Commodity money

Commodities are substances that come out of the earth and maintain a roughly universal price.

Commodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money.

Examples of commodities that have been used as ‘mediums of exchange’ include gold, silver, copper, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, barley etc.

Disadvantage of commodities as money:

Inconsistency of quality:

Items such as grains or tobacco deteriorate over time. Farmers also tend to sell or trade their highest quality produce while the poorest products were offered as commodity money.

Fluctuations in the value:

The value of commodity money may go up or down according to supply. Commodity money such as barley or cotton may increase exponentially with a bumper crop or deliberate excessive planting.

Difficult to store and transport:

Transportation and storage of some forms of commodity money is also a huge issue. While shells, gold, silver is easier to store and transport, items such as beaver pelt, grains, cotton or alcohol quickly created a nightmare for the recipients.
It was clear that the concept of commodity money was not desired as a stable means of conducting trade and commerce.