What Is Commodity Money?

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When was the last time you used a gold coin to purchase something — if you have at all? Today, that may sound like something only a pirate would do, but gold and silver coins were the norm until just a few centuries ago.

In fact, commodity money — the term for using gold, silver or any other commodity instead of paper bills — was the norm for much of civilization. The big difference? Paper isn’t so valuable, and it’s the numbers on the paper that ostensibly tell us what a paper bill’s value is. But commodity money is made of objects that are already considered valuable on their own, in addition to functioning as currency. Learn more about the basics of commodity money to better understand its uses and value.