Reciprocal Trade and The Economy

It is a rule of thumb that reciprocal trading is more active in a slow economy. The reasons are simple: when cash is scarce, businesses are more apt to consider and implement alternative methods of obtaining the things they need to continue operating. Many times, these businesses become lifetime users of reciprocal trade regardless of the economy. This is especially true when they belong to a reputable exchange system such as those represented by IRTA membership

The reality is that most modern economies lack fully elastic currency that is capable of expanding with the growth of production and providing the liquidity needed to clear product and service markets. This is mostly due to the fact that the money supply is controlled by monetary authorities who need to have their eyes fixed on particular economic objectives such as curbing inflation, ensuring full employment, protecting the value of the currency in foreign exchange markets, etc. Balancing between these in advanced economies often leads to monetary restriction thus restraining the flow of spending in the cash economy, limiting demand for output and creating excess capacity. By increasing demand for goods and services through reciprocal trade, it generates additional employment, production, and purchasing power. It also results in a higher rate of capacity utilization and enables firms to spread their overhead costs over more units of output, thereby reducing average costs and lessening inflationary pressures.

Reciprocal trade helps alleviate monetary stringency, puts unutilized capacity to work, and speeds up the flow of goods and services to their more productive uses. It thus adds an important measure of flexibility to the trade and payments system and market adjustment mechanisms of the domestic and international economies at a period in history when global economic organization is undergoing a dramatic restructuring. Reciprocal trade, therefore, should be encouraged.