<P> Commodities often come into being in situations where other forms of money are not available or not trusted . Various commodities were used in pre-Revolutionary America including wampum, maize, iron nails, beaver pelts, and tobacco . According to economist Murray Rothbard: </P> <P> In the sparsely settled American colonies, money, as it always does, arose in the market as a useful and scarce commodity and began to serve as a general medium of exchange . Thus, beaver fur and wampum were used as money in the north for exchanges with the Indians, and fish and corn also served as money . Rice was used as money in South Carolina, and the most widespread use of commodity money was tobacco, which served as money in Virginia . The pound - of - tobacco was the currency unit in Virginia, with warehouse receipts in tobacco circulating as money backed 100 percent by the tobacco in the warehouse . </P> <P> 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 beaver pelt as the standard currency, and created a price list for goods: </P> <Ul> <Li> 5 pounds of sugar cost 1 beaver pelt </Li> <Li> 2 scissors cost 1 beaver pelt </Li> <Li> 20 fish hooks cost 1 beaver pelt </Li> <Li> 1 pair of shoes cost 1 beaver pelt </Li> <Li> 1 gun cost 12 beaver pelts </Li> </Ul>

When there is more money available and its value drops