The Barter Exchange and Security

By: Tom Chatham – Portions of this article were extracted from The American Dream Lost.

In the days following the bottom of a serious crisis the ability to establish a new normal will be important to the community. Recovery will depend on how fast the exchange of goods and services are reestablished to provide the necessities people will need.

A barter exchange would be the best solution to the community’s problem. An exchange run by a person or small group could be set up in a secure area to facilitate the exchange of items. With most barter currency the script is purchased with dollars to put it into circulation but the collapse of fiat money would prevent that. A good solution would be to issue a barter currency that is backed by the items in the exchange. The exchange prints and maintains the currency. A person brings in an item to the exchange and the exchange gives the person barter currency for the value of the item. The item is then available in the exchange for the same amount. The person would be able to save the script for later use, use it immediately to purchase other goods available or to use as payment for services outside of the exchange. The exchange would generate currency by producing value added products. A bushel of corn brought to the exchange could be turned into corn meal which would have more value. The additional value of the cornmeal would be added to the exchanges “account” to pay employees and for the purchase of capital equipment. The value of any items that spoil or become unexchangeable would be deducted from the exchanges account. This would keep any issued certificates fully backed by physical items in the exchange. The exchange manager would decide what items are taken in and in what amounts to prevent spoilage and accumulation of unwanted items. The exchange would set the value of items and it would act to provide a frame of reference to those trading outside of the exchange. The barter currency would act as a medium of exchange in the community to allow an easier exchange of goods. The exchange could be one stop shopping depending on the support of the community and could carry food items, furniture, used clothing or homemade items as the exchange determines appropriate. The items could be valued as follows and we will call the currency units (CU).

1 oz Gold = 250 CU
1 oz Silver = 15 CU
1 Hour work = 3 CU
1 Month rent = 180 CU
30 KWH electricity = 1 CU
1 Gal fuel = 1 CU
1 Bu Wheat = 3 CU
1 Bu. Corn = 1.7 CU
1 Gal. Milk = 1 CU
1 Doz. Eggs = .5 CU
1 lb Cornmeal = .25 CU
1 lb Poultry = .33 CU
1 Chord firewood = 25 CU
1 lb Lead = .5 CU
1 lb Copper = 1 CU

.25 lb Nickel = 1 CU

These valuations are meant to be proportional. For example, six dollars in nickels contains 1 pound of copper and1/4 pound of nickel. Six dollars in nickels would trade for 2 gallons of fuel. A variation on the barter currency could be the use of copper/nickel coinage based on the metal content of the coins versus the face value. When you set the values of products it is helpful to look at the prices at a given point in time when you set the values to help keep everything proportional but supply and demand will also need to be taken into consideration.  If you assume that 1 CU equals $3 and do the math the above valuations may make more sense to you. Keep in mind that at the time these valuations were derived some prices may have been lower.

The currency units could be printed in the following denominations.

.1 CU fractional
.5 CU fractional
1 CU
5 CU
20 CU
100 CU

This is only meant to be a guide but will give you a good place to start. The currency could be paper or metal coins and should be produced in a way that makes counterfeiting difficult. Paper currency could be embossed or printed on special paper. This type of exchange must be kept out of the hands of government personnel otherwise they will do to the currency what they have done to the dollar. If you use gold and silver coins as an exchange medium you will basically have the type of barter system we enjoyed before paper currency became the norm. If an exchange is not operational prior to a crisis, the barter currency should be created and stored until needed along with any equipment needed. Those groups or communities that are concerned about a future currency crisis should take steps now to put this type of plan into effect if they have not already done so.

The second issue that needs addressing during a recovery is the security situation. No meaningful recovery can begin until the area is safe for travel and private property is protected from theft. This will require a security force of whatever sort the community determines is appropriate. This issue needs to be delt with as soon as possible to prevent hostile or criminal groups from becoming the dominant force in the area. A safe zone in and around the community will expedite recovery efforts and the production of necessary items to insure the community can return to an acceptable new norm as soon as possible.

The more area that is secured around the community the more potential resources that will be available and the larger the buffer zone will be against possible external threats. Adjacent communities, that can secure their respective areas with overlapping boarders, can provide a reinforcing cluster of safe zones that can be slowly expanded as resources become available. The security plan will be dictated by the needs and resources available to the community so pre-crisis planning is extremely important to assess future needs and secure materials for later deployment. Planning at the community level will be important to respond to the global problems we are about to face. Your plans should assume no outside help so you are not counting on non-existent resources should something happen.


Posted on June 21, 2012, in Preparedness and tagged , , . Bookmark the permalink. 3 Comments.

  1. You said that exchange/currency services should be kept out of the hands of government to keep government from doing with that currency what they’ve done with the greenback. I agree, but wouldn’t the provision of these kinds of services create a target for those who want to create a state and see this system of exchange as a threat? It seems like the creation of a viable currency would lay a foundation for the group who accomplished it to also lay foundation for government. I agree that currency creation/control should be kept from the government’s hands but it seems like an impossible thing to accomplish. The combination of control of monetary policy and the security required to ensure it almost inevitably leads to government and corruption accordingly. It is frustrating. Everything you’ve written makes sense but I’m struggling to see how to pull it off without the taint of corruption. My reply isn’t meant to be contrary. I’m keenly interested in a successful restart after a collapse. Keep it up. I appreciate your insight and value your posts.

    • You make an excellent point Earl. In any type of exchange system you run the risk of corruption. By having all barter certificates fully backed by physical goods you prevent the issuer from printing unbacked certificates to curry favors from selected groups or individuals. If exchanges are maintained within communities, the personnel are always within your reach to keep them in line. In the end any type of structure to provide services can be corrupted but at the local level it is much easier to keep in check.
      An additional point I should make is when this country was founded the founders advocated a local citizen militia over a standing army in order to keep a potentially corrupt government from getting out of control. By allowing the local militias to disappear we have abdicated our most effective tool over government. When we stopped using gold and silver coinage we gave away another tool of power over government.

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