Can money be considered a commodity?
Although money can take an extraordinary variety of forms, there are really only two types of money: money that has intrinsic value and money that does not have intrinsic value. Commodity money is money that has value apart from its use as money.
Today, U.S. bills are backed by the Federal Reserve, but as fiat money. As economies grew and became more global in nature, the use of commodity monies became more cumbersome. Countries moved toward the use of fiat money. Fiat money is legal tender whose value is backed by the government that issued it.
Fiat money is a government-issued currency that is not backed by a commodity such as gold. Fiat money gives central banks greater control over the economy because they can control how much money is printed. Most modern paper currencies, such as the U.S. dollar, are fiat currencies.
There are three major types of commodities; agriculture, energy, and metals. These three are differentiated in the means of accessing them. The means of accessing them is based on whether they are hard or soft.
Because these items weren't always easy to carry and could go bad after a while, we eventually changed to using coins, made of precious metals. These coins were still considered a commodity system because the value of the metals used to make the coins were equal to the value of the coins.
There are four categories of money. They are fiat money, commodity money, fiduciary money, and commercial bank money.
Commodity money is money that has value apart from its use as money. Mackerel in federal prisons is an example of commodity money. Mackerel could be used to buy services from other prisoners; they could also be eaten. Gold and silver are the most widely used forms of commodity money.
Expert-Verified Answer. Aluminium (option C /only C) is not commodity money. Commodity money refers to any physical article chosen as money to exchange goods. In ancient times people used various commodities as money.
Fiat money, therefore, does not have intrinsic value, while commodity money often does. Changes in public confidence in a government issuing fiat money may be enough to make the fiat currency worthless. Commodity money, however, retains value based on the metal or other material content it has.
2. Commodities: Used as raw material to meet another need (energy, food etc.). 3. Currencies: Measure of cash flows, medium of exchange or store of value.
What is the most common form of commodity money?
The most common form of commodity money was dried indian corn, which was used to purchase the item depicted above and described below.
Like gold and oil, water is a commodity—and it happens to be rather scarce nowadays. So, as with any other scarcity, the water shortage creates investment opportunities.
The functional reason why central banks won't go on the gold standard is that gold is a poor circulating currency, as it is not very durable and is easy to counterfeit. Gold coins are so soft that people will “sweat” them by simply shaking a bag of gold coins and selling the dust that comes off.
One of the major problems with commodity money was quality. Individuals tended to use or sell their best products while their poorest products would be offered as commodity money. Additionally, even good quality commodities would deteriorate if retained too long.
Other historic examples of commodity money include alcohol, tobacco, salt, cocoa beans, and soybeans. During periods of economic upheaval, such as hyperinflation or severe depression, investors have been known to prioritize commodity money over the money their governments authorize.
Precious Metals is not a modern form of money.
High-powered money is the sum of commercial bank reserves and currency (notes and coins) held by the Public. High-powered money is the base for the expansion of Bank deposits and creation of money supply.
Different stages of money are Commodity Money, Metallic Money, Paper Money, Credit Money, and Plastic Money. According to D.H. Robertson, “Anything which is widely accepted in payment for goods or in discharge of other kinds of business obligation, is called money.”
Some proponents of credit theories of money argue that money is best understood as debt even in systems often understood as using commodity money.
On the criteria above, gold meets all the requirements needed that we can say yes, gold is a commodity. Like silver and other precious metals, it is a basic metal element. As such it is described as being fungible – identical, and totally interchangeable.
Is gold a commodity or currency?
Gold is a commodity due to its fungibility and its consistent nature, meeting standards that make it interchangeable regardless of its source. Gold does not currently serve as a formal currency since it isn't issued by governments in circulating coins but was historically used as money up to the early 20th century.
Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods.
Firstly, the commodity is vulnerable to devaluation as the commodity itself perishes. Next, because quality can not be guaranteed between one sample and another, some commodity money may have lower quality than others.
For the first time certain principles of Marx's final theory are made explicit: money is a commodity, say gold or silver; money is unique amongst Page 5 48 History of Economics Review _______________________________________________________________________________ commodities since it is always acceptable in circulation ...
A commodity currency is a currency that co-moves with the world prices of primary commodity products, due to these countries' heavy dependency on the export of certain raw materials for income. Commodity currencies are most prevalent in developing countries (eg. Burundi, Tanzania, Papua New Guinea).
