Chapter 10
Published on Nov 18, 2015
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PRESENTATION OUTLINE
Commodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money.
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Examples of commodities that have been used as mediums of exchange include gold, silver, copper, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, barley etc.
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Most types of cash used today do not have any real intrinsic value. For example, a banknote is virtually worthless in itself and only has value because society accepts it as a measure of currency and a unit of exchange. This type of currency is known as fiat money.
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Historically, other forms of money were used that did have an underlying value, such as foods, fuels, or metals.
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Commodities are not widely used in modern economies as their underlying value can vary immensely from their agreed currency value. There is also the problem that many of these items are prone to spoiling or deteriorating.
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Some forms of commodity money may only fulfill the money role in very specific circumstances.
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