Money & Finance › What money is & money theory › What money is: a shared, transferable claim
Commodity money: shells, salt, grain, cattle
· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
Before coins and paper, goods with their own value, such as cowrie shells, salt, grain and cattle, served as money.
See it on the Money & Finance map →How it works
Commodity money is useful in itself, so its value does not depend on a government. Cowrie shells circulated from China (by about 1200 BC) to West Africa into the 1800s. Mesopotamia used barley; the Latin word for money, pecunia, comes from pecus, cattle. The drawbacks: bulky, perishable and uneven in quality, and it is hard to make change for a cow. Precious metals won out because they are durable, divisible and scarce.
Why it matters
It shows what any money needs: scarcity, durability, divisibility and wide acceptance. Gold's appeal today rests on the same logic.
Facts, rules and data
Archaeology (cowries in Shang dynasty tombs), word histories, and modern cases: economist R. A. Radford's 1945 paper described cigarettes becoming money in a WWII prison camp.
Debates and risks
The popular story that Roman soldiers were paid in salt, giving us 'salary', is probably a legend; the evidence is thin.
Connections (2)
▸Commodity money: shells, salt, grain, cattle was standardized into Coinage, beginning with Lydia's coins about 630 BCFact, law or data
The connection
Lumps of metal were already used as commodity money, but each payment meant weighing and testing purity. Lydia's stamped coins fixed weight and purity in advance, so metal could be counted rather than weighed. Coins turned a raw commodity into a standard, trusted unit.
When and why
Lydia, western Turkey, about 630 BC; the idea spread to Greek cities and Persia within a century.
How we know
Archaeologists find both earlier hacksilver hoards (cut silver weighed in payment) and the first coins, showing the transition.
Debates and risks
Whether coins first spread for market trade or for state needs, like paying soldiers, is still debated.
▸Commodity money: shells, salt, grain, cattle lives on in Gold and precious metals as investmentsMainstream view
The connection
Gold served as money for some 2,500 years, first as coins, then as backing for paper currencies until the US closed the gold window in 1971. That history still shapes demand: investors and central banks treat it as money of last resort, though no currency is tied to it now.
When and why
From Lydian coins about 630 BC to the gold standard's end on August 15, 1971; private US gold ownership became legal again on December 31, 1974.
How solid is the link?
Central banks still hold about 36,000 tonnes of gold as reserves, per the World Gold Council, a clear legacy of its money role.
Debates and risks
Keynes called the gold standard a 'barbarous relic' in 1923; whether gold's value today rests on real usefulness or mostly on tradition is argued.