Another Perspective on Selecting Barter Goods, by OSOM

Saturday, Nov 11, 2006

Dear Jim:
The recent letter on barter goods caused me to sit down and organize my thoughts on the matter. Running a successful retail/wholesale operation, I can see some caveats and analysis that needs further exploration.
What's WRONG with Barter Goods
As has been well emphasized before - forget about barter goods until you are squared away for your own logistics. Beyond that, remember that barter goods are much inferior to money or cash in a functioning economy, with a good division of labor. If you need to sell them to raise cash, it will take some effort, and you can easily lose money - especially if you need to sell them fast. Barter goods tie up your cash, take up valuable storage space, and must be carefully stored so rust / staleness, etc., etc. don't degrade the value of your inventory. Obsolescence is a major factor to consider for any technology item. And how do you know exactly what will be valuable in the future?
So why go to the trouble of storing any barter goods at all?
Barter goods, if well preserved and in demand, will preserve your purchasing power from inflation - and it is very hard for the taxman to collect on barter transactions! But of course gold and silver would do just as well, probably better, in a hyperinflation, and are much easier to store, easier to sell, more liquid, etc., etc.
So barter goods are for a real TEOTWAWKI when the economy is not functioning - a catastrophic breakdown in the division of labor. Think about a rapid and uncontrolled decline from a Western industrialized economy, to a primitive Third World economy - but without the low-tech skills the Third World folks survive with.
Your money (even real gold money) can't buy much because there simply isn't a functioning market to spend the gold or paper money. The shortages and/or civil disorder is so bad that immediate survival is the overriding issue, and the viability of money to get goods is in question. If it isn't this bad, gold and silver is the way to go. If it ever gets this bad there will be a horrific loss of life as it is the efficiencies of the division of labor that keeps our interdependent and sophisticated economy wealthy and our population fed.
In this horrific situation, tangibles for barter rule because, "you can't eat gold". For example let's imagine Farmer John who won't sell you one of his pig's for those gold coins you have. Even if there is a local market accepting gold and silver, he doesn't want to take a dangerous trip to town and leave his property unprotected. Transportation, communications and security are all in horrendous shape.
But Farmer John will consider trading the pig for tangible stuff that solves a critical problem for him. Stuff he has trouble getting, lets hypothesize: fuel for the tractor, or bullets for his gun (or a gun for his grown kids that are now back on the farm and under-equipped). How awfully bad it has to get before barter goods trump gold and silver is a prime factor to consider in evaluating what will be valuable - the desperate situation dictates that hard core survival items will be in highest demand, consumables, especially. If you don't think it will get this bad, just store gold and junk silver. Best bet is some of both.
War and/or hyperinflation are the most common circumstances, historically, where things get this desperate, with the fiat money collapse destroying the division of labor. Unless we were "bombed back to the Stone Age" sooner or later a functioning economy would evolve again with real gold and silver money reestablished. But that would take time - after the worst of the population die-off had occurred, and some stability re-attained. In the interim, barter goods will give you purchasing power to buy consumables you run out of, stuff that breaks or wears out, items you didn't think ahead to store - or unforeseen needs, e.g., medical, new baby, new people at the farm, etc., etc.
Be be advised that when storing barter goods you are entering the realm of running a business. You had better be able to predict what will be valued by your local market when you need to barter - supply and demand. Otherwise you will be wasting money, time and storage space.
What problems will people need to solve? What will be in high demand and/or short supply?
1. We don't know for sure, so be careful. It bears repeating - don't worry about barter till you have your own supplies well stocked.
Don't commit more than a small percentage of your assets to barter goods. Concentrate on stuff you can probably use yourself, or would like an extra spare of. Predicting the future is a tough game - put the odds in your favor so that even if TEOTWAWKI doesn't happen on schedule you have stuff you can use, sooner or later, or at least hold it's value for resale. You can predict your own demand better than anyone else's, so fill that first.2. Consumables Rule - If they haven't gone bad. Obviously consumables are depleted much faster than durable goods wear out, so supply will be tighter. Durable goods are likely to be in much better supply. The ugly truth is that barter only comes into it's own in a really desperate situation with a significant decline in the population. So there would likely to be a lot of durable goods left behind by the deceased - and you don't want to compete with that supply.
So my first choice for barter items would always be consumables that you consider essential as your core logistics that you store anyway. Just store more than what you need for food, ammo, fuel, batteries, etc., etc. But this has a strict limit, as you must be very careful on the storage life, and your rotation, so you don't end up sitting on a wasting asset.
That said, the guy who has stored gas or diesel, treated for long term storage, will be sitting very pretty after all the untreated fuel has gone bad (unless TEOTWAWKI is an EMP strike and not many vehicles are running.)3. Back to basics. When things are desperate, the first rung of Maslow's hierarchy of needs will prevail - the basic physical needs: shelter, warmth, water, food, defense, medical needs, etc., etc. Comforts and luxuries are not as sure a bet. If the situation is good enough to worry about luxuries your gold and silver will probably do just fine - no need for barter goods. Addictive substances such as cigarettes and alcohol are comforts that might be an exception to this rule (not that I would want to supply those items, however lucrative).4. Items that are less needed or uncommon in peaceful times, but sorely needed in TEOTWAWKI times will be good candidates because, even if they are not consumable, demand will outstrip supply. Best bets would be durable items where long term storage is not so much of an issue, e.g., work gloves, water filtration, defensive firearms and accessories, perimeter security, Body Armor, etc., etc.5. Stick to items that are good for a wide range of scenarios. Nuk-Alerts, radiation meters, etc., etc. wouldn't be "as good as gold" in a nuclear scenario - they'd be "better than platinum"! But they would have relatively low demand in other scenarios. Essential for yourself, but not a good barter bet. Stick to general use items.6. KISS. Don't got too complicated. High tech will degrade rapidly - stick with what is simple and easy to keep working.7. Keep it local - look at what your neighbors will need in your neighborhood, your climate, your situation. You won't want to travel far to trade, even if you can. For example propane conversion kits for gas generators would be a superb item out in the country with a lot of propane tanks about. But what if the only customers nearby only have a model that you don't have the right kit for? Travel would not be worth the risk. On the other hand, non-hybrid garden seeds that are optimal for your climate, and hardier than standard factory crops would be ideal.
8. Keep most items reasonably small and easily divisible. .22 Long Rifle ammo will be the "nickels and dimes" of post-TEOTWAWKI barter. Be able to "make change", or you might have to settle for a bad deal.9. Lower your risk by buying low. If it's an super deal it's hard to go wrong - but you must know the ins and outs of what you are buying, and the market pricing. Stick with what you know.
Some ideas: garage sales, auctions, eBay and craigslist.com (Craigslist is the free, online local classifieds.) [JWR Adds: I also like Craigslist, but I also highly recommend www.freecycle.org. If you watch the daily local freecycle ads closely, you can pick up lots of useful, barterable items, free for the taking. Often someone is moving and they list their excess household goods on freecycle. Check it out, you'll find lots of great stuff free. Since both "available:" and "wants" are listed, you will also see some opportunities to dispense charity to folks that are presently needy.]
Garage sales are generally the lowest cost supply - but hit or miss on useful items. If you're in or near a large city, crisis is the way to go, after garage sales. They are hoplophobes who won't accept ads for any kind of weapon, but their free, online classifieds is fast replacing the newspaper classifieds section in our metro area. It let's you deal consumer to consumer, cutting out the middleman.
By the way, Craigslist is also a great place to turn your unused items into cash. The eBay auctions are good for specialized items without a big local market, Gunbroker.com for weapons, but craigslist for everything else. A digital camera photo, a good description, and you are in business, cheap. You can actually buy furniture, cheap at garage sales, and resell on craigslist and make money - if you know your product.
Some of my favorite barter items:
Ammo: Common calibers that you can always use yourself. Consumable, easily divisible, in high demand, long storage life. And if TEOTWAWKI doesn't\ happen on schedule, you can have fun "rotating your storage" ;-) A lot of folks have guns, but not very many have enough of the right ammo, so think self defense first, then hunting and practice rounds. (A lot of folks will be smart enough to figure out that a gun and 100 rounds of practice, is better defense than a gun and 200 unfired rounds.) Cheap food that stores well long term, e.g., wheat properly packaged. I like cans over mylar for durability, but you won't want to trade a gallon can that looks like you have a bunch of stored food. Repackage into plastic before trading ."Tactical Kits" For the folks that don't have suitable defensive firearms a complete kit of an easy to operate rifle, spare mags, ammo, web belt, mag pouches, sidearm, holster, and even Body Armor, could have a value greater than the sum of the parts. The bonus here is that you can have spares for your weapons, and also be stocked to equip your Neighborhood Watch on Steroids, refugees that you take in, or long lost relatives that show up after The Crunch. Batteries and Solar Powered Chargers - obviously a great consumable, and solar powered chargers will be better than gold when there is no electricity. Check storage life for batteries and the number of recharges possible very carefully on batteries. From what I have read NiMH battery technology is the way to go - any battery experts out there? Work gloves become consumables when used constantly.If other folks can suggest items that fit the criteria, please, let's hear them! The above list is just a start. Regards, - OSOM "Out of Sight, Out of Mind"


Copyright 2005-2012 James Wesley, Rawles - SurvivalBlog.com All Rights Reserved