Advantages Of A Monetary System Over Barter


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Shows how inefficient a barter economy is compared to a monetary economy

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  • Actually it's been proven that using an organized trade exchange actually saves money. Plus using a trade exchange eliminates the need for one on one trading as in your example with the fruits and vegetables. Dollar for dollar the cost of goods and services on trade is less than using cash because one can leverage their profit margin. Please educate yourself before making false and misleading statements. If barter were so bad, then why did Pespi trade with the Russians for Vodka and Ships which was a $3 billion trade deal? And many of the Fortune 500 companies have used barter to grow their companies! If anyone would like more information on organized barter, feel free to check out our company
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Advantages Of A Monetary System Over Barter

  1. 1. The Advantages of a Monetary System Over a Barter System
  2. 2. Barter – goods and services were traded without the exchange of money. However, before trade could occur, there had to be a “double coincidence of wants” . E ach trader had to have something the other wanted. I’ll trade you a chicken for a pair of shoes. I would love to sell you these shoes but I can’t eat chicken, due to my bad teeth, caused by smoking. In a barter economy a chicken farmer who wants to buy shoes may have to first trade chickens for apples and then apples for shoes because the guy selling shoes wants only apples . Money eliminates this problem.
  3. 3. Or, a heart surgeon might accept only certain goods ( like pineapples ) but not others ( like broccoli ) b ecause he doesn’t like broccoli. You are lucky you are a pineapple farmer and not a broccoli farmer. I hate broccoli.
  4. 4. . <ul><li>It is less expensive to use money. </li></ul><ul><li>Using money saves time and time is money . </li></ul>The “calculation of exchange” by bartering is much slower than the “calculation of exchange” in a monetary system . It is less expensive to use money. The “calculation of exchange” is fast and easy because whatever the price is, you pay that amount. $2.00 Here’s $2.00 for one gallon.
  5. 5. . <ul><li>Let’s say that I own a pig . If I want to buy a “jukebox” , I don’t want to trade the whole pig. </li></ul>
  6. 6. <ul><li>So – I have to negotiate how much of the </li></ul><ul><li>pig I want to give up for the jukebox . </li></ul>
  7. 7. <ul><li>This negotiation will not be fast and easy . </li></ul><ul><li>I decide on the rear part of the pig [ plus the curly tail ]. </li></ul>I had to do some calculations on how much of the pig I wanted to give up.
  8. 8. “ Perhaps I Will Not Miss This.” However I’m not ready to become a pig angel just yet….. Because I would miss my girlfriend too much.
  9. 9. I get my chainsaw and do a little cutting . “ Take that.” This is not “fast and easy” . It took time to start the chain saw. There is also a clean up cost . In fact, this is “slow and hard” on both the pig – and me. OUCH …. You now know why some become vegetarians.
  10. 10. <ul><li>Money is also easier to tax . </li></ul><ul><li>So a monetary system is better than a barter system . </li></ul>T he m onetary system enables the “calculation of exchange” to go much faster.
  11. 11.