Search results
Results from the WOW.Com Content Network
Commodity money is to be distinguished from representative money, which is a certificate or token which can be exchanged for the underlying commodity, but only by a formal process. A key feature of commodity money is that the value is directly perceived by its users, who recognize the utility or beauty of the tokens as goods in themselves.
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. [1] Commodity currencies are most prevalent in developing countries (eg. Burundi, Tanzania, Papua New Guinea).
The commodity theory of money (money of exchange) is preferred by those who wish to view money as a natural outgrowth of market activity. [20] Others view the credit theory of money (money of account) as more plausible and may posit a key role for the state in establishing money.
The alternative to a commodity money system is fiat money which is defined by a central bank and government law as legal tender even if it has no intrinsic value. Originally fiat money was paper currency or base metal coinage, but in modern economies it mainly exists as data such as bank balances and records of credit or debit card purchases, [3] and the fraction that exists as notes and coins ...
The city states of Sumer developed a trade and market economy based originally on the commodity money of the shekel which was a certain weight measure of barley, while the Babylonians and their city state neighbors later developed the earliest system of prices using a measure of various commodities that was fixed in a legal code.
The global silver trade between the Americas, Europe, and China from the sixteenth to nineteenth centuries was a spillover of the Columbian exchange which had a profound effect on the world economy. Many scholars consider the silver trade to mark the beginning of a genuinely global economy , [ 1 ] with one historian noting that silver "went ...
Specifically, prevailing fiat money is free-floating, and depending upon its supply market finds or sets a value to it that continues to change as the supply of money shifts with respect to the economy's demand. Increasing free-floating money supply with respect to needs of the economy reduces the quantity of the basket of the goods and services.
Metallism is the economic principle that the value of money derives from the purchasing power of the commodity upon which it is based. The currency in a metallist monetary system may be made from the commodity itself (commodity money) or it may use tokens (such as national banknotes) redeemable in that commodity.