A Universal Option

Generally speaking, the strategies that make sense when deflation is underway are different than those that apply when hyperinflation is running rampant. There are some exceptions, however. When the printing presses are running flat out and a nation's currency is falling through the floor, the lack of a viable medium of exchange forces people to try and swap whatever value they might have or control via a more direct interaction -- that is, through bartering. Yet the same holds true when cash is in short supply. In "Swap Nation Why Bartering Is Making a Comeback," Readers Digest highlights the growing trend of Americans substituting what they have for what they don't.

If you're feeling squeezed by the recession, maybe it's time for a dollarless deal. These folks have mastered the art of the trade.

Ron Trejo's advertising agency caters to small companies around Lake Tahoe and Sacramento, and when they cut their budgets, he feels it fast. But the economic downturn that hit his business hard didn't stop him from taking his wife on a luxurious weekend getaway to Monterey last spring: three days in a cottage at Pacific Grove's tony Sea Breeze Inn. The Trejos shopped on Monterey's historic Cannery Row and cruised the coast in a rented 1968 Cadillac convertible, winding up in a romantic restaurant on the cliffs of Big Sur.

Foolish? No. The Trejos did it all for $350 by employing one of the oldest—and newest—tricks in the book: bartering. "The best thing about bartering," Ron says, "is it allows people to do things they couldn't afford to do normally."

Roberts exchanged her old designer duds for new ones. But for Ron Trejo and a growing number of other creative consumers, bartering isn't only about getting a piece of the good life. In his downtime, Trejo has done ad work in exchange for relatively basic things, like new tires and carpet cleaning.

Business is booming in the barter economy. On craigslist, the classified-advertising website, requests for bartered goods and services were up 125 percent in the past year, making it one of the site's most popular categories. Recent posts include "dining chairs for computer," "litigation services for a reliable van," and "my BlackBerry for your digital camera." At u-exchange.com, the number of members posting goods for trade has almost doubled over the past year, to over 64,000, including more than 16,000 who joined in the first half of 2009 alone.

Established trading networks like the Lake Tahoe region's Barter Club, which Trejo belongs to, are resurging too. Members receive a kind of alternative currency based on the retail dollar value of what they have to trade; they can spend those credits with anyone else who participates. Rick Tracewell, a deejay and a website designer, uses the club to treat his big family—he has five kids ranging from 4 to 16—to Italian and sushi dinners. "Money is always tight," Tracewell says. "To be able to go out to a nice restaurant with them is really awesome."

In addition to the Tahoe club, Trejo belongs to a large regional barter network called ITEX, which he tapped to find merchants in the Monterey area willing to supply his hotel stay, restaurant meals, and rental car.

Recently, Trejo did $2,000 worth of advertising work for a trendy local restaurant. "It's not my favorite place," he says. "But it's popular." So rather than dine like a king, he hired a housepainter for his living room and kitchen and paid him in restaurant credits. The painter turned around and got his car serviced using those same restaurant credits to "pay" the garage. Weeks later, some of that free dining was still circulating around the local barter crowd.

Heidi Pliam, a lawyer in Minneapolis, has seen more people looking to exchange goods and services— rather than money—for her counsel. "People need legal services and don't have the money," she says. She recently arranged a trade with a small printing company that was being sued. She donated 14 hours of legal services and received a printing credit of $2,500. With that, she made up promotional banners for her business.

Pliam also put together a nifty three-way trade: She did legal work for an entrepreneur who helps people organize their things. "I'm pretty neat," Pliam says, but she knew a handyman who needed clutter control. After the expert helped the handyman with his files, he repaired some of Pliam's windows and prepped her basement for painting. Everybody won.

In Orlando, Florida, life coach Susan White traded two half-hour coaching sessions with a designer for work on her business website. A bartering veteran, White made a similar trade a few years ago with a massage therapist. "The woman needed practice students while she established her business," White says. "For six months, I worked with her and got Reiki massages in exchange."

"Shopping your closet" is in vogue now, even among the trendiest. Instead of donating or selling items on eBay as before, though, style mavens are swapping clothes to save money. Monika Royal Roberts, a self-described clotheshound in Cincinnati, usually spends $200 to $300 a month on her outfits. "I like to change my wardrobe seasonally, and I don't like to repeat seasons from one year to the next," says Roberts, who works for a marketing firm and writes a fashion blog. The recession has forced her to scale back her shopping, "or else I'll never retire," she says.

Roberts recently attended a clothing swap, sponsored by a website in a conference center ballroom, that featured not only used clothing but also new items from local designers, along with wine to keep things festive. She took four items from her closet—including a Tory Burch sundress that no longer fit—and got $100 in credits. In return, she brought home eight pieces, one of them a designer dress by Miu Miu. As she wrote in her blog: "My take? Go to shop-and-swap events, and go often."

Other fashionistas use meetup.com, a site that connects people with common interests, to swap clothes. Between May 2007 and May 2008, there were about 180 Meetup clothing swaps across the country, and in the following 12 months, almost twice as many were arranged through the site.

As real estate continues to slump, homeowners trapped by the sluggish market are joining the swap economy too. House trades have long been a niche option for vacation homes and investment properties. Now primary residences are being traded.

In 2006, when Sergei Naumov, a computer programmer in St. Augustine, Florida, got no bites on his house in three months on the market, he launched a house-swapping site, goswap.org. In its first year, the site received about 90 listings. Today, it has more than 10,000 accounts, listing houses all over the country, including a four-bedroom colonial in Leesburg, Virginia, and an upscale condo in Seattle. "We even had a guy who swapped his boat for 300 acres in Canada," Naumov marvels.

Ryan Flickinger, an educational fund-raiser, spent more than a year—564 days, to be exact—trying to sell his 2,000-square-foot, three-bedroom town house in Oak Park, Illinois. He and his wife had bought the home in 2006 for $435,000, but after they separated in 2007, the house was too big for him (as was the monthly mortgage payment). He listed the property with real estate brokers and repeatedly cut the price, but he still couldn't find a buyer. "I had something like 40 or 50 showings and a dozen open houses, and I got zero offers," Flickinger says.

Finally, he listed it on several of the new home-swapping sites. A few early offers fell through—one was from a developer in downtown Chicago looking to unload some fancy condos—and then he got an e-mail from a woman, who coincidentally also lived in Oak Park, with a 1,100-square-foot, one-bedroom condo that she wanted to trade. After due diligence, Flickinger closed the swap deal just two and a half months later. The homes weren't worth the same amount—Flickinger asked $395,000 for his town house, and the woman wanted $200,000 for her condo—so the closing paperwork was set up as a simultaneous buy-and-sell. He had to show up with about $8,000 to cover closing costs, but he walked away with a substantially smaller mortgage.

Plus, his moving costs were minimal. "I was willing to move to Florida or Boston," says Flickinger. "But I wound up four blocks away."

Such swaps are becoming so common, they now have their own specialists. Dave Dessecker, a real estate broker in Orange County, California, has arranged 30 residential trades for clients. Right now he's working on a four-person trade involving an undeveloped lot in Maui and homes in Carlsbad, California, Prescott, Arizona, and Durango, Colorado. As long as the real estate market stays cold, he says, people will get creative.

And as long as the recession lingers on, people will keep trading with each other. Some, like Ron Trejo, say it's working so well for them, they plan to continue bartering even when the economy turns around. Why stop when the deals just keep getting better? Recently, he and his wife had their master bathroom retiled. They also both got LASIK eye surgery and had their teeth whitened.

While Trejo can't predict the next boom, he has a pretty good idea of his next vacation. "We're thinking about a trip to Miami," he says.

Comments

[roger]

In bartering the exchanges are far more equal and honest.
Money obfuscates what is really happening in the selling_
buying transaction.

[jg]

Added benefit of this is stiffing the Feds and IRS on taxes, as I presume these folks are not filing after-the-fact 'Use tax' statements and remittances.

The only way to change this terrible situation is to starve the Federal and state government beast of money. Only then will those idiots slash spending and prioritize things.

[Retired at 24]

Nations go through 3 stages before collapse:
1) Excessive speculation and debt.
2) Massive welfare and moral decay.
3) Last stage: political upheavel.

[HSpencer]

The American will step up to the plate everytime with a good way of getting things done. Just take a cruise back in history and see it. Our biggest enemies are/were Peer Pressure, Advertising, and Easy Credit.

Peer Pressure is an illusion that deceives one to think they must do more.

Advertising is designed to make people "feel" disatisfied with what they currently have.

Easy Credit is designed to move people into such heavy debt that they barely knew they were getting in it at the time.

Left alone by outside influences, most people will and have done just fine.

[Bob Bogus]

"Added benefit of this is stiffing the Feds and IRS on taxes..."

You can bet the gummymint will be all over this, and not just the federales but the states demanding sales tax (and income taxes).

[em]

Anyone used www.bigwardrobe.com to swap or sell their unwanted clothes. It's completely free, although there are many more European members on there at the moment. I sold a pair of Gap jeans for $20 - freebay!!