1/13/2013

commodity money

commodity money has the great advantage of being an item of consumption and a means of exchange. Unlike paper money and cheap coins that can easily lose their face value, commodity money has a value in and of itself and thus can always be consume whatever the status of the market is.

The use of commodity money has never disappeared, and it rises again whenever the normal flow of commerce and economic life is interrupted. Consumable commodities such as tobaccos and chocolates serve as adequate means of exchange, but they cannot perform the full function of money.
(1) they make a poor store of value (deterioration leads to loss of value)
(2) commodities money is accepted because people see value in it, but geographical difference implies that one particular kind of commodity money may not be accepted elsewhere.
(3) the value of commodity money is not widely fungible due to its natural size

Money never exists in a cultural and social vacuum. 

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