The barter system – not so wild a notion, after all

The barter system – not so wild a notion, after all

The recent news that Chinese homebuilders who are carrying huge unsold stocks are accepting watermelons and wheat from farmers in partial payment might, at first glance, have appeared like a fairy tale. But basically, the atavistic instinct of barter never dies out despite the entrenchment of national and international currencies.

Last year, Tesla founder Elon Musk seriously considered accepting bitcoins for electric cars, but gave up when authorities started looking askance at the idea. And that was just as well; at that time, Bitcoins were flying high, reaching a price of US$50,000 each. All hell would have broken out when Bitcoin’s descent price started and slipped below US$20,000. Auditors reportedly cried foul and tax authorities began to quibble over whether the resulting notional loss was commercial or speculative. El Salvador has given Bitcoin legal status, but the United States has not. Had that been the case, a transactional, accounting, payment and tax nightmare of unimaginable proportions would have come to haunt the nation. The US government can’t just undermine its own currency by recognizing a Johnny-come-lately quack currency. Such general chaos could perhaps have been avoided if Tesla fortuitously sold the Bitcoins at the same value for which he sold his car, i.e. $50,000 per Bitcoin, but this was never intended. . The intention was to hoard Bitcoin in anticipation of its relentless push north. It’s good that common sense prevailed and Musk’s whims weren’t acted upon; the market and shareholders would have voted with their feet.

Would watermelon and wheat be less calamitous and chaotic? In China, a house is an aspirational product. The future in-laws look askance at the bride and groom who are, so to speak, homeless! Chinese household debt has reached over $10 trillion. And about 27% of bank loans in China are related to real estate, reported a think tank, Policy Research Group (POREG). Hailed not so long ago as the biggest job creator in China today, he is reviled for ushering in the dreaded “Lehman moment”, in reference to the bankruptcy of Lehman Brothers in 2008, which triggered the global financial crisis. Especially since the number of empty homes has crossed the 65 million mark (90 million according to some estimates) – enough to house the French population. Given China’s deep and extensive global ties, any financial crisis there can drag the whole world into a quagmire. The foreclosure has made matters worse, with demand for homes not picking up. The sharp reduction in interest on home loans has not substantially revived buyer interest. As a result, builders in 3rd and 4th tier cities cling to the chaff and go bankrupt.

Although the offhand claim of Chinese manufacturers that their gesture is to help farmers market their products does not fool anyone, Chinese farmers would in fact be happy to get remunerative prices for their products without the hassle of marketing and storage. .

In international trade, countertrade or barter works reasonably well. In fact, India has adopted it several times. The Indo-Russian Rupee trade is a good example. The Indo-Iranian trade is another. This was cleverly done to circumvent US sanctions against anyone paying Iran in dollars – we got crude oil from Iran and Iran bought clothes, gems and other commodities from Iran. India from the credit balance earned through the export of oil. Countertrade, including offsets, is estimated to represent 15-20% of global trade. It is seen as a rebellion by developing countries against the undeserved dominance of the US dollar in international settlements and international reserve currency status. But you can hate the greenback but can’t ignore it because willy-nilly it has to be used for the valuation of the goods and services of the two nations involved in the countertrade when their negotiators sit down at the table to settle serious matters.

S Murlidharan

The recent news that Chinese homebuilders who are carrying huge unsold stocks are accepting watermelons and wheat from farmers in partial payment might, at first glance, have appeared like a fairy tale. But basically, the atavistic instinct of barter never dies out despite the entrenchment of national and international currencies.

Last year, Tesla founder Elon Musk seriously considered accepting bitcoins for electric cars, but gave up when authorities started looking askance at the idea. And that was just as well; at that time, Bitcoins were flying high, reaching a price of US$50,000 each. All hell would have broken out when Bitcoin’s descent price started and slipped below US$20,000. Auditors reportedly cried foul and tax authorities began to quibble over whether the resulting notional loss was commercial or speculative. El Salvador has given Bitcoin legal status, but the United States has not. Had that been the case, a transactional, accounting, payment and tax nightmare of unimaginable proportions would have come to haunt the nation. The US government can’t just undermine its own currency by recognizing a Johnny-come-lately quack currency. Such general chaos could perhaps have been avoided if Tesla fortuitously sold the Bitcoins at the same value for which he sold his car, i.e. $50,000 per Bitcoin, but this was never intended. . The intention was to hoard Bitcoin in anticipation of its relentless push north. It’s good that common sense prevailed and Musk’s whims weren’t acted upon; the market and shareholders would have voted with their feet.

Would watermelon and wheat be less calamitous and chaotic? In China, a house is an aspirational product. The future in-laws look askance at the bride and groom who are, so to speak, homeless! Chinese household debt has reached over $10 trillion. And about 27% of bank loans in China are related to real estate, reported a think tank, Policy Research Group (POREG). Hailed not so long ago as the biggest job creator in China today, he is reviled for ushering in the dreaded “Lehman moment”, in reference to the bankruptcy of Lehman Brothers in 2008, which triggered the global financial crisis. Especially since the number of empty homes has crossed the 65 million mark (90 million according to some estimates) – enough to house the French population. Given China’s deep and extensive global ties, any financial crisis there can drag the whole world into a quagmire. The foreclosure has made matters worse, with demand for homes not picking up. The sharp reduction in interest on home loans has not substantially revived buyer interest. As a result, builders in 3rd and 4th tier cities cling to the chaff and go bankrupt.

Although the offhand claim of Chinese manufacturers that their gesture is to help farmers market their products does not fool anyone, Chinese farmers would in fact be happy to get remunerative prices for their products without the hassle of marketing and storage. .

In international trade, countertrade or barter works reasonably well. In fact, India has adopted it several times. The Indo-Russian Rupee trade is a good example. The Indo-Iranian trade is another. This was cleverly done to circumvent US sanctions against anyone paying Iran in dollars – we got crude oil from Iran and Iran bought clothes, gems and other commodities from Iran. India from the credit balance earned through the export of oil. Countertrade, including offsets, is estimated to represent 15-20% of global trade. It is seen as a rebellion by developing countries against the undeserved dominance of the US dollar in international settlements and international reserve currency status. But you can hate the greenback but can’t ignore it because willy-nilly it has to be used for the valuation of the goods and services of the two nations involved in the countertrade when their negotiators sit down at the table to settle serious matters.

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