When was commodity money used

The first instance was in Canada then a French colony. In , soldiers were issued playing cards denominated and signed by the governor to use as cash instead of coins from France. The shift to paper money in Europe increased the amount of international trade that could occur. Banks and the ruling classes started buying currencies from other nations and created the first currency market. The stability of a particular monarchy or government affected the value of the country's currency, and thus, the ability for that country to trade on an increasingly international market.

The competition between countries often led to currency wars , where competing countries would try to change the value of the competitor's currency by driving it up and making the enemy's goods too expensive, by driving it down and reducing the enemy's buying power and ability to pay for a war , or by eliminating the currency completely. The 21st century has given rise to two novel forms of currency: mobile payments and virtual currency.

Mobile payments are money rendered for a product or service through a portable electronic device, such as a cell phone, smartphone, or a tablet device. Mobile payment technology can also be used to send money to friends or family members.

Increasingly, services like Apple Pay and Google Pay are vying for retailers to accept their platforms for point-of-sale payments.

The appeal of virtual currency is it offers the promise of lower transaction fees than traditional online payment mechanisms, and virtual currencies are operated by a decentralized authority, unlike government-issued currencies. Despite many advances, money still has a very real and permanent effect on how we do business today. Liuliang Yu and Hong Yu. Long River Press. Hans Ulrich Vogel. Bank of Canada. Accessed Oct. Monetary Policy.

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Your Practice. Popular Courses. So when the economy starts to grow; the commodity must be able to supplied and represent the new goods in the market. This means that it has a value outside of its use as money. Therefore, anything that has an alternate use could be considered a commodity form of money.

We can look back many centuries to when goods such as tobacco or salt were used as money. People would use them to trade with each other as they were commonly used goods. Even if nobody would accept it, the owner could use it for their purposes. So if someone went to market with a pound of tobacco and nobody would accept it, they would be able to smoke it instead.

Gradually, trust in commodities developed over the years. Even though traders may not accept it; the population was left reassured that it had alternate uses.

Part of the trust in commodity money also comes from its rarity, or at least how people perceive its rarity. Commodities such as gold are naturally rare, and it is because of this rareness that makes it more valuable and increases its intrinsic value.

By contrast, we also have commodity monies such as salt and tobacco, which relies on its consumption and creation. In other words, how supply can be restrained. Such commodities were not very effective. However, there was an element of trust in them. This was because, for a time, the supply was self-regulating. That is to say, farmers would produce large quantitates of tobacco, but the population would consume in equal size.

As it was a form of money, this inevitably led to inflation. The main difference between commodity and fiat money is that commodity money has an intrinsic value. In other words, it has a use and value outside of its use as money. The discovery of hordes of coins of lead, copper, silver and gold all over the globe suggests that coinage — especially in Europe, Asia and North Africa — was recognized as a medium of commodity money at the beginning of the first millennium A.

The wide circulation of Roman , Islamic , Indian and Chinese coins points to premodern commerce B. Coinage as commodity money owes its success largely to its portability, durability, transportability and inherent value.

Additionally, political leaders could control the production of coins — from mining, smelting, minting - as well as their circulation and use. Money soon became an instrument of political control. Taxes could be extracted to support the elite and armies could be raised. However, money could also act as a stabilizing force that fostered nonviolent exchanges of goods, information and services within and between groups. Throughout history money has acted as a record , a memory of transactions and interactions.

For instance, medieval Europeans widely used tally sticks as evidence for remembering debt. In the past, as today, no society was completely self-sustaining, and money allowed people to interact with other groups.

A commodity is an object that is intrinsically useful as an input to production or consumption. A medium of exchange is an object that is generally accepted as final payment during or after an exchange transaction, even though the agent accepting it the seller does not necessarily consume the object or any service flow from it. Money is the collection of objects that are used as media of exchange.

Commodity money is a medium of exchange that may become or be transformed into a commodity, useful in production or consumption. This is in contrast to fiat money, which is intrinsically useless. Unable to display preview. Download preview PDF. Skip to main content. This service is more advanced with JavaScript available. Advertisement Hide. Velde Warren E. This process is experimental and the keywords may be updated as the learning algorithm improves.

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