I) Animal money- In the early days of civilization in the primitive farming communities’ money took the form of animals. Domestic animals like cows, sheep, goats, etc were used as money. Cattle occupy a place of pride as wealth.
II) Commodity money-In the early days along with animals commodities were also used as money. This form of money existed during the village economy stage. Any commodity that was generally demanded was chosen by common consent as a medium of exchange. One commodity is selected as money. Commodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money. These objects were useful for their intrinsic value as well as their monetary properties.
If this commodity was not used as money, this commodity still has a purpose.
Commodity money can be anything. The first commodities chosen as money were commonly consumed articles like rice, wheat etc. The chosen commodity depended on factors like location of the community, climate, cultural and economic development. Eg communities living by the sea selected shells as the medium of exchange, skin and fur was used in cold countries and feathers in tropical countries.
According to Lester Chandler “At different places and at different times, various commodities were used as money for exchange depending on the stage of economic development of that region”. Lester Chandler has given an exhausting list of commodities that served as a medium of exchange eg in Africa ivory and tiger jaws, cold regions skin and fur, on seashores and islands sea shells, dry fish etc, other commodities like corn, rye, tobacco, hides, salt, tea, rice, clay, cattle, large stones, decorated belts, shells, cigarettes, sheep, goats, pigs teeth, tusks, wool, silk, wire, leather, precious stones and metals as also baser metals, paper etc.
The commodity selected as money depended on the stage of economic development and had qualities such as it was generally accepted, was marketable, scarce, durable, and divisible and was of a sufficiently high value.
Disadvantages of commodity money.
1) Some commodities were bulky and indivisible (also dividing may reduce the value of the medium of exchange eg cattle)
2) It was perishable.
3) It was difficult to store especially animals and grains.
4) Lack of uniformity.
5) Lack of storage and warehousing facilities.
In words of Geoffrey Crowther, “Money is one of the most fundamental of man’s inventions. Every branch of knowledge has its fundamental discovery. In mechanization it is the wheel, in science it is fire, similarly in mans social existence, money is the essential invention on which all the rest is based.”