Barter

At the simplest level, barter may be defined as the exchange of goods or services without the use of money. If you watch a neighbor’s children in exchange for whatever you want to eat from their refrigerator while you’re in the house, you are participating in barter. Economic activity prior to the introduction of money was carried out primarily through barter.

Although barter seems to have been replaced in modern times by economic systems that rely on money, barter still coexists with the use of money at several levels even in developed economies. In addition to the barter activity of individuals, corporations engage in barter through the use of “trade credits.” Essentially, corporate barter involves companies trading assets through the medium of credit (which usually has an agreed-upon cash value, even though cash doesn’t actually change hands). Specialty finance firms have been developed that broker these trade credits to facilitate the exchange of goods and services without the exchange of cash.