Thursday, August 23, 2012

Assaying and Barter

Last time I talked about cash and how our perceptions of value shape its use and adoption.  We looked at how cash as a medium can be manipulated, even in a very basic system and how most of our world system of commerce today is based on fiat currencies - those which have no intrinsic value of their own but the "full faith and credit" of the issuer.  This time I want to talk about how we determine the value of things and how that can substitute for cash when there is no agreed upon or suitable cash denomination to cover the transaction.


Assaying is the art and science of determining, to a high degree, the condition of something precious or worth having.  Mostly this is applied to precious metals, but you can assay antiques, stamps, coins, baseball cards, farm equipment, fire arms and more.  Knowing how to assay requires knowing foremost what a fake is and how to identify it, and secondarily, what something in mint, good  or fine condition looks like when it's the genuine article.  We see this a lot with car dealerships and gun shops.  Owners will usually take items on trade.  They specialize in assaying the condition of these specific items so that they can ensure they remain profitable in their business while offering meaningful value to their customers.

Perhaps ironically, assaying also involves having a current knowledge of what something is worth in a particular currency.  Most things in the US are assayed in US Dollars.  This is also common coin in Liberia and other African countries and parts of central America and the Carribean.  In Europe, it's likely Euros, British Pounds or Swiss Franks.  Russia, China and India and the middle east variably trade in gold, oil, US dollars, Euros or an agreed upon barter, rarely in their own currencies when dealing with each other.  The variety of currencies one can value material goods in should give you an idea of the potential to substitute other material goods for currency in this equation.  If you have a good idea of the accepted value of something : oil, wheat, goats, water - you can estimate the value of something you assay.  Catch that distinction?  Assigning value is a separate but related step from assaying.

So you come to me with a shotgun.  It's a break action, single-shot gun.  On it I find a makers mark and a model number along with a sort of serial number.  Breaking open the action and looking down the barrel, I observe pitting indicating either the age or lack of cleaning during it's lifetime of service.  The firing pin sticks a bit but otherwise appears to be in good shape.  Assaying would be my ability to understand that the gun was made by Savage arms in the 1930s or 40s, that the 16 gauge variety was a common give away item of the time, was going to be fairly useful for hunting small game and fowl and that given it's condition, which I rate to be fair given the beauty of the outside of the gun and the minimal impact on the function of a shotgun pitting in the barrel has, estimate it's value at about $200.  Since I want to profit if you are bringing this gun to me in trade, I will offer you $125 to start and might go up to $150 on trade.  Your ability to barter will get you closer to the price you want.


This is where bartering comes into the picture.  If you want to barter successfully, you need to be able to assay a bit yourself, and you also need to know what losses you are willing to take, or what profit you need to make on a trade.  You need to be up on a wide variety of topics and material goods in order to become successful at bartering.  Market prices are certainly part of this knowledge, but sometimes the market can lag behind the true value of something, especially in situations of sudden demand.  In the morning, a pound of rolled oats might be worth $3, or three two liters of pop, or a dozen twenty ounce bottles of water.  If there's a blackout in your area due to a storm, regional or national market prices won't move very much, but you might be willing to give $5 or a whole case of bottled water for those oats if your pantry is empty.  Demand and supply are quick manipulators of value, or the perception of value.

For a travelling trader, having a stock of small, portable trade-able items ensures a higher degree of successfully meeting someones needs and executing a trade. Successful trades where you both get something you want make you a successful trader.  Bartering skill is crucial if this is going to be your trade.  Simply surviving in your area by bartering with neighbors gives you a lot more flexibility in terms of what you can offer.  You have the option to offer labor or skilled services in exchange for goods or access to tools and equipment.  My neighbor and I often operate this way as cash is just impersonal and really not what we are after.  I like being his IT guy and he likes sharing stuff from his garden.  Beyond the material value, we enjoy the comradery and trades we execute in this fashion strengthen our bond and sense of community.

Naturally, cash is more portable than goods, and some people count their success in dollars rather than in honest haggling and swapping of goods or services, but in doing so they neglect their ability to assay, estimate value, barter and the opportunity to build and strengthen relationships through good faith trade.  There's nothing wrong with that, and during stable economic times with strong currency, it may even be much more suitable.  But we're more and more talking about unstable times these days - hence the topic.

Now, a word of warning.  If you operate a business or make a substantial amount of income by barter, you need to estimate the dollar value of received goods and report it on your taxes.  I believe there are some specific forms for this - consult your CPA on this point as my knowledge is sketchy in this area though I'm aware there is a threshold you eventually cross where you need to be reporting to your taxing body.  Our friendly neighborhood exchanges never come close to approaching the bulk of our income - seldom even the amount of half a days pay.  But, we like to keep in practice with these skills for that potential point in the future where dollar bills are nothing more than conveniently sized tinder for starting the evening fire.

Sharpen Your Skills

Gun and knife shows are a great way to start as many vendors will consider trading if you bring something to the table.  It will have to be something good that they want, and you'll get less than top dollar, but it will provide you the chance to assay their wares, as well as your own, and pit your skills against seasoned veterans in a friendly exchange.  You could also try this approach with garage sales though I don't think many people do so.  Got some old tools you want to unload?  Take them with you when you go to the next rummage sale in your area and see if they'll trade with you.  Know what you are looking for, what it looks like in poor, fair, good or mint condition and what you're willing to give for it.  Have fun!  The beauty of barter is the relationship you build over a simple cash in hand transaction where you pay the asking price and walk away.  Engaging in conversation can yield up a wealth of information you might otherwise not come by.