“Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, when the currency is unstable and devalued by hyperinflation.” -Wikipedia
It is estimated that the first trade occurred somewhere around 200,000 b.c. (Don’t ask me how they know).
During the next 196,000 years, people must have started to figure out that there are problems/inefficiencies with direct trading. Either when one party does not want what the other party has to trade (Coincidence of Needs), or it is too inconvenient to complete a multi-party trade. So people created Money (wampum, coconuts, etc.) as a common means of exchange in around 4,000B.C.
Around 1,000B.C. we see the appearance of coins made from precious metals.
Then around 1,200A.D. we see the appearance of representative currency notes, meaning people would trade the promissory notes they had secured by something of value (mostly gold) instead of actually trading the item of value itself. This introduces us into the Monetary Era.
In the US, that meant you would deposit gold bars into a bank, and the bank would give you a promise-to-pay note for the amount of gold deposited. Gradually, these notes became common tender.
Thanks to President Nixon, in 1971 the US was taken off the gold, and now we have FIAT money, meaning you can take that nice promissory note back to the bank, and instead of getting gold you’ll get a nice, brand new piece of paper. Paper for Paper…cool? Not really.
Many feel the Money/Monetary System superceded the Barter System, but through recessions we see that the inefficiencies of the Monetary System expose that it is simply built upon the Barter System.
