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Store of value

 

 
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Store of value
 
 
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To act as a store of value, a commodity
Commodity

A commodity is anything for which there is demand, but which is supplied without qualitative product differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk....
, a form of money
Money

Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money are as a medium of exchange, a unit of account, and a store of value....
, or financial capital
Financial capital

Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e....
 must be able to be reliably saved, stored, and retrieved - and be predictably useful when it is so retrieved.

This is distinct from the standard of deferred payment
Standard of deferred payment

A standard of deferred payment is the accepted way, in a given market, to settle a debt. For example, while the gold standard reigned, gold or any currency convertible to gold at a fixed rate constituted such a standard....
 function which requires acceptability to parties one owes a debt
Debt

Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned....
 to, or the unit of account
Unit of account

A unit of account is a standard monetary unit of measurement of the market value/cost of goods, services, or assets. It is one of three well-known functions of money....
 function which requires fungibility
Fungibility

Fungibility is the property of a Good or a commodity whose individual units are capable of mutual substitution. Examples of highly fungible commodities are crude oil, wheat, precious metals, and currencies....
 so accounts in any amount can be readily settled. It is also distinct from the medium of exchange
Medium of exchange

A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.By contrast, as William Stanley Jevons argued, in a barter system there must be a coincidence of wants before two people can trade ? one must want exactly what the other has to offer, when and where it is offered, so that the exchange...
 function which requires durability when used in trade, and a minimum of opportunity to cheat others.

When currency
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
 is stable, money
Money

Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money are as a medium of exchange, a unit of account, and a store of value....
 can serve all four functions.






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To act as a store of value, a commodity
Commodity

A commodity is anything for which there is demand, but which is supplied without qualitative product differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk....
, a form of money
Money

Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money are as a medium of exchange, a unit of account, and a store of value....
, or financial capital
Financial capital

Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e....
 must be able to be reliably saved, stored, and retrieved - and be predictably useful when it is so retrieved.

This is distinct from the standard of deferred payment
Standard of deferred payment

A standard of deferred payment is the accepted way, in a given market, to settle a debt. For example, while the gold standard reigned, gold or any currency convertible to gold at a fixed rate constituted such a standard....
 function which requires acceptability to parties one owes a debt
Debt

Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned....
 to, or the unit of account
Unit of account

A unit of account is a standard monetary unit of measurement of the market value/cost of goods, services, or assets. It is one of three well-known functions of money....
 function which requires fungibility
Fungibility

Fungibility is the property of a Good or a commodity whose individual units are capable of mutual substitution. Examples of highly fungible commodities are crude oil, wheat, precious metals, and currencies....
 so accounts in any amount can be readily settled. It is also distinct from the medium of exchange
Medium of exchange

A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.By contrast, as William Stanley Jevons argued, in a barter system there must be a coincidence of wants before two people can trade ? one must want exactly what the other has to offer, when and where it is offered, so that the exchange...
 function which requires durability when used in trade, and a minimum of opportunity to cheat others.

When currency
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
 is stable, money
Money

Money is anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money are as a medium of exchange, a unit of account, and a store of value....
 can serve all four functions. When it isn't, such as during times of hyperinflation
Hyperinflation

File:Bundesarchiv Bild 102-00104, Inflation, Tapezieren mit Geldscheinen.jpgIn economics, hyperinflation is inflation that is very high or "out of control", a condition in which prices increase rapidly as a currency loses its value....
 or when complex and volatile forms of financial capital
Financial capital

Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e....
 are involved, it becomes important to identify alternative stores of value, of which common ones are:

  • real estate
    Real estate

    Real estate is a law term that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is fixed in location.     - actual deeds in protectible land
  • gold
    Gold

    Gold is a chemical element with the symbol Au and atomic number 79. It is a highly sought-after precious metal, having been used as money, as a store of value, in jewelry, in sculpture, and for ornamentation since the beginning of recorded history....
     - once the basis of the gold standard
    Gold standard

    The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set, fixed quantities of gold....
  • silver
    Silver

    Silver is a chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal....
     - once the basis of the silver standard
    Silver standard

    The silver standard is a monetary system in which the standard economics unit of account is a fixed weight of silver. The silver standard was widespread until the 19th century, when it was replaced in most countries by the gold standard....
  • base metals such as copper
    Copper

    Copper is a chemical element with the symbol Cu and atomic number 29.It is a ductile metal with very high thermal and electrical conductivity....
     and nickel
    Nickel

    Nickel is a chemical element, with the chemical symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge....
     - some argue that metals with real applications are more stable in the long run.
  • precious stones, and precious metal
    Precious metal

    A precious metal is a rare metallic chemical element of high economics value. Chemically, the precious metals are less reactivity than most elements, have high lustre , are softer or more ductility, and have higher melting points than other metals....
    s
  • collectibles, e.g. original art
    Art

    Art is the process or product of deliberately arranging elements in a way that appeals to the senses or emotions. It encompasses a diverse range of human activities, creations, and modes of expression, including music and literature....
     by a famous artist or antiques
    Antiques

    An antique is an old collectible item. It is collected or desirable because of its age, rarity, condition, utility, or other unique features. It is an object that represents a previous era in human society....
  • livestock
    Livestock

    Livestock is the term used to refer to a domesticated animal intentionally reared in an agricultural setting to produce things such as food or fibre, or for its labour....
     (see African currency
    African currency

    African currency was originally formed from basic items, materials, animals and even people available in the locality to create a medium of exchange....
    )


While these items may be inconvenient to trade daily or store, and may vary in value
Value (economics)

The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged....
 quite significantly, they rarely or never lose all value. This is the point of any store of value, to impose a natural risk management
Risk management

Risk management is activity directed towards the assessing, mitigating and monitoring of risks. In some cases the acceptable risk may be near zero....
 simply due to inherent stable demand for the underlying asset. It need not be a capital asset
Capital asset

The term capital asset has three unrelated technical definitions, and is also used in a variety of non-technical ways.*In Financial economics, it refers to any Asset used to make money, as opposed to Asset used for personal enjoyment or consumption....
 at all, merely have economic value that is not known to disappear even in the worst situation. In principle, this could be true of any industrial commodity, but gold and precious metals are generally favored because of their demand and rarity in nature, which reduces the risk of devaluation
Devaluation

Devaluation is a reduction in the value of a currency with respect to other monetary units. In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency....
 associated with increased production and supply.

See also


External links

  • by Elmer G. Wiens. Examines the structural differences between barter and monetary commodity exchanges and oral and written linguistic exchanges.