the words. Let us examine the meaning and the difficulties of the phrase.
Demand conveys the idea partly of the intensity of the desire of a trader for a certain good, partly of his having something (a certain amount) which he is willing to give for it, and partly of the amount of goods which he desires to buy at the price. Thus we may define: demand is desire for a certain quantity of goods at a certain price, united with the power to give the amount of the price in trade for it. Real demand refers to actual trade, for demand is effective desire, desire backed by the price needed to induce the other party to trade. It is convenient, however, to speak of potential demand as the amount which buyers would be ready to take at some specified price.
The hungry boy looking longingly at the sweetmeats in the confectioner’s window, represents mere desire; not until the kind-hearted gentleman gives him a nickel does he represent demand for sweetmeats, and then only in case the sweets are the nickel’s worth that he most desires, and not then unless the confectioner is willing to part with the coveted article for a nickel. Demand is actual, desire for a sale-good is effective, only in reference to a certain price, the quantity of the goods which the seller will take for it. We may speak of the intensity of desire, but should say rather the extent (or amount, the number of units) of demand.
6. Supply. Supply is the correlative of demand in the phrase, demand and supply; it is the amount of sale-goods which sellers are actually ready to trade at a given price. Supply implies the existence of desire as surely as does demand. Indeed, supply may be defined as desire for a certain quantity of price-goods, at a certain ratio of exchange, united with the power to give sale-goods for them. Supply should not be confused with the stock in possession. The two may differ greatly, for at a given price a person may choose to offer for trade little or none at all of a good, even tho he has a considerable stock of it on hand. Demand and supply vary as the price changes, but in opposite directions. Demand varies inversely with price (rises as price falls), and supply varies directly with price (rises as price rises).
7. Limits of advantage in isolated barter. In barter the trade can take place only within certain limits of price permitting each party to gain somewhat by the choice. The number of units of sale-goods compared with those of the price (each in some specific unit, as pound, yard, gallon, etc.), expresses the ratio of trade (or ratio-of-exchange). When two farmers “trade even,” a horse for a cow, either the horse or the cow may be looked upon as the price of the other good, and the ratio of exchange is 1 to 1. But the fact that in trade one thing is equal to the other does not mean that in either trader’s opinion the values of the two things are equal. Indeed the very motive of the trade to each party is that he may get what is to him a more valuable for a less valuable object. To even up a trade something may be given “to boot” and one thing be traded for a group of things, as a gun for a boat and a set of fishing tackle, or on rabbit for a lot of 25 fish.3 It must nearly always be the case that there are several ratios of exchange at which a trader has more or less of a motive to trade.
Where there are only two (or a small number of) traders there is a considerable range for bargaining, or higgling. For example, the owner of the rabbit might be willing to take 20 fish rather than not to trade, and the owner of the fish might rather give 30 fish than go without the rabbit. It is not at all certain that in such a case the trade will be at a ratio arithmetically midway between the extremes. Higgling is illustrated by the old-time American horse trade, in which so much depends on “bluff”; in such cases it is as important to be able to judge character as to judge horses, for the bargain will be concluded at a ratio of price to sale-good which exactly balance the hope of gain and fear of loss by one of the parties. This same margin for higgling appears in most exchanges between two somewhat isolated traders, even in highly developed business.
The effect that duplicate and additional units of a good have on valuation (principle of diminishing gratification) is the most frequent cause of barter. The owner, in accordance with the principle of substitution, seeks to trade some of his stock of a good (those units which correspond to less intense, direct uses) for goods which he lacks entirely or values more highly. A hunter with a large pack will be glad to trade a part of his furs for a part of the farmer’s grain and fruit. He thus gives up the satisfaction of his marginal, less intense desires for furs to gratify his more intense desires for grain and fruit. But (having meat to eat) he would not, at any price, trade for food all the furs he has. Thus, when goods are turned to their trade-uses, new levels of actual valuations for each of the two kinds of goods result in place of those existing before the trade.
It should be clear from this chapter that any true trade must be mutual and voluntary. It thus differs from gift-making, stealing, extortion, taxation, etc. True trade is of mutual advantage to the parties, at least is believed to be so at the moment. It is this which makes trade rational. It is a mode of substituting more desirable for less desirable goods.
A popular idea very difficult to uproot is that if one party to a trade gains the other must lose. This idea was generally held in ancient times and in the Middle Ages, and seems to have been connected with the notion that value is something fixed in a good and unchangeable. This seems to have been one reason for the poor opinion held of merchants, tho the frequency of fraud in trade with strangers strengthened this opinion. But if goods having a small value may be given a higher value by being traded, trade and the work of merchants, peddlers, and carriers of all sorts, may be a value-increasing process.
Richard E. Lucas
09157274597
/ 09222084500
669 Alden Bldg. Unit 3 2nd
floor
Rizal Extension, Brgy
Cut-Cut
Angeles City, Pampanga
Philippines
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