Since barter is still legal (last I heard) in the US, what’s to stop Americans from bartering for goods and services with gold and silver?
No business can accept gold or silver, at least at their bullion value. Either way, Gresham’s law still holds.
Good luck creating a market with individuals willing to use only bartering.
Why can’t businesses barter in gold, silver or popsicles? Off to research Gresham’s law.
Legal tender laws. They can accept American gold/silver coins, but only at their face value, not at their bullion value. So the gold eagle, which is worth $908 will exchange for $50 (I think, can’t remember face value).
I understand that coins can only be accepted at face value because of legal tender laws, but I’m talking about bulk trading. Is there a law preventing me from bartering a fraction of a raw ounce of gold for an iPod? Are gold and silver singled out by law so they can’t be bartered in bulk?
Yeah, you can’t buy an Ipod in a store with your gold coins at bullion value. If your friend has an ipod, and accepts 1/4th and ounce of gold, then go ahead.
I actually don’t know the answer to this particular one. But two problems come to mind:
- You have to find someone who wants to take your gold and give you an ipod (double coincidence of wants)
- If a dispute arises, a State court may rule payment to be rendered in dollars, not gold
But is the difference between coins and bulk or the store and my friend? For example, If I own a department store, and I think that I’m going to have to raise my prices by 10 in a year and by another 10 percent the year after, can I just decide to except gold as barter instead? Can I run ads saying “Barter for iPods in gold and silver? No coins accepted.” If I owned a store right now, I might well rather collect bulk gold (or canned soup, but that’s not my question) than dollars.
Store and friend, I think.
of course the very reason that we use currency is its liquidability. the fact that it is accepted everywhere, easy to carry / transport, and valuable (for the above reasons not its inherent value) makes it the most suitable means of physical transaction.
You know, there are over 26,000 merchants across the USA who accept silver and gold as barter items for payment.
I recommend you visit http://www.silverbarter.com to learn more about this.
It’s relatively easy to find someone who’ll accept gold and silver as payment.
The problem is the other half of the buy-sell equation: It’s illegal NOT to accept US dollars as payment, thanks to legal tender laws.
“There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.”
Gold was worth $908 when I first replied to this question…
Well,
basically, the reason people don’t accept silver and gold as payment is because their liabilities are denominated in USD. Simply put, people’s mortgages, car loans, and credit cards must be paid in dollars, so they need dollars to pay the debt.
In the example of ipods-for-gold, say I open a computer store and sell ipods. I’m going to need a loan to start my business. And I’m going to need dollars to pay the loan.
Of course, I could borrow gold, but why what I do that, when I could have artificially-low interest rates and inflation (which reduces the real value of my debt), courtesy of the printing press? If I borrowed gold, it would be more expensive to pay it back.
That’s why banks, politicians, borrowers–everybody–loves fiat currency. It’s free money!
Shows how much I know about the law. Well then, what do legal tender laws do?
You’ll get hit with the tax code. The IRS will slam you for money laundering probably. You can’t own a business, not accept dollars and be profitable without paying taxes. The taxman cometh.
In addition to the legal tender laws, poverty hurts too. Rich people keep their assets in non-dollar forms (similar to gold and silver, maybe stocks/bonds/commodities) and then convert their assets to dollars only briefly to make a transaction.
People who go paycheck to paycheck can’t do this, so the legal tender laws only really effect them.
A couple of points from the IRS:
regarding Barter:
http://www.irs.gov/businesses/small/article/0,,id=188094,00.html
(there are about 5 other pages w/ similar info: http://bit.ly/3iiDXz)
regarding silver, i remember somewhere on the IRS’s site that
1.) american silver eagles / american gold eagles had to be claimed at market value (for their metal) and not for their face value
2.) silver that was ingot/bars/coins (not US issued) had to be claimed as income in the 35% income tax bracket
all these things really discourage people from engaging in honest barter systems.