Financial Information: The History Of Silver Commodities

Learn the evolution of commerce, commodities, and silver. See how the history of commodities played into the formation of today's business world.

Starting in ancient Greece with the Agora in Athens, continuing through Medieval Markets in England, and through trading rice in Japan, today"˜s business markets are the product of many years of trade evolution and innovative thinking. The conveniences of online trading, brokers, calls, and puts were preceded by years of lost crops, bankruptcy, and logistical nightmares. The economic theory of supply and demand was in effect long before the term was defined in the every day lives of people trying to make a living.

The development of commodities markets is actually a throw-back to those ancient days when grain, rice, and produce were traded in organized areas which were the most convenient to buyers and sellers. Elements that seem basic now were quite a challenge to early entrepreneurs. Uniting supply and demand was no easy task in the early days of transportation--before warehouses occupied every street corner and communication was made easy and available to everyone. Organized trade areas allowed farmers a common place to trade their goods; however, the lack of storage facilities caused perishable products to spoil before they had the chance to be sold. Having an abundant supply of goods without the ability to communicate to buyers also left farmers and tradesmen without business success. Customers who made the long trip to the market weren't guaranteed to find the products they desired. Finding a common time and a common place for buyers and sellers to meet was quite a challenge in the days before telephones, fax machines, and email.

The formation of the city of Chicago in 1833 allowed the business world's earliest players--farmers, tradesmen, dealers, and consumers--an ideal place in which to do business. The new city provided conveniences such as railroad service and telegraph lines to the east which attracted larger crowds and enabled buyers and sellers to come together in a way that hadn"˜t been possible in any other location. The ease of communication helped define the role of sellers and suppliers, so one person didn't have to do everything to be successful. The playing field was leveled to allow more businessmen the opportunity to be successful. The end result to customers was a better supply of the items they were looking for at a more reasonable price.

All business transactions evolved from the barter system which consisted of two individuals trading one item for another. The barter system worked well in small farm towns where a chicken farmer could easily trade a few chickens to a corn farmer for food for the chickens. However, the marketplace in Chicago took the barter system to an all new level. It allowed farmers who may have previously faced bankruptcy over unsold or lost crops to make arrangements with dealers for future purchases. The end result was a secure buyer for the farmer's goods, a dependable supplier for the dealer's inventory, and the creation of futures commodities. A commodity consisted of anything that could be bought, sold, or bartered. Organizations such as the Chicago Board of Trade and the Commodity Futures Trading Commission (CFTC) were later established to set limits on how much the price of a commodity could rise or fall in order to ultimately protect consumers from exorbitant prices.

Just as the methods for conducting business evolved steadily over the centuries, so did the currency with which they operated. Silver, gold, wheat, and other objects were commonly viewed as items of great worth. This perception, combined with the availability of the item, and its ability to retain the value perceived became the basis of the monetary system. The monetary system eventually replaced the barter system because it offered consistency. The value of a chicken might be far different to a banker or a clothier than it would be to a farmer. The monetary system allowed a common form of value for all business transactions, regardless of the product. Later, it became evident that government security and backing had more to do with the value of money than the actual gold, silver, or paper used to create the currency. Government security allowed all nickels to be worth the same $0.05 regardless of the weight of the coin or the value of the metal.

As the commerce system developed, some items historically viewed as being valuable were worth less in the business world. This situation was only temporary because those items then became valuable again in a different way. The term commodity became much more defined when it was discovered that precious metals could be traded in a manner far more sophisticated than the barter system, but without the standard value of traditional currency. Trading commodities allowed some investors to buy low and sell high and thus the eventual stock market was formed with a special category termed "precious metals".

Today, the precious metals market isn't as heavily traded as other stocks because successfully trading silver and gold relies on instinct almost as much as expertise, economic aptitude, or an extensive knowledge of the industry. The basis for trading silver today is essentially the same as in the beginning--utility value, consistency, convenience, and durability. For those who have a knack for trading precious metals in the stock market, the potential for success in the form of a large profit in a short period of time is there. Consequently, investors without intuition end up funding the success of others. The precious metals market provides big wins and big losses and little in between the two. Many investors avoid precious metals trading because the results represent such opposite ends of the spectrum. Most successful investors benefit from the lessons learned from previous losses--losses which some investors are unwilling to risk. One timeless piece of advice is always successful no matter what the situation--never invest more than you can afford to lose.

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