Barter

Barter is a simple form of trade where goods or services are exchanged for a certain amount of other goods or services, i.e. there is no money involved in the transaction. Barter trade was common in societies where no monetary system existed or in economies with a very unstable currency or a lack of funds.

The disadvantage of using barter is that it depends on the mutual coincidence of needs. Before any transaction will be undertaken, the needs of one person must mirror the needs of another person. If you have an surplus of goats and need more wheat, you must find someone that has a surplus of wheat and needs more goats. To overcome this mutual coincidence problem, intermediaries developed that would store, trade, and warehouse commodities.