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Thursday, May 13, 2010

Commodity Money

Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought of as having value. Commodity money value comes from the commodity out of which it is made. The commodity itself constitutes the money, and the money is the commodity.

Examples of commodities that have been used as mediums of exchange include:

gold
silver
copper
rice
salt
peppercorns
large stones
decorated belts
shells
alcohol
cigarettes
cannabis
candy
etc.

These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or Price System economies.

Use of commodity money is similar to barter, but a commodity money provides a simple and automatic unit of account for the commodity which is being used as money. Although some gold coins such as the Krugerrand are considered legal tender, there is no record of their face value on either side of the coin. The rationale for this is that emphasis is laid on their direct link to the prevailing value of their fine gold content.

American Eagles are imprinted with their gold content and legal tender face value.

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