Commodity value

In the field of economics, the commodity value of a good is its free market intrinsic value under optimal use conditions. In a free market, the commodity value of a good will be reflected by its price. For example, if an acre of land can yield a net of 100 dollars loss by lying fallow, 50 dollars gain by being planted with corn, and 100 dollars gain by being planted with wheat, then that acre's commodity value is 100 dollars; the farmer is assumed to put his land to best use.

Currency

Commodity value is of particular significance in the study of currency. For example, the commodity value of a coin is the value of the metal of which it is made. Gold and silver coins have a high commodity value, whereas fiat coins such as modern day quarters have a low commodity value. This is of particular historical relevance when analyzed in light of Gresham's Law.

Debt

Asset backed debt has a commodity value equal to the price of the collateral; a loan backed by a house has a commodity value equal to the free market price of the house. Non-collateralized debt, on the other hand, does not have a commodity value; it is valuable only insofar as it is repaid.

Investment

Commodity value is an important consideration in hedging against inflation. Whereas fiat currencies can devalue, often catastrophically, currencies with considerable commodity value are known to better maintain their value; a government can print as many fiat bills as it wants with relative ease, the same is not true of mining precious metals. This leads some investors to purchase goods and debts with high commodity value, which are inherently safer than those with low, or no commodity value, minimizing risk by sacrificing potential return.

See also

• Gold as an investment

This economic term article is a stub. You can help Wikipedia by expanding it.v · Categories: Commodities used as an investment Business terms Economic term stubs Wikimedia Foundation. 2010. Игры ⚽ Нужна курсовая? Valea Iudei River Adriana Gerši Look at other dictionaries: Commodity production — is the production of wares for sale. It is a type of production in which products are produced not for direct consumption by the producers, as in subsistence production, but are surplus to their own requirements and are produced instead… …   Wikipedia Commodity form theory — is a theory of jurisprudence advanced by the Soviet legal theorist Evgeny Pashukanis. The theory argues that the legal form is the parallel of the commodity form under capitalist society. All law is concerned with the process of the exchanging of …   Wikipedia commodity — com·mod·i·ty /kə mä də tē/ n pl ties: a class of economic goods; esp: an item of merchandise (as soybeans) whose price is the basis of futures trading Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. commodity …   Law dictionary Commodity Exchange Bratislava — Commodity Exchange Bratislava, JSC Type Joint stock company Founded December 8, 1992 Headquarters Bratislava, Slovakia …   Wikipedia Value added — refers to the additional value of a commodity over the cost of commodities used to produce it from the previous stage of production. An example is the price of gasoline at the pump over the price of the oil in it. In national accounts used in… …   Wikipedia Value — may refer to: *Value (mathematics), the value of a variable in mathematics. *Value (philosophy), the degree of importance, including the value independent on subjective valuations by any individual *Value (personal and cultural), the principles,… …   Wikipedia value–added tax — value–ad·ded tax n: a tax levied at each addition of value in the processing of a raw material, the performance of a service, or the production and distribution of a commodity with each payer except the consumer reimbursed from payment at the… …   Law dictionary commodity dollar — ☆ commodity dollar n. the unit of a proposed system of currency, that would have a fluctuating gold value determined at regular intervals on the basis of an official index of the prices of key commodities * * * …   Universalium commodity dollar — ☆ commodity dollar n. the unit of a proposed system of currency, that would have a fluctuating gold value determined at regular intervals on the basis of an official index of the prices of key commodities …   English World dictionary Commodity fetishism — Part of a series on Marxism …   Wikipedia 18+ © Academic, 2000-2024 Contact us: Technical Support, Advertising Dictionaries export, created on PHP, Joomla, Drupal, WordPress, MODx. Mark and share Search through all dictionaries Translate… Search Internet Share the article and excerpts Direct link … Do a right-click on the link above and select “Copy Link”