I got what you want and you got what I want lets trade!
December 26, 2010 3:50 AM   Subscribe

Low on money, don't despair, before money there was barter and you can still barter! Bartering for space. Bartering for the use of a car. Bartering food for pints of beer. Bartering books you've read for books you haven't read. Bartering gifts you don't want for gifts you do want. Bartering for dental care. Bartering for baby sitters time. Bartering time on your couch for time on someone else's couch. Bartering time in your home for time in someone else's home. Bartering your UK Council flat for someone else's council flat. Time as a currency alternative. Time banks, bartering your free time for time money. A list of 101 US based timebanks. A timebank in New York. Timebanking in The UK. A bartering exchange. Another bartering exchange. And another bartering exchange.Yet another bartering exchange. A UK based bartering exchange. Obligatory tale of serial bartering: a paperclip for a house. Lest you think bartering is for small transactions only, China barters infrastructure for $9B worth of copper. All the BarterNews you'll need to keep abreast of the fast moving world of barter!
posted by Mutant (22 comments total) 33 users marked this as a favorite
How the IRS views bartering and UK specific tax considerations.
posted by Mutant at 3:56 AM on December 26, 2010 [4 favorites]

One time I felt I owed it to myself but I couldn't afford it so I loaned myself some money, not real money, mind you, but money that was backed by securities I had put up against myself, because I felt that I was a good credit risk. It all went south and I got indicted for insider trading.
posted by twoleftfeet at 5:19 AM on December 26, 2010 [2 favorites]

Irony asplosion: www.timebanks.org is prominently asking for cash donations.
posted by localroger at 5:58 AM on December 26, 2010

OK, who barted?
posted by chavenet at 5:59 AM on December 26, 2010 [1 favorite]

I'm trying to understand the IRS's take on this. So let's say I agree to help out a starving-artist friend by fixing his computer in exchange for an original painting. I spend a couple of hours killing viruses, and, as payment, he gives me a still life to hang on my living-room wall.

A month later, he gets discovered! He's the rage! His paintings are valued at $150,000 and up! The market value of my painting is not $450,000!

Do I owe a shitload of taxes?

What if the artist is already famous? What if I fix Damien Hirst's computer and he gives me a jeweled skull in return. If I don't have enough money to pay taxes on it, will I have to sell it?
posted by grumblebee at 7:14 AM on December 26, 2010 [1 favorite]

Way back, when I was in grade school, we did a battering activity. It was pretty interesting.

We were each given a random item by the teacher (a bouncy ball or a slinky, or something of similar value) and in an allotted amount of time, were allowed to barter.
Kids brought in outside services or items, and trading was intense. I started with shampoo from a hotel or something, and after thirty minutes of bartering, came out with a pack of bubblicious bubble gum, a promise for two slices of pizza at lunch, and a kid's word that he wouldn't beat me up (for even today, I'm not that big.)

Bartering and the deals made through it are amazing. the paperclip guy 's storywill always amaze me.
posted by MHPlost at 7:25 AM on December 26, 2010

Whoops. I meant a "bartering" activity, not a "battering" activity, for battering grade school kids was made illegal quite some time ago.
posted by MHPlost at 7:27 AM on December 26, 2010 [1 favorite]

grumblebee- Bartering works just like money. If the fair market value of an hour of plumbing is $85, and a dentist appointment costs $100, the plumber "received" $15 in value. That counts as income. He paid $85 for something that has a fair market value of $100.

If you do an hour of computer work for an artist that would normally go for $50, and he gives you a piece of art that he could sell for $200, you technically got $150 of new income from your work.

Now that transaction is done. If the art later appreciates but you keep it, you owe nothing. But if you then sell it for $1000, you have a capital gain of $950. $1000 minus what you paid. You may owe taxes on that new income.
posted by gjc at 8:17 AM on December 26, 2010

...for battering grade school kids was made illegal quite some time ago.

Actually, if you stop at battering you're ok, it's the deepfrying that gets you in trouble.
posted by 445supermag at 8:18 AM on December 26, 2010

As a very delusional art student, I tried to pay for bread and coffee with portraits.

It worked better then you'd think, but I've got nothing on the friend who bought a stack of books with rocks..

Granted they were magic rocks.

I'm still vaguely bitter the mission cafe took down a portrait of me done by a now rising artist. Toby McGuire once ate a veggie sandwich under that picture and you can't just take that away from me.
posted by The Whelk at 8:28 AM on December 26, 2010

grumblebee- Bartering works just like money. If the fair market value of an hour of plumbing is $85, and a dentist appointment costs $100, the plumber "received" $15 in value. That counts as income. He paid $85 for something that has a fair market value of $100.

Not even close. The plumber received (not even in quotes!) $100 worth of services as compensation for his work, and the dentist received $85 of services as compensation. They must report this as income.

The fact that they didn't pay each other cash does not change the fact that they could have, and the IRS doesn't allow the exchange of goods and services in lieu of currency to skirt income tax. They can't catch everyone, but if communities get too tightly knit and people are reporting only half the income they really earn because they're accepting payment "in kind," the IRS will start cracking down.

With regard to the painting, it does not have a market value until it's on the market. Your friend may value it at $200, even if said friend is Banksy, in exchange for 4 hours of your $50/hr computer service. You report income of 1 $200 painting, Banksy reports $200 income in form of computer services. Sell that Banksy, and report $millions-$200 later on.
posted by explosion at 9:31 AM on December 26, 2010 [1 favorite]

The difficulty with quantifying barter transactions may come when services performed are amateur ones. I can fix computers, but I've never charged anyone for it; what does someone I've helped reported the value as? A lot of things are difficult to quantify; amateur-level services, any art object, items that don't have a known market value and that the owner can't appraise (for instance, old computer equipment), etc.

In any case, I don't think large numbers of people will turn to bartering, because it fell out of favor for very good reasons. Bartering is only cheap if your ability to store junk is unlimited. Furthermore, bartering as a system is really easy for people to exploit; everyone knows what money is worth (to a point...) but to be able to barter effectively, you have to be able to appraise everything you might need to take in trade. There are just too many consumer items to make it practical for people to be able to appraise them all, or even many of them; and when you can't appraise items you might need to accept in barter, you open the door for shady people to misrepresent the value of things to their advantage.
posted by Mitrovarr at 9:48 AM on December 26, 2010

We talked about the paperclip guy before.
posted by MrMoonPie at 9:54 AM on December 26, 2010

I'm trying to understand the IRS's take on this

They are there to make sure legal pressure can be put on ya if you get outta line.

Note the IRS comments on Timebanking. It is for one taxpayer only. That 'no tax for exchanging time' position may be different for you.

As for 'determining value' - one State I am aware of is saving over 1/4 a million a year by using PostgreSQL for their court lookup system. Elsewhere in the same State, the university system spend 25 and 35 million for a failed Microsoft and Oracle email system. Meanwhile a different campus uses Cyrus via Zimbra and spends 'bout a 1/4 a million in support fees.

So if you work on Cyrus - is that part of 25, 35 or 1/4 of a million tax basis? How exactly do ya figure out the tax basis in a "gift economy" using skilled labor?
posted by rough ashlar at 11:28 AM on December 26, 2010


That would be awesome. I'd love to trade some uncommon-ish books (and possibly some other stuff) for Flash programming work.
posted by swimming naked when the tide goes out at 12:07 PM on December 26, 2010

Other than (1) dodging taxes, (2) overcoming extreme illiquidity, and (3) soaking any philanthropic participant who ordinarily could earn more $ with her time -- what does the exchange of time-dollars accomplish that the exchange of ordinary dollars couldn't?

(I don't intend sarcasm; I really don't get the appeal.)
posted by foursentences at 1:47 PM on December 26, 2010 [1 favorite]

foursentences, it's the illiquidity. It's an alternate economy that is under local control so that when the normal dollar economy is foobar, you can get stuff done.

It is a very imperfect replacement, not least because of the problem of different time dollar values. When Ithaca started this whole thing with the Ithaca Hour they figured the dollar equivalant of an Hour at USD$10. That is less than half of what I am actually paid by my employer, and I would be considered low-paid for my skill set by almost anyone else in my field (but I don't mind because I also have great job security).
posted by localroger at 2:15 PM on December 26, 2010

I've been involved in a barter exchange system that includes quite a lot of small businesses of various kinds. It works both well and badly, and members have a love/hate relationship with it (often both). How it works generally is that Merchant A signs up, pays a real-money fee, and receives a starting number of trade points. He/she can spend those points with other members, on a (theoretical) 1 point for 1 dollar basis. For every purchase you make, you pay a percentage fee to the exchange, and for every sale you make, you pay a percentage fee to the exchange. This, along with signups, is how the exchange makes its money.

Here is how it works badly: it costs you real money to pay your mortgage, buy your goods, rent your shop, pay your employees, pay sales tax, and pay the exchange fee. You are effectively converting real money to trade points, which means that there is an exchange rate. Trade points are strictly inferior to real money, because real money can be spent anywhere and trade points can only be spent within the exchange, with (willing) members. This means that there is an informal rate of exchange, ie people value a trade point at a proportion of a real dollar. This varies from time to time and person to person, and the exchanges vigorously avoid actually publishing any rate of exchange so that they can maintain the 1 point for $1 fiction. However, anyone but the unsophisticated (new) users, realizes that there is such a rate of exchange. In mine, I'd estimate it at about 1/3. So if you're offering to pay a merchant 1000 trade points instead of $1000, you're actually offering to pay them the spending power equivalent of $333. Unless their markup covers that, and they have no-one else to sell it to, they're not going to want to sell it to you. To counteract the rate of exchange problem, members tend to inflate, often grossly inflate, the price of goods to other exchange members, deny any discounts, etc; all of which adds to the inflation problem and reduces the value of trade points vs real money, ie the rate of exchange.

Any new members tend to be descended on and ripped off for anything that they unwisely choose to sell at face value. Generally they tend to be delighted by their sudden increase in turnover, until three things happen at once: (1) the various real money bills fall due; (2) they discover that the overwhelming majority of stuff sold on the exchange by other (wiser) members is grossly overpriced crap (ie, it hasn't sold for cash); (3) they can't spend trade points on things they actually want at prices they actually want to pay. After this a lot of them quit the exchange, and tell all and sundry that it is a scam.

Compounding the problem is that members are business owners and self-employed people, and there are no more penny-pinching and bargain-seeking a class of human beings than these.

The way to make membership of a trade exchange work well, like most things, is to use it wisely. Always make sure that your real-money costs are covered. (By someone - it doesn't have to be that customer themselves, if they can refer other cash work to you to cover your costs, that's great.) The way to do this is to ask for real-money contributions, ie sell at 50% or 25% or some other sensible percentage, so that you're only taking as little of your profit, and only profit, in trade points as you can. While other members may grumble they rarely refuse (and if they do, they probably weren't worth dealing with anyway). The exchange may (or may not) officially disapprove but if you're actually still a trading member, and not telling all and sundry that it is a scam, then you're still a money-generating customer for them.

Consider carefully what you offer on trade. Ideally, services with no or minimal associated material costs and high markups. Barter exchanges work much better for service businesses such as accountants, business coaches, lawyers, etc, and best of all for those that don't have staff to pay and shops to rent. There are probably services (or even goods) within your business that have a very high markup rate - these are the ones to promote to the trade network.

Use trade exchanges to get your product and service out into the market. One of the advantages of a trade exchange is that, generally speaking, buyers are very eager to spend points and will spend them without blinking on all kinds of stuff that they'd never, ever, buy with cash. (Remember, most members are penny-pinching business people.) The expectation of most members is that stuff bought on the trade exchange will be crap, it will break, it will not do what it is sold to do, and it will be drastically overpriced for what it is. Thus, stuff that is actually good looks about three times as good in comparison. When you have a satisfied customer, milk that for all it's worth - ask them to promote you to other, cash-paying, customers, and offer them incentives (free goods, the right to spend trade points with you on stuff you normally wouldn't sell on trade, real money fees, etc) to do so.

Referral, referral, referral. Anything your friends and neighbours and customers need, you are now in the business of either supplying directly ("I'll organize that for you") or telling them where they can get it. Find other businesses in the trade network who share the same customers with you (lawyer and accountant are an easy pairing), and talk to them. Promote each others' businesses in your newsletters, give out each others' business cards, etc. What you want to be doing, primarily, is having real-money customers referred to you, and this is much more likely to happen if you put in the effort to do that for others first.

Have people spend real money with you, and you spend trade points to supply the actual goods or service. Example: your aunt needs her house painted: (1) get a quote from a painter on the trade exchange, say 2000 points; (2) get comparable quotes for cash work from that or other painters, say $1500; (3) tell your aunt that you can get the job done for $1300 in real money by paying 2000 trade points; (4) pay the trade painter 2000 trade points, and get the $1300 from your aunt. Everyone, in theory, is happy.

Use the exchange itself to get you jobs you wouldn't have otherwise gotten. The one I'm in gives us a broker whose job is to promote our services to other exchange members. That broker can organize goods and services for you and as they get commission for doing so, are usually eager to help if they can. This saves you time, as they will do the running around, and the brokers are usually more able to get trade exchange members to let you spend points with them, than you will be yourself. Make sure your broker knows to promote the goods and services that make you the most profit and cost you the least in real money to provide. Tell them who your ideal customers are and what they will see them doing that indicates a need for your services; this may not be obvious to people not directly involved in your industry.
posted by aeschenkarnos at 2:49 PM on December 26, 2010 [5 favorites]

I really don't get the appeal

Go read the propaganda from the creator of Timebanking - either his book or what snippits are on the website.

(if you DO organize a timebank - get a functional board. One I know of has outright lies on grant applications. Waiting for it to blow over or blow up - but a functioning board would have saved things.)

Compounding the problem is that members are business owners and self-employed people, and there are no more penny-pinching and bargain-seeking a class of human beings than these.

And the one I know of "for businesses" has the businesses jack their prices on trade items.

A Win 2000 machine with bare min memory was $800 when the ebay price for the same thing - $250ish. Oh and the machines from the exchange lacked CDs and came with no paper license or CD for the copy of ghost on the machine. The local newspaper always charges the most expensive rate for "trade".

Price jacking is OK by them - they get 10% in FRNs from the business banking the trade and 10% in FRN when the exchange the barter away.
posted by rough ashlar at 3:29 PM on December 26, 2010

Regarding price jacking...some crowdsourcing (I'm beginning to hate that word, BTW) the actual price of things would be a possible solution...submit a task, get others to decide the value of it, then decide whether you are still willing to give it at that price or retract your offer.
posted by swimming naked when the tide goes out at 4:51 PM on December 26, 2010

I suppose there is an advantage to barter networks: cash settled exchanges are more interesting to frauds and thieves than a trade of services and goods. So I'd expect more thieves to target ebay than swap.com.

That said, I think anyone investing / promoting barter networks as a gap solution for financial apocalypse is neglecting the many alternatives.
posted by pwnguin at 11:51 PM on December 26, 2010

Master Blaster run Bartertown.

Well, at least Master Blaster run weekdays. Carl pull nights and open up in morning. Dave weekend manager.
posted by The 10th Regiment of Foot at 5:02 AM on December 27, 2010

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