donde se trata al dinero como mercancia, basa tu respuesta en este texto: "URL: https://www.britannica.com/money/money
Título: Definition, Economics, History, Types, & Facts - Britannica Money
Fecha de publicación: None

(Read Britannica’s biography of this author, Nobelist Milton Friedman.)

The subject of money has fascinated people from the time of Aristotle to the present day. The piece of paper labeled 1 dollar, 10 euros, 100 yuan, or 1,000 yen is little different, as paper, from a piece of the same size torn from a newspaper or magazine, yet it will enable its bearer to command some measure of food, drink, clothing, and the remaining goods of life while the other is fit only to light the fire. Whence the difference? The easy answer, and the right one, is that modern money is a social contrivance. People accept money as such because they know that others will. This common knowledge makes the pieces of paper valuable because everyone thinks they are, and everyone thinks they are because in his or her experience money has always been accepted in exchange for valuable goods, assets, or services. At bottom money is, then, a social convention, but a convention of uncommon strength that people will abide by even under extreme provocation. The strength of the convention is, of course, what enables governments to profit by inflating (increasing the quantity of) the currency. But it is not indestructible. When great increases occur in the quantity of these pieces of paper—as they have during and after wars—money may be seen to be, after all, no more than pieces of paper. If the social arrangement that sustains money as a medium of exchange breaks down, people will then seek substitutes—like the cigarettes and cognac that for a time served as the medium of exchange in Germany after World War II. New money may substitute for old under less extreme conditions. In many countries with a history of high inflation, such as Argentina, Israel, or Russia, prices may be quoted in a different currency, such as the U.S. dollar, because the dollar has more stable value than the local currency. Furthermore, the country’s residents accept the dollar as a medium of exchange because it is well-known and offers more stable purchasing power than local money.
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URL: https://open.lib.umn.edu/macroeconomics/chapter/9-1-what-is-money/
Título: 9.1 What Is Money? - Principles of Macroeconomics
Fecha de publicación: None

Money serves three basic functions. By definition, it is a medium of exchange. It also serves as a unit of account and as a store of value—as the “mack” did in Lompoc.

We can understand the significance of a medium of exchange by considering its absence. Barter occurs when goods are exchanged directly for other goods. Because no one item serves as a medium of exchange in a barter economy, potential buyers must find things that individual sellers will accept. A buyer might find a seller who will trade a pair of shoes for two chickens. Another seller might be willing to provide a haircut in exchange for a garden hose. Suppose you were visiting a grocery store in a barter economy. You would need to load up a truckful of items the grocer might accept in exchange for groceries. That would be an uncertain affair; you could not know when you headed for the store which items the grocer might agree to trade. Indeed, the complexity—and cost—of a visit to a grocery store in a barter economy would be so great that there probably would not be any grocery stores! A moment’s contemplation of the difficulty of life in a barter economy will demonstrate why human societies invariably select something—sometimes more than one thing—to serve as a medium of exchange, just as prisoners in federal penitentiaries accepted mackerel.

Money serves as a unit of account , which is a consistent means of measuring the value of things. We use money in this fashion because it is also a medium of exchange. When we report the value of a good or service in units of money, we are reporting what another person is likely to have to pay to obtain that good or service.

Ask someone in the United States what he or she paid for something, and that person will respond by quoting a price stated in dollars: “I paid $75 for this radio,” or “I paid $15 for this pizza.” People do not say, “I paid five pizzas for this radio.” That statement might, of course, be literally true in the sense of the opportunity cost of the transaction, but we do not report prices that way for two reasons. One is that people do not arrive at places like Radio Shack with five pizzas and expect to purchase a radio. The other is that the information would not be very useful. Other people may not think of values in pizza terms, so they might not know what we meant. Instead, we report the value of things in terms of money.

A Store of Value

The third function of money is to serve as a store of value, that is, an item that holds value over time. Consider a $20 bill that you accidentally left in a coat pocket a year ago. When you find it, you will be pleased. That is because you know the bill still has value. Value has, in effect, been “stored” in that little piece of paper.

Money, of course, is not the only thing that stores value. Houses, office buildings, land, works of art, and many other commodities serve as a means of storing wealth and value. Money differs from these other stores of value by being readily exchangeable for other commodities. Its role as a medium of exchange makes it a convenient store of value.

Because money acts as a store of value, it can be used as a standard for future payments. When you borrow money, for example, you typically sign a contract pledging to make a series of future payments to settle the debt. These payments will be made using money, because money acts as a store of value.

Money is not a risk-free store of value, however. We saw in the chapter that introduced the concept of inflation that inflation reduces the value of money. In periods of rapid inflation, people may not want to rely on money as a store of value, and they may turn to commodities such as land or gold instead.
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URL: https://quickonomics.com/terms/commodity-money/
Título: Commodity Money Definition & Examples - Quickonomics
Fecha de publicación: None

Definition of Commodity Money Commodity money is a form of money that is based on a commodity with intrinsic value. That means it is a medium of exchange that is backed by a physical asset, such as gold or silver. This type of money was used in many societies before the introduction of paper money and coins (i.e., fiat money). Example To illustrate this, let’s look at the example of gold. Gold has been used as a form of money for centuries. In the past, gold coins were used as a medium of exchange in many societies. People would exchange goods and services for gold coins, which could then be used to purchase other goods and services. This worked because the gold coins themselves were valuable, durable, did not decay with time, and could easily be exchanged. The value of the gold coins was not determined by the government or any other centralized entity but by their intrinsic value, as they could always be used to make other valuable products, such as jewelry. In that sense, this type of money was more like an actual good that could also be used as money. Why Commodity Money Matters Commodity money is important because it provides a stable and reliable form of money. This is because the value of the commodity is not subject to the same fluctuations as paper money or coins. That means it is less likely to be affected by inflation or other economic factors. As a result, commodity money is often seen as a more reliable form of money than paper money or coins. Disclaimer: This definition was written by Quickbot, our artificial intelligence model trained to answer basic questions about economics. While the bot provides adequate and factually correct explanations in most cases, additional fact-checking is required. Use at your own risk.
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URL: https://open.lib.umn.edu/principleseconomics/chapter/24-1-what-is-money/
Título: 24.1 What Is Money? - Principles of Economics - Open Textbook Library
Fecha de publicación: None

Money serves three basic functions. By definition, it is a medium of exchange. It also serves as a unit of account and as a store of value—as the “mack” did in Lompoc.

We can understand the significance of a medium of exchange by considering its absence. Barter occurs when goods are exchanged directly for other goods. Because no one item serves as a medium of exchange in a barter economy, potential buyers must find things that individual sellers will accept. A buyer might find a seller who will trade a pair of shoes for two chickens. Another seller might be willing to provide a haircut in exchange for a garden hose. Suppose you were visiting a grocery store in a barter economy. You would need to load up a truckful of items the grocer might accept in exchange for groceries. That would be an uncertain affair; you could not know when you headed for the store which items the grocer might agree to trade. Indeed, the complexity—and cost—of a visit to a grocery store in a barter economy would be so great that there probably would not be any grocery stores! A moment’s contemplation of the difficulty of life in a barter economy will demonstrate why human societies invariably select something—sometimes more than one thing—to serve as a medium of exchange, just as prisoners in federal penitentiaries accepted mackerel.

Money serves as a unit of account , which is a consistent means of measuring the value of things. We use money in this fashion because it is also a medium of exchange. When we report the value of a good or service in units of money, we are reporting what another person is likely to have to pay to obtain that good or service.

Ask someone in the United States what he or she paid for something, and that person will respond by quoting a price stated in dollars: “I paid $75 for this radio,” or “I paid $15 for this pizza.” People do not say, “I paid five pizzas for this radio.” That statement might, of course, be literally true in the sense of the opportunity cost of the transaction, but we do not report prices that way for two reasons. One is that people do not arrive at places like Radio Shack with five pizzas and expect to purchase a radio. The other is that the information would not be very useful. Other people may not think of values in pizza terms, so they might not know what we meant. Instead, we report the value of things in terms of money.

A Store of Value

The third function of money is to serve as a store of value, that is, an item that holds value over time. Consider a $20 bill that you accidentally left in a coat pocket a year ago. When you find it, you will be pleased. That is because you know the bill still has value. Value has, in effect, been “stored” in that little piece of paper.

Money, of course, is not the only thing that stores value. Houses, office buildings, land, works of art, and many other commodities serve as a means of storing wealth and value. Money differs from these other stores of value by being readily exchangeable for other commodities. Its role as a medium of exchange makes it a convenient store of value.

Because money acts as a store of value, it can be used as a standard for future payments. When you borrow money, for example, you typically sign a contract pledging to make a series of future payments to settle the debt. These payments will be made using money, because money acts as a store of value.

Money is not a risk-free store of value, however. We saw in the chapter that introduced the concept of inflation that inflation reduces the value of money. In periods of rapid inflation, people may not want to rely on money as a store of value, and they may turn to commodities such as land or gold instead.
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URL: https://quickonomics.com/different-types-of-money/
Título: The Four Different Types of Money - Quickonomics
Fecha de publicación: None

In economics, money is defined as a generally accepted medium of exchange for goods and services. Virtually anything can be considered money or a monetary aggregate as long as it performs what we call the three major functions of money (i.e., medium of exchange, store of value, unit of account). With this in mind, it is not surprising that there have been different types of money throughout history. To give you a brief overview, we are going to take a look at the four most relevant ones below: commodity money, fiat money, fiduciary money, and commercial bank money. Commodity Money Commodity money is the simplest and, most likely, the oldest type of currency. It builds on scarce natural resources that act as a medium of exchange, store of value, and unit of account. Commodity money is closely related to (and originates from) a barter system, where goods and services are directly exchanged for other goods and services (i.e., peer-to-peer). This type of money facilitates the exchange process because it acts as a generally accepted medium of exchange. The important thing to note about this type of currency is that its value is defined by the intrinsic value of the commodity itself. In other words, the commodity itself becomes money, which makes it immune to inflation and ensures monetary stability. Examples of commodity money include gold and other precious metals, coins, beads, shells, spices, etc. Fiat Money Fiat money gets its value from a government order (i.e., fiat). That means the government declares this type of money to be legal tender, which requires all people and firms within the country to accept it as a means of payment. If they fail to follow this government-issued order, they may be fined or even put in prison. Unlike commodity money, fiat currency is not backed by any physical commodity but is issued by central banks. By definition, its intrinsic value is significantly lower than its face value. Hence, its value is derived from the relationship between supply and demand, trust in the government, and monetary policy of the central banks that are in charge of managing the money supply (i.e., inflation and monetary stability). Most financial systems of modern economies are based on fiat currencies. Thus, examples of fiat money include most of the currencies (i.e., coins and paper money) around the world today.

Fiduciary Money

The value of a fiduciary currency depends on the confidence that it will be generally accepted as a medium of exchange. Unlike fiat currency, it is not declared legal tender by the government, which means people are not required by law to accept it as a means of payment. Instead, the issuer promises to exchange it back for a commodity or fiat currency if requested by the bearer. As long as people are confident that this promise will not be broken and the currency won’t lose its value due to high inflation, they can use this type of money just like regular fiat or commodity money.

Examples of fiduciary currency include cheques, banknotes, or drafts. Note that cryptocurrencies like Bitcoin or Ethereum can also be considered fiduciary (in most countries), although proponents suggest they constitute an entirely new type of money.

Commercial Bank Money

Commercial bank money (or just bank money) can be described as claims against financial institutions that can be used to purchase goods or services. It represents the portion of a currency that is made of debt generated by commercial banks from their bank deposits.

More specifically, commercial bank money is created through a banking system that we call fractional reserve banking. Fractional reserve banking describes a process where banks only hold a fraction of their deposits as bank reserves and use the rest to give out loans worth more than the value of the actual currency they hold as liquid assets. At this point, note that, in essence, commercial bank money is debt generated by the banking industry that can be exchanged for “real” money or to buy goods and services.

Summary

The four most relevant types of money are commodity money, fiat money, fiduciary money, and commercial bank money. Commodity money relies on intrinsically valuable commodities that act as a medium of exchange. Fiat money, on the other hand, gets its value from a government order. Meanwhile, the value of a fiduciary currency depends on the confidence that it will be generally accepted as a medium of exchange. And commercial bank money can be described as claims against financial institutions that can be used to purchase goods or services.
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URL: https://www.investopedia.com/terms/m/money.asp
Título: Understanding Money: Its Properties, Types, and Uses - Investopedia
Fecha de publicación: None

What Is Money?

Money is a system of value that facilitates the exchange of goods in an economy. Using money allows buyers and sellers to pay less in transaction costs, compared to barter trading.

The first types of money were commodities. Their physical properties made them desirable as a medium of exchange. In contemporary markets, money can include government-issued legal tender or fiat money, money substitutes, fiduciary media, or electronic cryptocurrencies.

Key Takeaways Money is a system of value that facilitates the exchange of goods.

The use of money eliminates the problem of bartering where both parties must have something the other wants or needs.

Historically, the first forms of money were agricultural commodities, such as grain or livestock.

Today, most money systems are based on standardized currencies that are controlled by central banks.

Digital cryptocurrencies also have some of the specific properties of money.



How Money Works

Money is a liquid asset used to facilitate transactions of value. It is used as a medium of exchange between individuals and entities. It's also a store of value and a unit of account that can measure the value of other goods.

Prior to the invention of money, most economies relied on bartering, where individuals would trade the goods they had directly for those that they needed. This raised the problem of the double coincidence of wants: a transaction could only take place if both participants had something that the other needed. Money eliminates this problem by acting as an intermediary good.

The first known forms of money were agricultural commodities, such as grain or cattle. These goods were in high demand and traders knew that they would be able to use or trade these goods again in the future. Cocoa beans, cowrie shells, and agricultural tools have also served as early forms of money.

As economies became more complex, money was standardized into currencies. This reduced transaction costs by making it easier to measure and compare value. Also, the representations of money became increasingly abstract, from precious metals and stamped coins to paper notes, and, in the modern era, electronic records.

During World War II, cigarettes became a de facto currency for soldiers in prisoner-of-war camps. The use of cigarettes as money made tobacco highly desirable, even among soldiers who did not smoke.

What Are the Properties of Money?

In order to be most useful, money should be fungible, durable, portable, recognizable, and stable. These properties reduce the transaction cost of using money by making it easy to exchange.

Money Should Be Fungible

The word fungible refers to a quality that allows one thing to be exchanged, substituted, or returned for another thing, under the assumption of equivalent value. Thus, units of money should be interchangeable with one another.

For example, metal coins should have a standard weight and purity. Commodity money should be relatively uniform in quality. Trying to use a non-fungible good as money results in transaction costs that involve individually evaluating each unit of the good before an exchange can take place.

Money Should Be Durable

Money should be durable enough to retain its usefulness for many, future exchanges. A perishable good or a good that degrades quickly due to various exchanges will be less useful for future transactions. Trying to use a non-durable good as money conflicts with money's essential future-oriented use and value.

Money Should Be Portable

Money should be easy to carry and divide so that a worthwhile quantity can be carried on one's person or transported. For example, trying to use a good that's difficult or inconvenient to carry as money could require physical transportation that results in transaction costs.

Money Should Be Recognizable

The authenticity and quantity of the good should be readily apparent to users so that they can easily agree to the terms of an exchange. Using a non-recognizable good as money can result in transaction costs relating to authenticating the goods and agreeing on the quantity needed for an exchange.

Money's Supply Should Be Stable

The supply of the item used as money should be relatively constant over time to prevent fluctuations in value. Using a non-stable good as money produces transaction costs due to the risk that its value might rise or fall, because of scarcity or over-abundance, before the next transaction.

How Is Money Used?

Money primarily functions as the good people use for exchanges of items of value. However, it also has secondary functions that derive from its use as a medium of exchange.

Money As a Unit of Account

Due to money's use as a medium of exchange for buying and selling and as a value indicator for all kinds of goods and services, money can be used as a unit of account.

That means money can keep track of changes in the value of items over time and multiple transactions. People can use it to compare the values of various combinations or quantities of different goods and services.

Money as a unit of account makes it possible to account for profits and losses, balance a budget, and value the total assets of a company.

Money As a Store of Value

Money's usefulness as a medium of exchange in transactions is inherently future-oriented. As such, it provides a means to store a monetary value for use in the future without having that value deteriorate.

So, when people exchange items for money, that money retains a particular value that can be used in other transactions. This ability to function as a store of value facilitates saving for the future and engaging in transactions over long distances.

Money As a Standard of Deferred Payment

To the extent that money is accepted as a medium of exchange and serves as a useful store of value, it can be used to transfer value over different time periods in the form of credits and debts.

One person can borrow a quantity of money from someone else for an agreed-upon period of time, and repay a different agreed-upon quantity of money at a future date.

Different Types of Money

Market-Determined Money

Money can originate out of the spontaneous order of markets. As traders barter for various goods, some goods will prove more convenient than others because they have the best combination of the five properties of money listed above.

Over time, these goods may become desirable as objects of exchange, rather than for practical use. Eventually, people may come to desire a good solely for future trading.

Historically, precious metals such as gold and silver were often used as market-determined monies. They were highly prized across many different cultures and societies. Today, people in cashless economies frequently turn to cigarettes, instant noodles, or other nonperishable goods as a market-determined money substitute.

Government-Issued Currency

When a certain type of money is widely accepted throughout an economy, government bodies may begin regulating it as a currency. They may issue standardized coins or notes to further reduce transaction costs.

A government may also recognize some money as a legal tender, meaning that courts and government bodies must accept that form of money as a final means of payment.

Issuing money allows the government to benefit from seigniorage, the difference between the face value of a currency and the cost to produce it.

For example, if the cost of printing a $100 bill is only $10, the government will earn a $90 profit for each bill it prints. However, governments that rely too heavily on seigniorage may inadvertently debase their currency.

$18.32 Trillion The total value of the M1 money supply in the United States as of August 2023. This is more than a 10% reduction in M1 compared to May 2022, where it stood at $20.6 Trillion. This illustrates the variable nature of the money supply.

Fiat Currency

Many countries issue fiat currency, which is currency that does not represent any type of commodity. Instead, fiat money is backed by the economic strength of the issuing government. It derives its value from supply and demand and the stability of the government.

Fiat money allows the issuing government to conduct economic policy by increasing or reducing the money supply. In the U.S., the Federal Reserve and the Treasury Department monitor several types of money supplies for the purpose of regulating and mitigating monetary issues.

Since fiat money does not represent a real commodity, it falls to the issuing government to ensure that it meets the five properties of money outlined above.

The International Monetary Fund (IMF) and World Bank serve as global watchdogs for the exchange of international currencies. Governments may enact capital controls or establish pegs in order to stabilize their currency on the international market.

Money Substitutes and Fiduciary Media

To reduce the burden of carrying large quantities of currency, merchants and traders sometimes exchange money substitutes such as written statements of debt that can be redeemed later. These statements can themselves adopt some of the properties of money, particularly if traders use them in lieu of actual currency.

For example, ancient banks issued bills of exchange to their depositors, stating the amount that had been deposited and the terms for redemption. Rather than withdraw money from the bank to make payments, depositors would simply trade their bills, allowing the recipient to redeem or trade them at will.

This use of money substitutes can increase the portability and durability of money, as well as reduce the cost of storage. However, there are risks involved with money substitutes. Banks may print more bills than they have money to redeem, a practice known as fractional reserve banking. If too many people try to make withdrawals at the same time, the bank may suffer from a bank run.

Fiduciary media are types of money substitutes introduced into circulation that aren't fully
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URL: https://boycewire.com/commodity-money-definition/
Título: Commodity Money: What it is, Why it has value & Examples - BoyceWire
Fecha de publicación: None

Commodity Money Definition

Commodity money is a physical good that consumers universally use to trade for other goods. In other words, it is like the money we use today, but has an actual value. For example, gold was used as money, but also in the manufacturing of jewellery. So it had value outside its use as a medium of exchange. In economics, this is known as ‘intrinsic value‘.

Commodity money is unique in the sense that it is the only form of money that has an underlying value. Even though we no longer use commodities such as gold as a form of money; it still has value as jewellery or gilding.

Key Points A commodity money is a physical good that has ‘intrinsic value’ – a use outside of its use as money. Historic examples include alcohol, cocoa beans, copper, gold, silver, salt, sea shells, tea, and tobacco. There are four main characteristics of commodity money – it’s durable, divisible, easily exchangeable, and rare.

We can see, touch, and feel commodity money – it is physical. Its underlying value ensures that people trust it. That means it has value in and of itself, with people trading it freely in the knowledge that someone will accept it.

By contrast, other forms of money only derive value from the trust people place in it. For example, the $10 note in your pocket is unlikely to buy much in the unlikely event the US’ stops using it as its main currency.

Origins of Commodity Money

The history of commodity money extends beyond centuries and millennia. In fact, its origins are virtually impossible to accurately determine. Nevertheless, there are records that indicate activity during the period 700-500BC when gold became a common form of money.

Photo of gold coins originally used by Lydian Merchants

Source: wikiwand | Licensed under Creative Commons License.

During this period, Lydian merchants produced a gold coin mixed with silver; otherwise known as electrum. Their aim was to help improve the efficiency of trading between countries. It was a useful store of value, it was durable, and it was widely accepted between nations. Later, in 550 B.C., under the order of King Croesus of Lydia, it went into full circulation.

Commodity Money Examples

Not all commodity money is made the same. Many have been tried and failed due to a number of factors, but here are a list of some commodity monies that have been used through history:

Some examples of Commodity money include:

Alcohol In various cultures and throughout different time periods, alcohol has been used as a form of commodity money. This is because it holds intrinsic value, is consumable, and can serve as a medium of exchange, especially in societies where it is considered a staple or valuable good. Cocoa Beans In ancient Mesoamerican cultures, particularly the Mayans and Aztecs, cocoa beans were used as commodity money. Cocoa beans were valuable, tradable, and could be used to create chocolate, a luxury item. Copper Copper has been used as a form of commodity money due to its value and its widespread use in the production of goods. Various societies have used copper coins as a medium of exchange. Gold Gold is one of the most notable examples of commodity money. Due to its rarity, durability, and attractiveness, it has been used throughout history in many cultures as a medium of exchange. In modern times, gold has been used to back paper currencies, known as the gold standard. Salt Salt, due to its vital role in food preservation and seasoning, has been used as commodity money in numerous societies. The word ‘salary’ derives from the Latin word ‘salarium,’ which was the money paid to Roman soldiers for the purchase of salt. Sea Shells Particularly cowrie shells, have been used as a form of commodity money in various cultures around the world, including Africa, the South Pacific, and North America. They were portable, durable, and visually distinctive. Silver Like gold, silver has been used widely as commodity money. Its intrinsic value, durability, and divisibility made it an ideal form of currency. Many modern coins are made from silver or used to be made from silver. Tea In ancient China, tightly packed bricks of tea leaves were used as a form of currency. Tea was valuable due to its role as a staple beverage and its medicinal properties. Tobacco In early colonial America, especially in regions where tobacco was grown abundantly, tobacco leaves were used as commodity money. Tobacco was tradable, had intrinsic value, and was used globally, making it a feasible form of currency.

Each of these examples reflects a form of commodity money, demonstrating the variety of goods that can be used as a medium of exchange based on their intrinsic value, divisibility, and utility.

Characteristics of Commodity Money

We have already seen what commodity money is and why people trust it, but let’s dive in and see what are the characteristics of commodity money.

1. Durable

Commodities such as meat would not be effective as they go bad over time. Similarly, metals such as iron would not suffice as it rusts easily. If the commodity cannot retain its intrinsic value, then the trust in it won’t last.

2. Divisible / Measurable

We have to have a specific way of measuring money. The creation of units of measurements such as ounces and pounds paved the way for such. As a result, we are able to purchase different goods at different prices. If we cannot measure money, we cannot measure how much we are willing to pay. If there was only a $50 note in circulation; it makes it incredibly difficult to buy something at $1.

3. Easily Exchangeable

Nobody wants the inconvenience of taking a cow to market. It is far more convenient to use gold coins that are much lighter and easier to carry. The commodities that have historically taken off are all easy to trade and convenient.

4. Rarity

A commodity money has to be rare in the fact that the supply is limited. Without such, money can become almost unlimited – thereby leading to massive levels of inflation. Nevertheless, the money supply has to still be able to react to increasing economic output. That is to say, the commodity supply must be able to react to increasing demand. So when the economy starts to grow; the commodity must be able to supplied and represent the new goods in the market.

Trust in Commodity Money

In economic terms, commodity money has what is known as an ‘intrinsic value’. This means that it has a value outside of its use as money. Therefore, anything that has an alternate use could be considered a commodity form of money.

The ‘intrinsic value’ of commodity is a crucial part of building its trust. We can look back many centuries to when goods such as tobacco or salt were used as money. People would use them to trade with each other as they were commonly used goods. Even if nobody would accept it, the owner could use it for their purposes. So if someone went to market with a pound of tobacco and nobody would accept it, they would be able to smoke it instead.

Gradually, trust in commodities developed over the years. Even though traders may not accept it; the population was left reassured that it had alternate uses.

Part of the trust in commodity money also comes from its rarity, or at least how people perceive its rarity. Commodities such as gold are naturally rare, and it is because of this rareness that makes it more valuable and increases its intrinsic value. By contrast, we also have commodity monies such as salt and tobacco, which relies on its consumption and creation. In other words, how supply can be restrained.

Such commodities were not very effective. However, there was an element of trust in them. This was because, for a time, the supply was self-regulating. That is to say, farmers would produce large quantitates of tobacco, but the population would consume in equal size. Nevertheless, there was a fundamental issue in the fact that the supply would eventually outstrip the demand; meaning there was a large supply of tobacco and/or salt. As it was a form of money, this inevitably led to inflation.

FAQs

What are examples of commodity money? Some examples include:

Alcohol

Cocoa Beans

Copper

Gold

Salt

Sea Shells

Silver

Tea

Tobacco What is the difference between commodity money and fiat money? The main difference between commodity and fiat money is that commodity money has an intrinsic value. In other words, it has a use and value outside of its use as money. For example, gold can can be used in jewellery as well as a money. So even if it wasn’t used as money, it has value. By contrast, fiat money only has value that is guaranteed by government. For instance, if the US government said it was no longer using the dollar, a 1 dollar bill would become worthless. What gives commodity money its value? Commodity money obtains value as it is based on a good that has a value outside its use as a currency. This is known as ‘intrinsic value’.

About Paul

Paul Boyce is an economics editor with over 10 years experience in the industry. Currently working as a consultant within the financial services sector, Paul is the CEO and chief editor of BoyceWire. He has written publications for FEE, the Mises Institute, and many others.
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URL: https://www.dyingeconomy.com/commodity-money.html
Título: Commodity Money Definition (& 11 Examples from History)
Fecha de publicación: None

Home Banking Commodity Money

Commodity Money Definition & Examples

The earliest forms of commodity money can be traced back to earliest days of human development, right back to the time of the hunter-gatherer.

Necessity has always been the mother of invention and one of the most basic necessities of life is trade. Without trade there is little hope of long-term survival, and no hope at all of any standard of living beyond the most meager level of subsistence.

Given the importance of being able to trade with our fellow humans, the necessity of developing some sort of medium of exchange that would be readily accepted as a means of payment for various items presents itself.

Money is, of course, that medium of exchange, and throughout our history there have been many different forms of money.

What is Commodity Money?

The most basic definition of money is that: ‘anything which acts as money, is money’. In other words, anything that is widely accepted as a medium of exchange to facilitate trade, can be called money. However, this is not an ideal classification as there are several other functions of money.

Commodities, of one sort or another, were best suited to the ‘medium of exchange’ function for most of human history.

Whilst our hunter-gatherer friends lacked access to modern money, they did have access to commodities. The meat that they hunted would not be good as a medium of exchange because it would quickly spoil, but the skins and furs that they trapped were durable, and could be used as a basic form of commodity money.

Historical evidence shows that skins and furs were indeed used as money to purchase all manner of other items.

The Evolution of Money

The evolution of money has not always unfolded in a constant progression from a basic form of money to a better form of money and so on. There have been many circumstances in our early history where advancements were undone by war, famine, natural disasters and so on. As with so many of our modern accomplishments, most of the evolution of money took place after the industrial revolution.

Our current fiat monetary system only came into being in 1971 with the collapse of the Bretton Woods system of money i.e. a system where international currencies were convertible into dollars at a fixed exchange rate and the dollar itself was convertible into gold at a fixed rate. For more details on the development of paper money, or representative money, see my article at:

For information on the latest development of money, including cryptocurrency and central bank digital currency, have a look at my article:



On this page I will focus on the earliest evolution of money from the barter system to various types of commodities that have been used as money. I’ll also ponder some of the frailties of our current monetary system and the possible return to a representative money if the ravages of inflation and debasement irreparably undermine our confidence in fiat money.



From Skins/Furs to Cigarettes

As indicated above, the earliest example of commodities being used as money dates right back to our hunter-gatherer days when skins & furs were used for trade purposes in order to obtain all manner of other available items.

Moving forward to our earliest civilizations, which were built on agriculture and animal husbandry, we find that cattle was used as money. One major advantage of cattle over skins and furs was that it could be more easily transported, and was relatively more durable, meaning that animals could perform some of the other functions of money beyond a simple medium of exchange.

The price of all manner of tradable items would be quoted in terms of an equivalent number of oxen, meaning that cattle served as a unit of account.

However, cattle could not perform all of the functions of money, and precious metals were usually used alongside cattle to perform the function of a store of value and a standard of value for large amounts of money.

When the precious metals took on more of the duties of money, they began to take on local names that were derived from the local term for cattle. When those metals were turned into coinage, they would often be stamped with the image of an ox or other types of cattle. The word ‘fee’, denoting the payment of an amount of money, is derived from the Anglo-Saxon term ‘feoh’ which was the term used for both money and cattle.

Whilst the precious metals, gold and silver in particular, are the best form of commodity for use as money, their scarcity in many places of the world meant that they simply weren’t available for use, and so a very wide range of alternative commodities have been used instead.

The classic example of a commodity money is that of Cowry Shells; cowries have been used as money throughout much of Africa and Asia, and even the Americas and Australia. The local value of these shells would of course depend on the local supply and demand at any given time.

In Fiji, the local people at one time used whale teeth as money. Apparently, there are both white whale’s teeth and red whale’s teeth, and they would exchange at different values according to their scarcity.

A common feature of many of these early forms of commodity money was their ornamental value, implying that they had at least some intrinsic value of their own and did not rely entirely on their use as a means of exchange to derive their value. The idea of intrinsic value, or lack of it, is one of the main criticisms of cryptocurrency today. It is an important consideration, and one that continues to divide opinion among many top investors in the financial asset space. Returning to our early civilizations, whilst agricultural commodities have no ornamental value, their intrinsic value was derived from their value as food.

As agricultural harvests grew, many civilizations used grains as the bedrock of their economies. Ancient Rome was an agrarian society, and wheat was commonly used as money. Similarly, corn has been used as money throughout Europe from the time of the Ancient Greeks right up to the period of the industrial revolution.

Corn has even been deposited in Banks, and then borrowed and lent, thereby satisfying yet another function of money i.e. that of a ‘standard of value’. You may have heard of the term ‘corn-exchange’, this has particular relevance to Victorian Britain where corn was a major commodity for trade purposes (the word ‘corn’ was used in relation to all grains including wheat and barley).

Around the Mediterranean, olive oil has been used as a commodity money. Central America has used both maize and cacao nuts as money.

During World War 2, the Red Cross would deliver food packages to allied prisoners that contained various items including cigarettes. Those cigarettes were more durable and storable than the other items, and not all prisoners were smokers. That motivated the exchange of cigarettes for chocolate and other items. Before long all available items had a price in terms of cigarettes, and so cigarettes had become a form of commodity money.

As all these examples from history offer some important lessons; money is an essential component of efficient trade, and wherever there is an opportunity for mutually advantageous trade there will usually be something being used as money in order to facilitate that trade.

Commodity Money Examples

Altogether I have mentioned 11 types of commodity money that humans have used:



Skins and Furs Cattle Precious metals Cowry shells Whale’s teeth Wheat Corn Olive oil Maize Cacao nuts Cigarettes

If this list seems like a long one, I should point out that it doesn’t even scratch the surface. At various times and places there has been an almost endless list of other types of physical commodity that has been used as money but, as mentioned already, precious metal is by far the most important. Gold and Silver have both been used throughout history, and perhaps they will again someday soon if the current precarious experiment with fiat money comes to an unfortunate end.



Commodity Money Vs Fiat Money

I have previously written about the characteristics of money on my page about the different types of money, so I won’t repeat myself here, but it suffices to point out that of all the potential commodity monies to choose from, the precious metals offer the best fit with the characteristics of money.

As Jevons puts it:

“Some of the metals seem to be marked out by nature as most fit of all substances for employment as money, at least when acting as a medium of exchange and a store of value.” W. S. Jevons – Money and the Mechanisms of Exchange, P.41

With the introduction of coinage (estimated to have been invented sometime around 900 B.C.) the formation of gold and silver into standardized units greatly increased the usefulness of these metals for circulation through the economy, which thereby facilitated new trade and commerce.

Gold in particular has, for long periods of our history, been the standard of value by which international debts have been settled. Even in the modern age a country's gold stock is still held as a financial asset by central banks, and it constitutes a large part of their ‘official reserves’ which are used to support the value of the domestic money supply by smoothing out short-term fluctuations in exchange rates.

Advantages of Gold over Fiat Currency

With gold being the ultimate commodity money, it is worthwhile to consider whether or not it is a superior money to our current fiat monies. I’ll start with the advantages:

The supply of gold is stable – this has the very important advantage of preventing governments or banks from over-expanding the money supply and thereby causing inflation.

Gold has real intrinsic value – meaning that it is unlikely to ever collapse without value, which is precisely what has happened to every fiat money in history.

The Gold Standard was the predominant monetary system in the west for the 50 years from 1870 to 1920, a system where 
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URL: https://usfirstexchange.com/what-is-commodity-money
Título: What Is Commodity Money and Is It Still Used? - with Examples
Fecha de publicación: None

Sometimes, it can be difficult to grasp why money has value. Yes, you use it to buy things, but why can you use it to buy things? To try to answer that question, we should go back in history and answer – what is commodity money?

Monetary and economic systems evolve over time, but they are all built atop one another. So, to truly understand how the current fiat money system works, we need to understand what it evolved from.

And that is what we will discuss in this article – we will talk about commodity money, how it is different from other monetary systems, and provide examples. We will also show that commodity money is not just a historical artifact but still has practical use today. So let’s get started.

What Is Commodity Money?

Commodity money is a form of money that has inherent, intrinsic value because it is made from a commodity that has value by itself for production or consumption. Commodity money is a physical asset - you can see it, hold it, touch it.

In simpler terms, gold coins were commodity money because the gold from which the coins were made had intrinsic value and if the coins were melted down, the gold would still retain its value. The gold could also be used for production, i.e., making jewelry, giving it its intrinsic value.

But we should backtrack a bit here – what is money? Money can be defined as an asset that is accepted as a medium of exchange for goods or services. The value of that asset can and was determined by many different factors but it often boiled down to a commonly recognized value by the people that use it.

In that context, there are three primary categories or types of money (the latter 2 will be discussed in more detail later):

Commodity money

Representative money

Fiat money

Popular examples of commodity money throughout history were gold, silver, and copper, cocoa beans, shells, tea, barley, furs, and even cigarettes. Clearly, people exchanged all types of commodities for goods or services. Then, how is commodity money different from bartering?

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Commodity Money vs. Bartering

Bartering is an exchange system where goods are exchanged for other goods or services. The value of the items that are being exchanged is determined by the people participating in the trade. So, if an ancient cattle farmer was to give a calf to a carpenter in exchange for a table, that would be bartering.

But the system of bartering has several limitations. For one, it is difficult to transport different types of goods across large distances, making it impractical. Second, there is no set ‘exchange rate’ or how the value of one asset converts to all other assets.

Third, many goods cannot be divided into smaller parts, making smaller trades or more accurate exchanges difficult. Finally, many goods are also perishable, which disallows them to be a store of value. So, bartering faced 4 challenges:

portability; convertibility; divisibility; perishability.

To make trade more effective, the concept of commodity money evolved. A single type of asset that was portable, divisible, and non-perishable would be chosen and used to trade for other goods and services at an agreed-upon exchange rate.

Thus, the key difference between barter and commodity money is that commodity money uses a single recognized unit of exchange to purchase goods or services.

Two Other Primary Types of Money – Representative and Fiat Money

To reiterate, commodity money is money that has intrinsic value due to the commodity of which it is made. But there are also two other primary categories of money:

Representative money – representative money is when the value of the money is backed by an underlying commodity that has intrinsic value and where the unit of money can be exchanged for the underlying commodity via a formal process, but where the unit of money has no intrinsic value itself. In other words, paper money that is backed by gold and can be exchanged for that gold at a fixed rate is representative money. So a paper bill represents (and can be exchanged for) the equivalent value of the gold that backs it. While the US was under the gold standard, the USD was a form of representative money.

Fiat money – Fiat money is a form of money that has no intrinsic value and is not backed by a commodity, i.e., it does not represent the equivalent value of an underlying commodity. The value of fiat money is backed by the government that issues it and is accepted as a form of payment because there is an agreement on how much a specific currency is worth. Almost all modern currencies, from the Chinese yuan to the Brazilian real, are considered fiat money.

To simplify, commodity money is made from a physical commodity and has intrinsic value, representative money has no intrinsic value but represents a commodity that has intrinsic value and can be redeemed for it, while fiat currency has no intrinsic value and does not represent a commodity but is given value as a unit of exchange by the institution that issues it.

Examples of Use of Commodity Money

The most common example of commodity money throughout history is the use of metal coins, like gold, silver, or copper. Silver coins based on the Spanish dollar are likely the best example of commodity money in the Americas.

But that is far from the only example of the use of commodity money. For instance, beaver pelts were the main unit of exchange in the area around Hudson’s Bay in Canada for fur traders in the 18th century.

This system came about because the First Nations were not interested in exchanging goods for precious-metal coins, so they needed to find another medium of exchange – the beaver pelts. They even had an exchange rate set up, e.g., 5 pounds of sugar were worth 1 beaver pelt while 1 gun cost 12 beaver pelts.

Eventually, even that commodity money system evolved. For convenience, Hudson Bay post managers started issuing stamped copper or brass tokens in different sizes – these were called made beaver coins. The largest token represented the pelt of one adult male beaver in good condition. The smaller tokens represented smaller pelts. Thus, the commodity money system of the fur traders evolved into a combined commodity and representative money system over time.

In modern times, it may seem like commodity money is a historical occurrence, given that almost all countries use representative or, more commonly, fiat money. But that is not the case – commodity money can exist alongside other money categories.

Cigarettes are a common form of commodity money when other types of currency are prohibited. For example, they were often used in prisons in the US as a unit of exchange before smoking was banned in prison in the early 2000s.

While the line where a commodity becomes a currency can be debated, generally speaking, whenever a single commodity is recognized by a population as a unit of exchange for goods or services, it can be considered commodity money.

Exchange Fiat Money Online

Although commodity money still sees use in specific instances, the primary medium of exchange for goods or services in the current era is fiat money. And US First Exchange can help you exchange it. With us, you can buy or sell over 20 different currencies, including exotic ones like the Iraqi dinar or Vietnamese dong.

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URL: https://www.vaia.com/en-us/explanations/macroeconomics/economics-of-money/commodity-money/
Título: Commodity Money: Examples, Value & History | Vaia
Fecha de publicación: None

Understanding Commodity Money Commodity money refers to money whose value arises from the commodity out of which it is made. It is constituted of physical and tangible items that have value in themselves, such as gold, salt, or silver.

What is Commodity Money: An Explanation Commodity money holds a significant place in the economic history of the world. It is a type of money that not only serves as a medium of exchange but also holds an intrinsic value. This means that the money itself has value and is not merely representative of value. Gold and silver coins, for instance, have their own value irrespective of their assigned nominal value as 'money'.

Different goods have been used as commodity money, depending on the area and resources available. For example, in some parts of Africa, cowrie shells were used, while in the colonial American colonies, tobacco was common. For example, if you have a gold coin that is assigned a value of 50 dollars, it not only can be used to purchase goods or services up to 50 dollars but also has an intrinsic value - the value of the gold itself. So even if the nominal value was removed and it ceased to be 'money', you could still trade the gold itself.

Essence of Commodity Backed Money Whereas commodity money holds value on its own, commodity backed money differs slightly. Commodity backed money or representative money is currency that represents a specific commodity or a mix of commodities. The currency notes or coins themselves do not hold intrinsic value, but they can be exchanged for a specific amount of the commodity with a guarantee from the issuing authority. Commodity Money Commodity Backed Money Value intrinsic to the object itself, e.g., gold coin Value represented in a physical note or coin, e.g., paper money backed by gold

What gives Commodity Money its Value The value of commodity money comes from the commodity itself. This is governed by the law of supply and demand. When a certain commodity is scarce, its value tends to go up. Conversely, when it's plenty, its value decreases. The equation of exchange, formally written as \(MV=PQ\), reveals this relationship. In this equation 'M' stands for money supply, 'V' for velocity of money, 'P' for average price level, and 'Q' for total output of the economy. The equation essentially confirms that if the total output 'Q' remains constant and the money supply 'M' increases (more commodity money is put into the system), the average price level 'P' will increase, indicating inflation. This means that the more abundant the commodity money, the less value it holds - resulting in more units of the particular commodity money needed to purchase the same amount of goods.

Practical Illustrations of Commodity Money A deep comprehension of the concept of commodity money can be enhanced by looking at practical examples and exploring how this type of currency has been used in different times throughout history.

Commodity Money Example: Real World Instances The practical occurrence of commodity money has varied significantly throughout different time periods and geographical areas. Essentially, in the absence of a centralised currency, societies have often used the most abundant and valuable resources available to them as a medium of exchange. For instance, during ancient times, gold and silver, due to their rarity and usefulness in various applications, were commonly used as commodity money. The intrinsic value of these precious metals was the same as their exchange value. Similarly, societies located near seas or oceans often used rare shells as their form of currency, while those in agricultural regions often used staple crops such as maize or wheat. In modern times, commodity money has mostly been replaced by paper money and digital transactions. However, there are still some instances where commodity money is used. An example can be seen in prison systems, where objects like cigarettes or canned food are often used as a form of currency due to restrictions on actual cash.

History of Commodity Money: Economic Evolution Delving into the history of commodity money offers an understanding of economic evolution throughout human history. As societies evolved from primal hunter-gatherers to complex civilizations, so did our systems of trade and currency. In the stage of barter economies, commodities were directly exchanged for one another. This method was later replaced by commodity money due to the issues of indivisibility and exact exchange. Indivisibility refers to the problem of splitting goods into smaller units without loss of value, while exact exchange pertains to the difficulty of arranging fair trades when precise quantities are required. As societies grew in complexity, it was clear that a universal form of exchange was needed, thus leading to the emergence of commodity money. Commodity money allowed for the creation of standardized units of exchange, easing the process of trade and economic growth. From commodity money, societies eventually moved to representative money, where notes represent a fixed amount of a commodity, typically gold or silver. These notes were easier to carry around, and as long as people had trust in the issuing authority, trade would flourish. This form of money eventually evolved into the fiat money we use today, which has no intrinsic value and is not directly tied to a commodity but is declared to be legal tender by the government. To summarise, the economic history of commodity money reveals a pattern of societies adapting their currency to become more efficient and convenient, and to suit their changing needs better.

Differentiating Commodity Money and Fiat Money In the world of economics, two key types of money are frequently discussed: commodity money and fiat money. Both are vital to the understanding of monetary systems, currencies, and economic history, yet they are fundamentally different in several ways.

Commodity Money vs Fiat Money: Key Distinctions Commodity money and fiat money serve the same purpose – to act as a medium of exchange. However, there are important differences in terms of their nature, value source, and how they are regulated. Fiat Money: This is a type of currency that is declared to be legal tender by a government but is not backed by a physical commodity. It has no intrinsic value. The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the value of a commodity backing it. Intrinsic Value: Fiat money does not have intrinsic value – its value is not based on a physical commodity. On the other hand, commodity money has intrinsic value as its value is derived from the material it is made from.

Fiat money does not have intrinsic value – its value is not based on a physical commodity. On the other hand, commodity money has intrinsic value as its value is derived from the material it is made from. Regulation: Fiat money is regulated by governmental authorities. For instance, central banks can control the supply of money to manage inflation or deflation. Commodity money, on the other hand, is self-regulating. Its value changes according to the fluctuations in the supply and demand of the commodity.

Fiat money is regulated by governmental authorities. For instance, central banks can control the supply of money to manage inflation or deflation. Commodity money, on the other hand, is self-regulating. Its value changes according to the fluctuations in the supply and demand of the commodity. Reliability: In the case of fiat money, the public's trust in the issuer, typically the government or central bank, greatly influences its value. If trust breaks down, the money potentially becomes worthless. Conversely, commodity money’s worth is independent of any governing authority since its value directly corresponds to the commodity itself.

In-depth Comparison: Commodity Money and Fiat Money Both commodity money and fiat money have played significant roles during various periods in economic history. Each has its advantages and limitations, and their use is influenced by different factors including economic stability, geographical location, societal trust, and regulatory frameworks. Category Commodity Money Fiat Money Physical Existence Exists in a physical form, such as gold or silver. Can exist in a physical form (notes, coins) as well as in electronic form (bank credit). Degree of Trust Less dependent on societal and governmental trust as value is inherent in the commodity. Largely dependent on the public's trust in the government or central bank. Inflation Control Can potentially control inflation (the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling), as there is a tangible limit on the supply of commodities. Prone to inflation if the money supply is not correctly managed by the central bank. The formulas \(M1=kPQ\) and \(M2=k'P'Q'\), where \(M1\) and \(M2\) stand for the amount of commodity money and fiat money circulating in the economy respectively, \(k\) and \(k'\) are constants, and \(PQ\) and \(P'Q'\) represent total economic output, highlight the subtle relationship between money supply, type of currency, and economic activity. Understanding the differences between commodity money and fiat money helps in understanding the complexities of economic theory, and the historical evolution of global monetary systems.

Commodity Money in the Economic Society Commodity money holds a significant position in the understanding of monetary systems and economic structures. It has played a pivotal role in the evolution of economies across the globe, and its remnants can still be seen in some societies today.

The Role of Commodity Money in a Monetary Economy Commodity money, a commodity that has value in itself as well as value in its use as money, has been a pillar in the edifice of economic societies in the past. Understanding 
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URL: https://en.wikipedia.org/wiki/Commodity_money
Título: Commodity money - Wikipedia
Fecha de publicación: None

Currency from items of intrinsic value

Japanese commodity money before the 8th century AD: arrowheads, rice grains and gold powder. This is the earliest form of Japanese currency.

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.[1] This is in contrast to representative money, which has no intrinsic value but represents something of value such as gold or silver, for which it can be exchanged, and fiat money, which derives its value from having been established as money by government regulation.

Examples of commodities that have been used as media of exchange include precious metals and stones, grain, animal parts (such as beaver pelts), tobacco, fuel, and others. Sometimes several types of commodity money were used together, with fixed relative values, in various commodity valuation or price system economies.

Aspects [ edit ]

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. Since payment by commodity generally provides a useful good, commodity money is similar to barter, but is distinguishable from it in having a single recognized unit of exchange. Radford (1945) described the establishment of commodity money in P.O.W camps.

People left their surplus clothing, toilet requisites and food there until they were sold at a fixed price in cigarettes. Only sales in cigarettes were accepted – there was no barter [...] Of food, the shop carried small stocks for convenience; the capital was provided by a loan from the bulk store of Red Cross cigarettes and repaid by a small commission taken on the first transactions. Thus the cigarette attained its fullest currency status, and the market was almost completely unified.[2]

Radford documented the way that this 'cigarette currency' was subject to Gresham's law, inflation, and especially deflation.

In another example, in US prisons after smoking was banned circa 2003, commodity money has switched in many places to containers of mackerel fish fillets, which have a fairly standard cost and are easy to store. These may be exchanged for many services in prisons where currency is prohibited.[3]

Metals [ edit ]

In metallic currencies, a government mint will coin money by placing a mark on metal tokens, typically gold or silver, which serves as a guarantee of their weight and purity. In issuing this coinage at a face value higher than its costs, the government gains a profit known as seigniorage.

The role of a mint and of coin differs between commodity money and fiat money. In commodity money, the coin retains its value if it is melted and physically altered, while in a fiat money it does not. Usually, in a fiat money the value drops if the coin is converted to metal, but in a few cases the value of metals in fiat moneys have been allowed to rise to values larger than the face value of the coin. In India, for example, fiat Rupees disappeared from the market after 2007 when their content of stainless steel became larger than the fiat or face value of the coins.[4] In the US, the metal in pennies (97.5% zinc since 1982, 95% copper in 1982 and before) and nickels (75% copper, 25% nickel) has a value close to, and sometimes exceeding, the fiat face value of the coin.

History [ edit ]

A bronze okpoho or manilla, the traditional commodity money in West Africa until the 1940s.

Commodities often come into being in situations where other forms of money are not available or not trusted, and these are social norms. Various commodities were used in pre-Revolutionary America including wampum (shell beads), maize (corn), iron nails, beaver pelts, and tobacco.

In Canada, where the Hudson's Bay Company and other fur trading companies controlled most of the country, fur traders quickly realized that gold and silver were of no interest to the First Nations. They wanted goods such as metal knives and axes. Rather than use a barter system, the fur traders established the made beaver (representing a single beaver pelt) as the standard currency, and created a price list for goods:

5 pounds of sugar cost 1 beaver pelt

2 scissors cost 1 beaver pelt

20 fish hooks cost 1 beaver pelt

1 pair of shoes cost 1 beaver pelt

1 gun cost 12 beaver pelts

Examples of Hudson's Bay Company tokens used c. 1854 , representing one made beaver along with fractional values.

Other animal furs were convertible into beaver pelts at a standard rate as well, so this created a viable currency in an economy where precious metals were not valued.[5] However, for convenience, Hudson's Bay post managers exchanged made beaver coins, which were stamped pieces of copper or brass.

Long after gold coins became rare in commerce, the Fort Knox gold repository of the United States functioned as a theoretical backing for Federal Reserve. Between 1933 and 1970 (when the U.S. officially left the gold standard), one U.S. dollar was technically worth exactly 1/35 of a troy ounce (889 mg) of gold. However, actual trade in gold bullion as a precious metal within the United States was banned after 1933, with the explicit purpose of preventing the "hoarding" of private gold during an economic depression period in which maximal circulation of money was desired by government policy. This was a fairly typical transition from commodity to representative to fiat money, with people trading in other goods being forced to trade in gold, then to receive paper money that purported to be as good as gold, and finally a fiat currency backed by government authority and social perceptions of value.

Cigarettes and gasoline were used as a form of commodity money in some parts of Europe, including Germany, France and Belgium, in the immediate aftermath of World War II.[6] They have continued to be used as currency in war-torn locations experiencing inadequate supply of common goods and monetary collapse, such as during the Siege of Sarajevo in 1993[7] or in Russian-occupied Kherson in 2022.[8]

Functions [ edit ]

Axe-like grzywnas (commodity money) from Kostkowice, Poland, 9th to mid-10th century AD

Although grains such as barley have been used historically in relations of trade and barter (Mesopotamia circa 3000 BC), they can be inconvenient as a medium of exchange or a standard of deferred payment due to transport and storage concerns and eventual spoilage. Gold or other metals are sometimes used in a price system as a durable, easily warehoused store of value (demurrage).

The use of barter-like methods using commodity money may date back to at least 100,000 years ago.[citation needed] Trading in red ochre is attested in Eswatini, shell jewellery in the form of strung beads also dates back to this period, and had the basic attributes needed of commodity money.[citation needed] To organize production and to distribute goods and services among their populations, before market economies existed, people relied on tradition, top-down command, or community cooperation. Relations of reciprocity, and/or redistribution, substituted for market exchange.[citation needed]

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 economics using a metric of various commodities, that was fixed in a legal code.[9]

Several centuries after the invention of cuneiform script, the use of writing expanded beyond debt/payment certificates and inventory lists to codified amounts of commodity money being used in contract law, such as buying property and paying legal fines.[10]

Legal tender issues [ edit ]

Today, the face value of specie and base-metal coins is set by government fiat, and it is only this value which must be legally accepted as payment for debt, in the jurisdiction of the government which declares the coin to be legal tender. The value of the precious metal in the coin may give it another value, but this varies over time. The value of the metal is subject to bilateral agreement, just as is the case with pure metals or commodities which had not been monetized by any government. As an example, gold and silver coins from other non-U.S. countries are specifically exempted in U.S. law from being legal tender for the payment of debts in the United States,[11] so that a seller who refuses to accept them cannot be sued by the payer who offers them to settle a debt. However, nothing prevents such arrangements from being made if both parties agree on a value for the coins.

See also [ edit ]

References [ edit ]

Citations [ edit ]

Sources [ edit ]

Further reading [ edit ]
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URL: https://www.stlouisfed.org/open-vault/2021/december/what-is-money
Título: Here's What Makes Money, Money | St. Louis Fed - Federal Reserve Bank ...
Fecha de publicación: None

No se pudo determinar el tipo de contenido.
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URL: https://www.forextime.com/education/forex-trading-for-beginners
Título: What is Forex Trading? Guide for Beginners - FXTM
Fecha de publicación: None

A long position means a trader has bought a currency expecting its value to rise. Once the trader sells that currency back to the market (ideally for a higher price than they paid for it), their long position is said to be ‘closed’ and the trade is complete.

If you wanted to open a long position on the Euro, you would purchase 1 Euro for USD 1.1918. You will then hold your position in the hope that it will appreciate, selling it back to the market at a profit once the price has increased.
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URL: https://www.cmcmarkets.com/en/learn-forex/forex-trading-strategies
Título: 5 Forex Trading Strategies with Examples - CMC Markets
Fecha de publicación: None

Similar to analysing support levels, forex traders also analyse resistance levels. The resistance level is a point where the market turned from its previous peak and headed back down. If a market is appreciating but then suddenly falls, the overall view is likely to be that the price is getting too expensive. This forex trading strategy mirrors the bounce strategy. We are looking for the forex pair to ârun out of steamâ near that previous high and then go short and sell to try and profit from a slide in price.

Such strategies, based on previous highs and lows on a chart, can make risk management relatively straightforward for any trader. For instance, if we are looking for a bounce off a level, our stop loss can go below that previous low point. If we are looking to sell short when a market starts to falter near a previous high, then many traders will place a stop loss above that previous high.

The forex strategy example below shows how a high from the previous day in the AUD/USD currency pair ended up being the place where the market twice ran out of steam the following morning.
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URL: https://www.investopedia.com/articles/forex/11/why-trade-forex.asp
Título: How To Start Forex Trading: A Guide To Making Money with FX - Investopedia
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Every second, about $850 million changes hands in the foreign exchange (forex or FX) market, making it the world's largest financial marketplace, with daily trading volume reaching $7.5 trillion. While dealing in this massive market was once the exclusive domain of banks and financial institutions, online trading platforms have opened the door for individual investors to try their hand at currency trading.

Forex trading involves simultaneously buying one currency while selling another in hopes of profiting from changes in their relative values. For example, if you think the euro will strengthen against the U.S. dollar, you might buy euros and sell dollars, aiming to sell those euros later at a higher price. Thus, forex trading is about anticipating and capitalizing on these currency value shifts.

Key Takeaways The foreign exchange (forex or FX) market is a global marketplace for exchanging national currencies.

Because of the worldwide reach of trade, commerce, and finance, forex is the world's largest and most liquid asset market.

Currencies trade against each other as exchange rate pairs. For example, EUR/USD is a currency pair for trading the euro against the U.S. dollar.

Forex markets exist as spot (cash) and derivatives markets, offering forwards, futures, options, and currency swaps.

Market participants may use forex to hedge against international currency and interest rate risk, speculate on geopolitical events, and diversify portfolios, among other reasons.

The accessibility of online forex trading has a double edge—while it's opened prospects for everyday traders, it's also exposed some to risks they're not ready for. In addition, the market lingo comes fast at beginners and can quickly become overwhelming. That's why we've put together this detailed guide to help you start trading foreign currencies. We'll break down the essential concepts and guide you through the most critical steps, from choosing a broker and placing your first trade to developing a solid strategy and, most importantly, managing your risk.

What Is the Forex Market?

The foreign exchange market is where currencies are traded. Its most striking aspect is how it has no central marketplace. Instead, currency trading is done electronically over the counter (OTC). All transactions occur via computer networks that connect traders worldwide.

The main markets are open 24 hours a day, five days a week (from Sunday, 5 p.m. ET until Friday, 4 p.m. ET). Currencies are traded worldwide, but a lot of the action happens in the major financial centers. A 24-hour trading day begins in the Asia-Pacific region, then moves to major centers in Europe and then to North America, where it ends with the U.S. trading session. The forex market is highly dynamic no matter the time of day, with price quotes changing constantly.

You’ll often see the terms FX, forex, foreign exchange market, and currency market. These terms are synonymous, and all refer to the forex market.

How Does the Forex Market Work?

The FX market is one of two 24-hours-a-day (during weekdays) trading markets, the other being cryptocurrencies (though crypto markets don’t pause on weekends). Traditionally, the forex market was dominated by institutional firms and large banks, but its popularity among retail traders has significantly grown over the past decade. There's a caveat: Newer traders in the market have lured in fraudsters looking to take advantage of less knowledgeable investors.

Where Is It?

The world forex markets have no physical buildings that serve as trading venues. Instead, markets operate via connected trading terminals and computer networks. Market participants are institutions, financial product banks, commercial banks, and retail investors worldwide.

Who Trades on It?

Currency trading used to be complicated for individual investors until it made its way onto the internet. Previously, most currency traders were large multinational corporations, hedge funds, or high-net-worth individuals. While commercial and investment banks still conduct much of the world's forex trading, there are also prospects for professional and individual investors to trade one currency against another.

What Is Forex Trading?

At its core, forex trading is about capturing the changing values of pairs of currencies. For example, if you think one currency will gain in value against another, you'll buy one to sell it later at a higher price.

In addition to speculative trading, forex trading is also used for hedging purposes. Individuals and businesses use forex trading to protect themselves from unfavorable currency movements. For example, a company doing business in another country might use forex trading to insure against potential losses caused by fluctuations in the exchange rate.

By securing a favorable rate in advance through forex trades, a firm can reduce financial uncertainty and ensure more stable costs in its domestic currency. Hedging FX risks is an essential part of international business today.

Forex is a zero-sum game: for every winner, there's a loser. Successful traders aim for modest but consistent returns rather than trying to get rich quickly.

Forex trading has high liquidity, meaning it's easy to buy and sell many currencies without significantly changing their value. Traders can use leverage to amplify the power of their trades, controlling a significant position with a relatively small amount of money. However, leverage can also amplify losses, making forex trading a field that requires knowledge, strategy, and an awareness of the risks involved.

Forex trading is also quintessentially global, encompassing financial centers worldwide. This means that currency values are influenced by a variety of international events. Economic indicators such as interest rates, inflation, geopolitical stability, and economic growth can significantly impact currency prices. For instance, if a country's central bank raises its interest rates, its currency might rise in value due to the higher returns on investments made in that currency.

Similarly, political uncertainty or a poor economic growth outlook can depreciate a currency. These interlocking exchange relations—some currencies growing stronger, others not—means forex trading reflects worldwide economic and political developments.

How To Make Money Forex Trading

Making money in forex trading requires more than just buying and selling currencies—it demands a well-thought-out approach combining strategy, discipline, and risk management. While the potential for profit exists, it's crucial to understand that forex trading isn't a get-rich-quick scheme.

The primary way traders make money in forex is by correctly predicting currency price movements. When a trader goes "long" on a currency pair like EUR/USD, they profit if the euro strengthens against the dollar. Conversely, going "short" means profiting when the first currency weakens against the second. For example, if you buy euros at $1.20 and sell when the price reaches $1.22, you'd make 2 cents per euro traded.

Many new traders focus on mastering one or two currency pairs before expanding their portfolio.

Another way to generate returns is through "carry trading," where you profit from interest rate differences between two currencies. By buying a currency with a higher interest rate while selling one with a lower rate, you can earn the difference in rates. For instance, if you buy Australian dollars (with a 4% interest rate) using Japanese yen (with a 0.1% rate), you could earn almost 4% annually, plus any favorable exchange rate movements.

Successful traders typically follow these principles:

Start small : Begin with a mini or micro account that lets you trade smaller amounts while learning.

: Begin with a mini or micro account that lets you trade smaller amounts while learning. Use stop-loss orders : These automatically close trades at preset levels to limit your potential losses.

: These automatically close trades at preset levels to limit your potential losses. Avoid over-leveraging : While leverage can amplify profits, it also magnifies losses. Most successful traders use modest leverage ratios.

: While leverage can amplify profits, it also magnifies losses. Most successful traders use modest leverage ratios. Diversify currency pairs : Once you get some experience, you'll want to avoid putting all your capital into a single currency pair.

: Once you get some experience, you'll want to avoid putting all your capital into a single currency pair. Review your records: Track all trades, including entry/exit points and reasons for trading decisions, so you can learn along the way.

Success typically comes from managing risks while capitalizing on high-probability trading opportunities rather than seeking huge gains on individual trades.

How To Start Trading Forex

Here's a to-do list to get you started.

Learn about forex: You now have the basic concepts, but you'll need to understand more of the terminology and how the forex market operates. This includes learning currency pairs, market patterns, and the factors influencing currency prices. Develop a trading strategy: Learn the different trading strategies, such as various technical analysis strategies, fundamental analysis, and news trading. Choose a strategy that aligns with your trading style and risk tolerance. For more, see Forex Trading Strategy and Education. Develop a plan: Create a trading plan that includes your goals, risk tolerance, strategies, and the criteria you'll use to assess trades. The most crucial part is not just making a plan but sticking to it in the heat of trading when emotions run high. Successful traders are disciplined traders. Set up a brokerage account: Select a broker regulated by a reputable financial authority, such as the Commodities Futures Trading Commission (CFTC) in the U.S. Ensure the broker offers a user-friendly trading platform, good customer support, and low fees. For 
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URL: https://www.investopedia.com/terms/f/forex.asp
Título: Forex (FX): Definition, How to Trade Currencies, and Examples
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What Is Forex (FX)?

Forex (FX) refers to the global electronic marketplace for trading international currencies and currency derivatives. It has no central physical location, yet the forex market is the largest, most liquid market in the world by trading volume, with trillions of dollars changing hands every day. Most of the trading is done through banks, brokers, and financial institutions.

The forex market is open 24 hours a day, five days a week, except for holidays. The forex market is open on many holidays on which stock markets are closed, though the trading volume may be lower.

Its name, forex, is a portmanteau of foreign and exchange. It's often abbreviated as fx.

Key Takeaways Forex (FX) market is a global electronic network for currency trading.

Formerly limited to governments and financial institutions, individuals can now directly buy and sell currencies on forex.

In the forex market, a profit or loss results from the difference in the price at which the trader bought and sold a currency pair.

Currency traders do not deal in cash. Brokers generally roll over their positions at the end of each day.

Investopedia / Mira Norian

Understanding Forex (FX)

Forex traders use various analysis techniques to find the best entry and exit points for their trades. Forex exists so that large amounts of one currency can be exchanged for the equivalent value in another currency at the current market rate.

Some of these trades occur because financial institutions, companies, or individuals have a business need to exchange one currency for another. For example, an American company may trade U.S. dollars for Japanese yen in order to pay for merchandise that has been ordered from Japan and is payable in yen.

A great deal of forex trade exists to accommodate speculation on the direction of currency values. Traders profit from the price movement of a particular pair of currencies.

Forex Pairs and Quotes

Currencies being traded are listed in pairs, such as USD/CAD, EUR/USD, or USD/JPY. These represent the U.S. dollar (USD) versus the Canadian dollar (CAD), the Euro (EUR) versus the USD, and the USD versus the Japanese Yen (JPY), respectively.

There will also be a price associated with each pair, such as 1.2569. If this price was associated with the USD/CAD pair it means that it costs 1.2569 CAD to buy one USD. If the price increases to 1.3336, it now costs 1.3336 CAD to buy one USD. The USD has increased in value (the CAD has decreased) as it now costs more CAD to buy one USD.

Forex Lots

In the forex market, currencies trade in lots called micro, mini, and standard lots. A micro lot is 1,000 units of a given currency, a mini lot is 10,000, and a standard lot is 100,000.

This is obviously exchanging money on a larger scale than going to a bank to exchange $500 to take on a trip. When trading in the electronic forex market, trades take place in blocks of currency, and they can be traded in any volume desired, within the limits allowed by the individual trading account balance. For example, you can trade seven micro lots (7,000) or three mini lots (30,000), or 75 standard lots (7,500,000).

How Large Is the Forex?

The forex market is unique for several reasons, the main one being its size. Trading volume is generally very large. The Forex market trades over $5 trillion per day compared to $200 billion for the equities market.

The largest foreign exchange markets are located in major global financial centers including London, New York, Singapore, Tokyo, Frankfurt, Hong Kong, and Sydney.

How to Trade Forex

The forex market is open 24 hours a day, five days a week, in major financial centers across the globe. This means that you can buy or sell currencies at virtually any hour.

In the past, forex trading was largely limited to governments, large companies, and hedge funds. Now, anyone can trade on forex. Many investment firms, banks, and retail brokers allow individuals to open accounts and trade currencies.

When trading in the forex market, you're buying or selling the currency of a particular country, relative to another currency. But there's no physical exchange of money from one party to another as at a foreign exchange kiosk.

In the world of electronic markets, traders usually take a position in a specific currency with the hope that there will be some upward movement and strength in the currency they're buying (or weakness if they're selling) so that they can make a profit.

A currency is always traded relative to another currency. If you sell a currency, you are buying another, and if you buy a currency you are selling another. The profit is made on the difference between your transaction prices.

Spot Transactions

A spot market deal is for immediate delivery, which is defined as two business days for most currency pairs. The major exception is the purchase or sale of USD/CAD, which is settled in one business day.

The business day excludes Saturdays, Sundays, and legal holidays in either currency of the traded pair. During the Christmas and Easter seasons, some spot trades can take as long as six days to settle. Funds are exchanged on the settlement date, not the transaction date.

The U.S. dollar is the most actively traded currency. The euro is the most actively traded counter currency, followed by the Japanese yen, British pound, and Chinese renminbi.

Market moves are driven by a combination of speculation, economic strength and growth, and interest rate differentials.

Forex Rollover

Retail traders don't typically want to take delivery of the currencies they buy. They are only interested in profiting from the difference between their transaction prices. Because of this, most retail brokers will automatically "roll over" their currency positions at 5 p.m. EST each day.

The broker basically resets the positions and provides either a credit or debit for the interest rate differential between the two currencies in the pairs being held. The trade carries on and the trader doesn't need to deliver or settle the transaction.

When the trade is closed the trader realizes a profit or loss based on the original transaction price and the price at which the trade was closed. The rollover credits or debits could either add to this gain or detract from it.

Since the forex market is closed on Saturday and Sunday, the interest rate credit or debit from these days is applied on Wednesday. Therefore, holding a position at 5 p.m. on Wednesday will result in being credited or debited triple the usual amount.

Forex Forward Transactions

Any forex transaction that settles for a date later than spot is considered a forward. The price is calculated by adjusting the spot rate to account for the difference in interest rates between the two currencies. The amount of adjustment is called "forward points."

The forward points reflect only the interest rate differential between two markets. They are not a forecast of how the spot market will trade at a date in the future.

A forward is a tailor-made contract. It can be for any amount of money and can settle on any date that's not a weekend or holiday. As in a spot transaction, funds are exchanged on the settlement date.

Forex Futures

A forex or currency futures contract is an agreement between two parties to deliver a set amount of currency at a set date, called the expiry, in the future. Futures contracts are traded on an exchange for set values of currency and with set expiry dates.

Unlike a forward, the terms of a futures contract are non-negotiable. A profit is made on the difference between the prices the contract was bought and sold at.

Most speculators don't hold futures contracts until expiration, as that would require they deliver/settle the currency the contract represents. Instead, speculators buy and sell the contracts prior to expiration, realizing their profits or losses on their transactions.

How Forex Differs From Other Markets

There are some major differences between the way the forex operates and other markets such as the U.S. stock market.

Fewer Rules

This means investors aren't held to as strict standards or regulations as those in the stock, futures, or options markets. There are no clearinghouses and no central bodies that oversee the entire forex market. You can short-sell at any time because in forex you aren't ever actually shorting; if you sell one currency you are buying another.

Fees and Commissions

Since the market is unregulated, fees and commissions vary widely among brokers. Most forex brokers make money by marking up the spread on currency pairs. Others make money by charging a commission, which fluctuates based on the amount of currency traded. Some brokers use both.

Full Access

There's no cut-off as to when you can and cannot trade. Because the market is open 24 hours a day, you can trade at any time of day. The exception is weekends, or when no global financial center is open due to a holiday.

Leverage

The forex market allows for leverage up to 1:50 in the U.S. and even higher in some parts of the world. That means a trader can open an account for $1,000 and buy or sell as much as $50,000 in currency. Leverage is a double-edged sword; it magnifies both profits and losses.

Example of Forex Transactions

Assume a trader believes that the EUR will appreciate against the USD. Another way of thinking of it is that the USD will fall relative to the EUR.

The trader buys the EUR/USD at 1.2500 and purchases $5,000 worth of currency. Later that day the price has increased to 1.2550. The trader is up $25 (5000 * 0.0050). If the price dropped to 1.2430, the trader would be losing $35 (5000 * 0.0070).

About the Rollover

Currency prices move constantly, so the trader may decide to hold the position overnight. The broker will roll over the position, resulting in a credit or debit based on the interest rate differential between the Eurozone and the U.S.

If the Eurozone has an interest rate of 4% and the U.S. has an interest rat
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Título: How Currency Trading Works - Investopedia
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Trading in any investment market is very difficult, as evidenced by the fact that most beginning traders lose money. However, success can be found with enough of the right education, practice, and experience. So, what is currency trading and is it right for you?

The currency market, or forex (FX), is the largest investment market in the world and continues to grow annually, with more than $7.5 trillion in notional value exchanged daily, as of April 2022. By comparison, daily value traded on the New York Stock Exchange (NYSE) averaged ~$117 billion in the first half of 2024. Traditionally, the bulk of the volume came from professional traders, but as currency trading platforms have improved, more retail traders have found forex to be suitable for their investment goals.

Key Takeaways Forex exchanges trade 24 hours, five days a week, and form the world's largest and most liquid asset market.

While the market is massive, eight major currencies are responsible for nearly 80% of the volume.

Currencies are traded against one another as pairs (e.g., EUR/USD), and each pair is typically quoted in pips (percentage in points) out to four decimal places.

Currency prices fluctuate based on the economic situation of the countries involved, geopolitical risks and instability, and trade & financial flows, among other factors.

How Does Currency Trading Work?

The forex market runs 24 hours a day, five days a week, from Sunday, 5 p.m. until Friday, 4 p.m. ET, but different times of the day may have entirely different trading dynamics. Traders generally recognize three sessions: Asian, European, and the U.S. Although there is some overlap in the sessions, the main currencies in each market are traded most heavily during their respective market hours.

This means that certain currency pairs will have more volume during certain sessions. For example, traders who use pairs based on the dollar will find the most volume during the U.S. trading session.

Forex Market Hours in GMT. ForexMarketHours.com

Pairs and Pips

All currency trading is done in pairs. Unlike the stock market, where you can buy or sell a single stock, in the forex market you buy one currency and simultaneously sell another. Each currency pair is quoted in terms of one currency versus another. For example, in the EUR/USD currency pair, EUR (the euro) is the base currency and USD (the U.S. dollar) is the quote currency. If you buy this pair, you are buying euros and selling dollars. Conversely, if you sell this pair, you are selling euros and buying dollars.

Nearly all currencies are priced out to the fourth decimal point. A pip (percentage in point) is the smallest increment of trade. One pip typically equals 1/100 of 1%, or the number in the fourth decimal place . Most currencies are priced out to the fourth or fifth decimal place(the EUR/USD pair might be quoted as 1.1234).

Exceptions to this rule are currency pairs that include the Japanese Yen (JPY) as the quote currency. These pairs typically price out to two or three decimal places, with a pip being represented by the second decimal place (the USD/JPY pair might be quoted as 156.78)

Currencies are traded in various sized lots. A micro lot is 1,000 units of the base currency in a pair. If your account is in U.S. dollars, a micro lot represents $1,000 of your base currency, the dollar. A mini lot is 10,000 units of your base currency and a standard lot is 100,000 units.

Retail or beginning traders often trade currency in micro lots, because one pip in a micro lot represents only a 10-cent move in the price. This makes losses easier to manage if a trade doesn't produce the intended results. In a mini lot, one pip equals $1 and that same one pip in a standard lot equals $10. Some currencies move as much as 100 pips or more in a single trading session making the potential losses to the small investor much more manageable by trading in micro or mini lots.

Far Fewer Products

The majority of the volume in currency trading is confined to only 18 currency pairs compared to the thousands of stocks that are available in the global equity markets. Although there are other traded pairs outside of the 18, the eight major currencies most often traded are the U.S. dollar (USD), Canadian dollar (CAD), euro (EUR), British pound (GBP), Swiss franc (CHF), New Zealand dollar (NZD), Australian dollar (AUD) and the Japanese yen (JPY). Although nobody would say that currency trading is easy, having far fewer trading options makes trade and portfolio management more simple.

What Moves Currencies? An increasing number of stock traders are taking an interest in the currency markets, as many of the forces that move the stock market also move the currency market. Factors like interest rates, new economic data from the largest countries, and geopolitical tensions are just a few of the events that may affect currency prices. Supply and demand dynamics also play a major role. When the world needs more dollars, the value of the dollar increases, and when there are too many circulating the price drops.

Why Is Currency Trading Called Forex or FX? Forex is an abbreviation of "foreign exchange," as is FX. These terms are common shorthand for currency trading.

Who Invented Currency Trading? The exchange of foreign currencies goes back to early human civilization and the advent of trade routes and commerce. However, modern forex trading effectively began in 1973, when the gold standard of foreign exchange was abandoned and free-floating currencies were adopted.

How Are Currency Pairs Quoted? Currencies are traded in pairs, so that in every trade one currency is exchanged for another at a given rate, determined by the market. These pairs look something like EUR/USD = 1.08. This means that one Euro buys USD $1.08. The base currency appears first and the quote currency (or counter currency) second. In a direct quote, the quote currency is the foreign currency, while in an indirect quote, the quote currency is the domestic currency.

The Bottom Line

Much like anything in investing, learning about currency trading is easy, but finding the winning trading strategies takes a lot of practice. Most forex brokers will let you open a free virtual account to trade with virtual money until you find strategies that will help you become a successful forex trader.

Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.
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Título: Forex and Currencies Trading | A Beginner's Guide - eToro
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Looking to enter the exciting world of forex trading? Find out more about how forex trading works, the risks and rewards, and helpful trading tips.

While you have probably heard plenty about crypto, stocks, indices and ETFs, you might not be as familiar with forex or currency trading. And what might be even more surprising is that the forex market is the largest market in the world, with an average daily trading volume of over $5 trillion!

Currency trading provides multiple opportunities for active traders, but forex trading can be intimidating for beginners. This guide provides an overview to help you start trading forex.

What is currency trading?

So, what exactly is currency trading?

The currency market refers to the overall market in which people are able to buy and sell international currency. Sometimes, it is also referred to as the foreign exchange market, forex or the FX market, and market trading hours/times run 24 hours a day in different parts of the world.

Find out more about currency trading with our educational video.

The forex market provides the opportunity for those with relatively small amounts of capital to still be able to invest. Traders invest in exchange rate pairs to trade one fiat currency against another, in the hope of benefitting from fluctuations in currency exchange rates. You sell one currency to buy another, which makes a pair.

So, for example, you might want to invest in USD/AUD, thinking that the USD will become stronger against the AUD. This isn’t very different to when you used to exchange your native cash at the airport when travelling overseas.

While the term forex is a shortened version of “foreign exchange,” there is not a specific marketplace or platform on which currencies are traded.

How to invest or trade forex

The basic idea behind investing or trading forex is quite straightforward. If you believe the value of a particular currency may rise in relation to another, you can buy that currency and then sell it later for a potential profit.

You may choose to select a currency pair or may look to invest in a currency ETF, providing exposure to the performance of a currency when compared to another or a broader basket of currencies.

Technical analysts are particularly drawn to trading in currencies due to the volatility of currency exchange rates. In the right conditions, this volatility can lead to higher profits, but it is important to remember that exchange rates are influenced by an assortment of factors, ranging from political events to central bank policies.

Some investors also use currencies to hedge their forex exposure. If, for example, an investor’s portfolio was to contain a high proportion of GBP and they invest in a company that is dominated by USD, they may opt to short sell the USD to neutralise the effect the currency has on the portfolio.

Certain currencies are considered “safe-haven” investments. This means that they are viewed as less risky by investors than those from emerging markets. Some common “safe-haven” currencies include the US dollar, the Japanese yen and the Swiss franc. When the market is unsettled, it is not uncommon for investors to turn to these currencies.

Now that you have an understanding of what forex is, it’s time to start trading forex. Here are four steps to follow to start forex trading:

1. Choose a currency pair

Trading in currencies involves buying one fiat currency while selling another simultaneously. This is why they are called “currency pairs.” You can go with common pairs of major currencies or more obscure currency pairs.

2. Review the market

Constant learning and research are key to being a competent trader. Take your time researching your favourite currency pairs and keep an eye on both current and historical charts. Also, read about daily economic announcements and search for other technical and fundamental analysis news on your chosen currencies.

3. The quote

The quote — or “term currency” — has two rates, indicating the two currencies (e.g., USD and EUR). The first rate is the price for which you can sell the currency pair (also known as the “bid” price), while the second rate is that at which you can buy it (also known as the “ask/offer” price). The difference between the two rates is known as the “spread,” which is what a forex broker charges you for carrying out the trade.

4. Choose a position

In forex trading, you have to consider both the up and down movements in the market — because you are both buying a currency and selling another at the same time.

In terms of having a “buy position,” you expect the base currency’s value to rise compared to the quote currency (the second currency). Whereas having a “sell position” means you expect the base currency’s value will fall compared to the quote currency.

Tip: Set financial goals and create a plan before you invest to help mitigate risk.

What are currency pairs?

A currency pair is exactly what it sounds like — a pair of currencies. In forex trading, a currency pair shows which type of currency is being traded for another. Or, in another way of looking at it, it shows how much of one type of currency it costs to purchase one unit of another type of currency, following a similar principle to other forms of pairs trading.

The way in which the currencies are listed in the pair matters. The first currency listed in a currency pair is the base currency. The second is called the quote currency. The currencies are listed by standardised abbreviations used in markets around the world.

For example, let’s say you are looking at a forex market, and you see AUD/USD = 1.10000. The AUD represents Australian dollars, which is the base currency. The USD represents US dollars, which is the quote currency. That means you can exchange 1.10 US Dollars for 1 Australian Dollar.

Risks of forex trading

Every investment opportunity comes with risks that potential traders need to be aware of. Here are a few of the major risks to think about before you get started.

Leverage

If you get in too deep with real leverage, you can quickly lose a large portion of your capital with even a small shift in the market.

Failure

It is no fun to think about failing when it comes to investing, and nobody plans on losing money when they enter a market. But it is important to go into forex trading with your eyes open.

Education

To be a successful forex trader, you need to have a big-picture understanding of global economies and what makes them tick. Getting a handle on so many global factors can be a barrier to success for relative newcomers.

Forex trading can be an excellent opportunity for traders with various levels of experience and capital available for investment. It provides you with access to a truly global market that is the largest in the world. Of course, it also comes with risk, as does any investment opportunity.

Quiz

What is a currency ETF? A financial instrument that tracks the performance of a currency against either another currency or a basket of currencies A financial instrument that tracks the performance of a currency against an asset from a different asset class, such as a stock or a cryptocurrency

FAQs

What’s different about forex trading compared to traditional share trading? There is no central governing body for foreign exchange trading — this is in contrast to stocks, futures and options trading. What hours is forex trading open? The forex market runs 24 hours on weekdays and can be used to assess potential price movements in the future. What currencies can I trade in forex? While there are a number of exotic currencies available, most forex traders tend to deal with the most liquid currency pairs: EUR/USD, USD/JPY, GBP/USD, USD/CHF.
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Este grupo de agricultores pudo comercializar sus productos con apoyo del gobierno.

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URL: https://dictionary.cambridge.org/dictionary/spanish-english/comercializar
Título: COMERCIALIZAR in English - Cambridge Dictionary
Fecha de publicación: None

La clausura sanitaria de la fábrica no nos deja comercializar nuestro producto
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URL: https://www.spanishdict.com/translate/comercializar
Título: Comercializar | Spanish to English Translation - SpanishDictionary.com
Fecha de publicación: None

a.

A muchos padres no les importa comercializar el talento de sus hijos. Many parents don't mind commercializing their children's talent.
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URL: https://www.spanishdict.com/translate/comercializa
Título: Comercializa | Spanish to English Translation - SpanishDictionary.com
Fecha de publicación: None

a.

A muchos padres no les importa comercializar el talento de sus hijos. Many parents don't mind commercializing their children's talent.
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URL: https://context.reverso.net/translation/spanish-english/comercializa
Título: comercializa - Translation into English - Reverso Context
Fecha de publicación: None

Isotron, importa y comercializa los más variados tipos de conectores circulares. Isotron imports and markets the most diverse types of circular connectors.

El níspero es la primera fruta de hueso que se comercializa en primavera. Loquats are the first stone fruit present in the spring markets

Crear un curso puede ofrecer ingresos pasivos si se comercializa efectivamente al público adecuado. Creating a course can offer passive income if marketed effectively to the right audience.

Por lo tanto, este producto se comercializa justo antes de ser embutido. Therefore, this product is marketed just before being stuffed.

También comercializa productos importados de última generación para el sector de limpieza. The company also sells cutting-edge imported supplies for the cleaning industry.

Prozis es una empresa joven e innovadora que comercializa suplementos dietéticos y deportivos. Prozis is a young and innovative company that sells sports and dietary supplements.

La empresa comercializa sus productos de forma innovadora, apelando a consumidores más jóvenes. The company markets its products new, appealing to younger consumers.

El producto se comercializa disuelto en agua y no contiene disolventes orgánicos. The product is marketed dissolved in water and contains no organic solvents.

Cada producto se comercializa en el mercado internacional, tiene un código. Every product is marketed in the international market, has a code.

Un grupo global que comercializa sus productos en los cinco continentes. A global group which markets its products on all five continents.

Wagner desarrolla y comercializa una amplia gama de productos de pintura y decoración. Wagner develops and markets a wide array of painting and decorating products.

Sin embargo, se comercializa generalmente a los que levanten pesos. However, it's generally marketed to those who lift weights.

La filial vende y comercializa estos productos a través de comisiones de ventas. The affiliate sells and markets these products in return for commission business.

Generalmente se comercializa a compañías de seguro y a otros países. It is usually marketed to insurance companies and to other countries.

Cada queso se comercializa entero, envasado y provisto de un sello. All cheeses must be marketed whole, packed and bearing a seal.

Hoy, comercializa suplementos dietéticos en países de todo el mundo. Today it markets dietary supplements in countries throughout the world.

El asaí a menudo se comercializa como un superalimento, elogiado por sus ricos nutrientes. The acai berry is often marketed as a superfood, praised for its rich nutrients.

La empresa comercializa productos de forma sostenible, atrayendo a consumidores que priorizan los temas ambientales. The company markets products ecologically, appealing to consumers who prioritize environmental issues.

Un periódico, por ejemplo, se comercializa para lectores y anunciantes. A newspaper, for instance, markets itself to both readers and advertisers.
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URL: https://www.linguee.com/spanish-english/translation/comercializar.html
Título: comercializar - English translation - Linguee
Fecha de publicación: None

Noscira tiene como misión principal [...] descubrir, desarrollar y comercializar terapias que permitan [...] la mejora de la calidad de vida de los pacientes. noscira.com noscira.com descubrir, desarrollpias que permitan Noscira's main mission is to [...] discover, develop and commercialise therapies which enable [...] patients to have improved quality of life. noscira.com noscira.com discover,ich enable

uede comercializar con calidad clínica. sener-aerospace.com sener-aerospace.com Este producto se pcalidad clínica. The medical [...] quality of this device allows its market. sener-aerospace.com sener-aerospace.com quality of this device al

esee comercializar un producto fitosanitario lo notificará [...] a la Comisión. europarl.europa.eu europarl.europa.eu La persona que droducto fitosanitario lo notificará The person [...] who wishes to place a plant protection product on the market shall notify [...] the Commission. europarl.europa.eu europarl.europa.eu who wa plant protection product onl notify

Por tanto, es primordial que estos países se [...] esfuercen por comercializar su café de la [...] manera más eficaz posible. regency.org regency.org esfuercenafé de la So it is important [...] for each country to market its coffee as effectively [...] as possible. regency.org regency.org for eachas effectively

que comercializar nuestros productos de la mejor manera posible [...] y optimizar de forma permanente nuestras compras. claas.es claas.es Tenemostros productos de la mejor manera posible have to market our produce as best possible and optimise our purchasing [...] process on a continuous basis. claas.com claas.com Weduce as best possiblepurchasing

La logística y el equipo existentes deben ser [...] adecuados para poder comercializar el producto con éxito [...] en el mercado de destino. fairtrade.net fairtrade.net adecuados para producto con éxito The logistics and equipment in place should be [...] appropriate to successfully commercialize the product in the [...] target market. fairtrade.net fairtrade.net appropriate ton the

Somos críticos con las ayudas de la UE a la exportación destinadas a [...] productores de azúcar y celebramos el hecho de que en el [...] futuro será posible comercializar el azúcar en condiciones [...] más justas. europarl.europa.eu europarl.europa.eu futuro será poszúcar en condiciones We are critical of the EU's export subsidies to domestic [...] sugar producers and welcome the fact that it [...] will be possible for sugar to be traded under fairer [...] conditions in the future. europarl.europa.eu europarl.europa.eu will be pfairer

Este Reglamento tiene por [...] objeto simplificar los procedimientos para comercializar de estos productos, haciendo una lista de [...] productos que pueden sacarse al mercado. robert-schuman.eu robert-schuman.eu objeto simplificar los procedimientosstos productos, haciendo una lista de This regulation aims to simplify [...] procedures for the marketing of these products by establishing a list of foodstuffs that can be marketed. robert-schuman.eu robert-schuman.eu procedures forthese products by establishing a list of foodstuffs that c

se dedica [...] a promover y comercializar artesanías de [...] alta calidad a través de una tienda en Santo Domingo. iddi.org iddi.org a promovsanías de Is a store [...] that promotes and trades with high quality [...] craft pieces in Santo Domingo. iddi.org iddi.org that promotigh quality

oder comercializar armas pequeñas [...] también es necesario estar acreditado ante el RENAR como legítimo usuario. international-alert.org international-alert.org Para ps pequeñas be able to sell firearms it is also [...] necessary to be accredited by RENAR as a legitimate user. international-alert.org international-alert.org In order tot is also

Quienes se dedican a la piratería de bienes materiales suelen [...] fabricar, distribuir y comercializar sus artículos ilícitos [...] por sí solos o mediante redes clandestinas de cómplices. unesdoc.unesco.org unesdoc.unesco.org fabricar, distribuartículos ilícitos Those who engage in piracy of physical goods generally [...] manufacture, distribute, and market their illicit goods [...] themselves or through underground networks of accomplices. unesdoc.unesco.org unesdoc.unesco.org manufacture, dist goods

uede comercializar como de procedencia orgánica o sustentable y convencional o pescaría. naturland.org naturland.org El mismo producto no se pde procedencia orgánica o sustentable y convencional o pescaría. naturland.org naturland.org It is not permissible to offer one and the same product from organic and conventional cultivation or fishery at the same time.

Con arreglo a REACH, los usuarios [...] intermedios no deben comercializar ni utilizar ninguna [...] sustancia que no esté registrada de conformidad con REACH. guidance.echa.europa.eu guidance.echa.europa.eu intermedios no dtilizar ninguna Under REACH, downstream users must [...] not place on the market or use any substances [...] which are not registered in accordance with REACH. guidance.echa.europa.eu guidance.echa.europa.eu laceany substances

KG, tiene la misión [...] de desarrollar y comercializar nuevos e inteligentes [...] sistemas de red de abordo. hella-press.de hella-press.de de desarrollos e inteligentes KG is dedicated to the [...] task of developing and marketing new intelligent vehicle [...] wiring systems. hella-press.de hella-press.de task of dnt vehicle

Por ejemplo, en los debates radiales se aclaró que al escasear las trilladoras a los agricultores les era [...] difícil elaborar y comercializar el arroz. regency.org regency.org difícil elaborrroz. For example, the radio discussion made it clear that lack of threshing machines made it difficult for [...] farmers to process and sell their rice. regency.org regency.org farmers to

Deberán discutirse las repercusiones de cualquier posible diferencia en la quiralidad, la forma química y [...] el perfil de impurezas entre el compuesto utilizado en los estudios no [...] clínicos y el producto que se desea comercializar. eur-lex.europa.eu eur-lex.europa.eu clínicos y el producto que se d The implications of any differences in the chirality, chemical form, and [...] impurity profile between the compound used in the nonclinical studies [...] and the product to be marketed shall be discussed. eur-lex.europa.eu eur-lex.europa.eu and thessed.

La industria se niega a proporcionar información [...] sobre el origen de los recursos biológicos que están siendo utilizados para fabricar [...] los productos que buscan comercializar. viacampesina.org viacampesina.org los productos que bu Industry refuses to provide information about the origins of the biological resources that are used to [...] make the products that it commercializes. viacampesina.org viacampesina.org make the

Una forma de reducir las diferencias de costos [...] consistía en comercializar los productos [...] derivados de la producción de biocombustibles. daccess-ods.un.org daccess-ods.un.org consistíproductos he commercialization of by-products from [...] bio-fuels production is a way to reduce the gap in costs. daccess-ods.un.org daccess-ods.un.org ts from

Las patentes [...] existen para proteger y comercializar la información técnica [...] incorporada en los productos y procesos nuevos. wipo.int wipo.int existen para protegnformación técnica Patents are all [...] about protecting and commercializing technical information [...] embedded in new products and processes. wipo.int wipo.int about pormation

oder comercializar el café oro en [...] el mercado mundial, el café se categoriza según determinados criterios. naturland.de naturland.de Para pafé oro en Before the raw coffee can be traded on [...] the world market, it needs to be graded according to established criteria. naturland.de naturland.de raw coffee can be traded on

No deberá utilizar esta [...] información para comercializar los valores de Juniper y no deberá facilitar esta información a otros de manera a que puedan comercializar con valores de [...] Juniper. juniper.fr juniper.fr informaciónvalores de Juniper y no deberá facilitar esta información a otros de manera a que puvalores de n to trade in Juniper securities and you may not provide the information to others so they can trade in Juniper securities. juniper.fr juniper.fr You may not use that informatiouniper securities andinformation to others so they can trade in Juniper securities.

Lo que cuenta [...] es la calidad de la idea que se ha de comercializar. wipo.int wipo.int es la calidad de la idea que se h wipo.int wipo.int The quality of the business idea is more the issue.

Algunas empresas ya han desarrollado distintas estrategias comerciales [...] para producir y comercializar la ropa personalizada. eur-lex.europa.eu eur-lex.europa.eu para producopa personalizada. Some companies have already developed a variety of business strategies [...] for producing and marketing customised clothing. eur-lex.europa.eu eur-lex.europa.eu for prclothing.

ar y comercializar la tecnología está aumentando [...] en todo el mundo. america.gov america.gov El apoyo para desarrollecnología está aumentando eveloping and commercializing the technology is growing [...] around the world. america.gov america.gov Support for dy is growing

Las obligaciones de deuda garantizadas son difíciles de valorar y [...] no se suelen comercializar. daccess-ods.un.org daccess-ods.un.org no se su Collateralized debt obligations are difficult to [...] value and are rarely traded. daccess-ods.un.org daccess-ods.un.org value and

ar y comercializar tecnologías de [...] biomasa a precios competitivos. abengoa.es abengoa.es Desarrollologías de elop and market biomass technologies at [...] competitive prices. abengoa.es abengoa.es Devlogies at

Una vez que la [...] empresa ha sido habilitada y ha obtenido el Certificado Sanitario, puede comercializar sus productos en el mercado nacional e internacional. embaparlebanon.com embaparlebano
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URL: https://en.bab.la/dictionary/spanish-english/comercializar
Título: COMERCIALIZAR - Translation in English - bab.la
Fecha de publicación: None

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