Money Is A Store Of Value

Money, a good that we relentlessly pursue and something that can dictate most of our lives, yet do we ever ask ourselves some bigger questions about what money actually is? Where did it come from? Why is it so important? I hope to answer these questions and uncover the hidden secrets of money.

Properties of Currency

Firstly, it is important to understand that there is a difference between the two ideas: “money” and “currency”. The two ideas are very, very similar but there is a key component that differentiates the two. A practical definition of the two can be: “A tool for trading your time. A container for storing up your economic energy until you are ready to spend it elsewhere.” This is a strong literal definition, yet I want to go into a more practical definition which helps us separate the two. Both currency and money contain these following characteristics:

• Medium of exchange: can be used as an intermediate to exchange goods or services. “I would like your $3 for my 12 eggs.”

• A unit of account: able to put into numerical measurement helping to compare goods and services. “4 eggs cost $1.”

• Portable: can be transported and transferred around. I can carry my cash around.

• Durable: can withstand being used and not decay. My $1 note will last for a long time.

• Divisible: can be divided into smaller units of value. My $100 note can be split into $1 and my $1 can be split into 100 cents.

• Fungible: one unit is interchangeable with another. My $1 note is the same as your $1 note.

Over the years there have been 100s of attempts for people to create their own currency/money yet what has made these attempts successful isn’t down to luck. It is down to these specific characteristics. However, there is one specific characteristic that is unique to money, not currency and that is “Store of Value.”

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