Barter after the financial crisis

by Nicolas Nova

The bartering meme is spreading with interesting developments. This is clearly a favorite topic of mine, as attested by this introductory blogpost (or the presentation of this swiss platform). For several months, there is renewed interest in this topic as specialists aim at using bartering to fix issues related to the financial crisis.

I’ve seen more and more articles in the press, and Russia appears to be an important site for practices and potential business platforms that would support bartering. There has already been some documented research about this phenomena in the 1990s.

See for example this article in the Moscow Times. The journalist reports on the activity of the Anti-Crisis Settlement and Accounting Center, led by German Sterligov, which plans to start facilitating the barter of debt and goods. This russian millionaire is indeed convinced that “barter trade would be the right choice for the world in times of liquidity problems and payment delays”.

Of course, this is not just for the local Joe Smith who would like to trade his DVDs against a proper haircut. It’s far more complex and connected to the economy as the company built an interactive database allowing the barter of debt and goods worldwide:

“Sterligov illustrated a possible barter deal with a real-life example: Magnitogorsk Iron & Steel Works’ estimated debt of 1 billion rubles ($30.4 million) to Mechel for coal supplies. “Mechel could put information about MMK’s nonpayment in our system and then add which products it needs itself,” Sterligov said. MMK, in turn, would put 1 billion rubles of steel into the system, he said. At some point, a company would surface that wanted steel and had a product needed by Mechel, and the deal would be completed. “For this to work, you have to have thousands of bids in the system,” Sterligov said, adding that debt would probably become the most popular item for barter. (Mechel and MMK declined to comment about their possible participation in such a system.)”

An example that is of course criticized by some because “barter would not work because of hassles involving taxes and property rights” and that it’s mean that “throw us back into the Dark Ages, which is definitely not what modern economy needs”.

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