June 18, 2011
A question often asked of me is how does one set a value on a trade. Whether it is gold, silver, soy beans, labor or bullets, there needs to be a joint understanding and mutual agreement before the deal is made.
There are times of desperation where one party will be willing to pay anything for the trade good such as medicine or water.
I do many trades. They cover a large spectrum of items. Postage stamps, maple syrup, farm produce, tanned furs, organic beef, eggs, construction labor, firewood, silver coins and so on.
Making sure both parties agree with the values of the trade are very important because the relationship between the two parties often continues after the trade. Many trades are lopsided so you make sure yours are fair. It is easier to value an item when it is as simple as five pounds of tomatoes because you can go to the store and see what they sell for and thus you have the value for the trade. Firewood is also easy as that price is set locally. But, you should know a pole cord from a face cord from a full cord. There is green wood versus seasoned wood. Is it dumped in the round or cut and split. Stacked or not.
Labor is even more difficult. Is it one hour of my labor in trade for one hour of your labor? If that is what you agree upon, then so it is. I have a set dollar value for one hour of my time. That is what I trade. You value whatever you are offering me and we will decide if that is fair.
Then we proceed. What if you are trading for something you really do not want but will do the deal because you can either trade that item off on your next trade or you want to sell it on the open market? An issue I am often asked to address is how to value silver and gold in trade. That value is set by the market place and is complicated. There are buy prices and sell prices.
KITCO on the internet shows the market prices at retail for any given date and time. You can contact a commercial dealer via phone and ask the buy and sell prices for what you are dealing with. When I trade for silver or gold I trade my hourly rate at the buy price which is lower than the sell price. That is because I am taking a risk that the value will bounce all over the place before I choose to sell it or trade it and it very well could go down.
Food items do not have the market bounce and retail value is the way to go. That goes for firewood and other items that will be consumed. What is tougher is when there is a shortage and you hold a large supply of toilet paper, 30.06 bullets, medical supplies and such. The value is not set by retail value but by what both parties agree is the trade value. There are times and places when and where barter is the only option available. You are hiking on a long trek, bear stole your food, days away from a store and you meet another hiker who has excess food, what is the trade? A whistle, compass, rope, whatever. Power out for two weeks, no food left, neighbor has three month supply of canned food and water. What do you trade and at what value. You have guns and offer squirrel meat for water and tuna?
Barter can be a simple concept. The issue is what to trade and for what value. During good times it is so much easier.