How does barter and commodity money compare to todays paper and coin money?
please help
Barter trades goods and services.
http://en.wikipedia.org/wiki/Barter
Commodity money has intrinsic value in itself.
http://en.wikipedia.org/wiki/Commodity_money
How do you think they compare with today's money?
Barter and commodity money differ from today's paper and coin money primarily in their forms and functions. Here's a comparison between the two:
1. Barter System: In a barter economy, goods and services are directly exchanged for other goods and services, without the use of money. For example, if you have chickens and need wheat, you would find someone who has wheat and wants chickens, then negotiate a trade. The problem with barter is the need for a double coincidence of wants, where both parties have what the other desires. It can be difficult to find such matches, making barter less efficient.
2. Commodity Money: Commodity money is a type of currency that has value in itself other than as money. It can be a valuable commodity like gold, silver, or even livestock, which is widely accepted and used as a medium of exchange. Commodity money maintains value because it has intrinsic worth beyond its use as a medium of exchange.
3. Paper and Coin Money: Today's money is primarily in the form of paper notes and metal coins, which are known as fiat money. Fiat money lacks intrinsic value and is declared as legal tender by the government. It relies on public trust and confidence in its value. The value of paper and coin money is not directly linked to any specific commodity.
Here's how to compare the two systems:
1. Touch: With barter and commodity money, tangible goods are physically exchanged. In contrast, paper and coin money is intangible and relies on the transfer of currency notes or digital representation.
2. Store of Value: Commodity money has intrinsic value, making it a reliable store of value. In contrast, paper and coin money rely on trust, government backing, and stability of the economy for their value.
3. Convenience: Barter and commodity money can be inconvenient due to the need for direct exchange and the bulkiness of valuable commodities. Paper and coin money are lighter, easily portable, and more universally accepted, making transactions more convenient.
4. Stability: The value of commodity money can fluctuate based on the supply and demand of the underlying commodity. Paper and coin money, although subject to inflation and other economic factors, tend to provide greater stability in value, as they are regulated by the government.
In summary, barter and commodity money rely on direct exchange and the value of specific commodities, while paper and coin money are government-issued currencies that are more convenient, portable, and stable, although lacking intrinsic value.