COMMODITY MONEY: UPSC Daily Important Topic | 4 January 2022

COMMODITY MONEY

• 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 – for example, gold not only use as medium of exchange but also for making jewellery as well.

• IndiaàCowries were used to make exchanges during earlier times.

PROBLEMS OF COMMODITY MONEY-

✓ Face Value was not same throughout region.

✓ Generally commodities used were perishable in nature.

✓ Generally commodities are bulky to carry

✓ No fungibility (replaceable by another identical item; mutually interchangeable) and divisibility.