Commodity Money.

Money as a medium of exchange first came into human history in the form of . commodities, A great variety of items have served as . money at onetime or another: cattle. olive oil. beer or wine, copper. iron, gold silver, diamonds, and cigarettes.

Each of the above has advantages and disadvantages Cattle are not divisible into small change. Beer does not improve with keeping. although wine may. Olive oil provides a’nice liquid currency that is as minutely divisible as one wishes. but it is a bit messy to handle. And so forth By the nineteenth century commodity money was almost exclusively limited. to metals like silver and gold. These forms of money had intrinsic Value, meaning that they had use value in themselves.

Because money had intrinsic value. there was no need for the government to guarantee its value, and the quantity of money was’regulated by the market through the .supply an demand for gold or silver. But metallic money has shortcomings because scarce resources . are required to dig it out of the ground; moreover, it might become abundant simply because. of accidental discoveries of ore deposits. intrinsic value of money is now the least important thing about it.

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