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Cake day: July 3rd, 2023

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  • When you have commodity money, the value of the money is derived from the value of the commodity.

    The value of the commodity acts as a floor, but the face value is dictated by supply and demand, and demand usually exceeds supply, driving it significantly above the floor. Take gold, for example. Gold’s intrinsic values are (1) it’s pretty and can be used to make decorative items, and (2) it has some applications in electronics. It can’t be eaten, can’t be worn, and it’s too soft even to make tools out of it. Yet, its extrinsic value is huge, because it is publically seen as a good medium of exchange and so a lot of people want it.