Commodity money
Topic: Money: From Barter to Digital Currency · NCERT: Class 7, Ch 11 "From Barter to Money"; Class 10, Ch 3 "Money and Credit"
Meaning
Commodity money is money made of goods that are useful or valuable in themselves. It came before modern currency. In India, grains and cattle were used "since the very early ages". Later came gold, silver and copper coins, and the metallic-coin phase lasted well into the last century. A full-bodied gold or silver coin is commodity money because its metal is worth its face value.
Example
Ancient Indian kārṣhāpaṇa coins of silver or copper were valued for their metal. Cowrie shells, salt and cattle served as money in many societies.
Don't confuse with
- Fiat money: commodity money has value of its own. Fiat money, such as today's ₹100 note, is paper worth far less than ₹100. Its value comes from the guarantee of the issuer.
- Commodity: a commodity is any tradable good. Commodity money is a commodity accepted as the common means of payment.