Global Financing and Exchange Rate Mechanisms-Countertrade

RUNNING HEAD: Global Financing and Exchange Rate Mechanisms

Global Financing and Exchange Rate Mechanisms-Countertrade

Alyson Anderson

University of Phoenix Online

MGT 448/Global Business Strategies

Dr. Richard Dool

October 15, 2006

In pre-monetary societies, the most logical way of managing the material needs of a community was to distribute goods by bartering among the members according to need and surplus production. For example, if one family or group grew corn but another raised sheep, items could be traded between the groups as needed. This method was cumbersome, time-consuming, and could prove to be inequitable given the disparate nature of the items traded. The solution for this was the production of money, which basically leveled the playing field and gave every item an intrinsic value for purposes of trade. For local trading, this proved to be an excellent system with few drawbacks.

From a global trade standpoint there have proven to be some inherent problems in the basic system of providing currency for goods and services. As there is not a global currency with the same value for all players, exchanging the