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A store of value is any commodity or
asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...
that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. The most common store of value in modern times has been money, currency, or a
commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...
like a precious metal or
financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide ...
. The point of any store of value is risk management due to a stable demand for the underlying asset.


Money as a store of value

Monetary economics Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and it ...
is the branch of economics which analyses the functions of money. Storage of value is one of the three generally accepted functions of money. The other functions are the
medium of exchange In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. The origin of "mediums of exchange" in human societies is as ...
, which is used as an intermediary to avoid the inconveniences of the
coincidence of wants The coincidence of wants (often known as double coincidence of wants) is an economic phenomenon where two parties each hold an item that the other wants, so they exchange these items directly without any monetary medium. Within economics, this h ...
, and the unit of account, which allows the value of various goods, services, assets and liabilities to be rendered in multiples of the same unit. Money is well-suited to storing value because of its purchasing power. It is also useful because of its durability. Because of its function as a store of value, large quantities of money are hoarded. Money's usefulness as a store of value declines if there are significant changes in the general level of prices. So if inflation rises, purchasing power declines and a cost is placed on those holding money. Workers who are paid in a currency which is experiencing high- inflation will prefer to spend their income quickly instead of
saving Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash. Saving also involves reducing expenditures, such as recur ...
it. When a currency loses its store of value, or more accurately when a currency is perceived to lose its future purchasing power, it fails to function as money. This causes people to use currencies from other countries as a substitute. According to the Cambridge cash-balance theory, which is represented by the Cambridge equation, money's ability to store value is more important than its function as a medium of exchange. Cambridge claims that the
demand for money In monetary economics, the demand for money is the desired holding of financial assets in the form of money: that is, cash or bank deposits rather than investments. It can refer to the demand for money narrowly defined as M1 (directly spendable ...
is derived from its ability to store value. This is contrary to
Fisher Fisher is an archaic term for a fisherman, revived as gender-neutral. Fisher, Fishers or The Fisher may also refer to: Places Australia *Division of Fisher, an electoral district in the Australian House of Representatives, in Queensland *Elect ...
economists' belief that demand arises because money is needed for exchange.


Other stores of value

Examples for stores of value other than money are: *
Bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemical ...
s – value is guaranteed by a legal contract *
Collectible A collectable (collectible or collector's item) is any object regarded as being of value or interest to a collector. Collectable items are not necessarily monetarily valuable or uncommon. There are numerous types of collectables and terms t ...
s, e.g. original art by a famous artist or
antique An antique ( la, antiquus; 'old', 'ancient') is an item perceived as having value because of its aesthetic or historical significance, and often defined as at least 100 years old (or some other limit), although the term is often used loosely ...
s such as ancient artifacts or ancient coinage * Gemstones *
Gift economy A gift economy or gift culture is a system of exchange where valuables are not sold, but rather given without an explicit agreement for immediate or future rewards. Social norms and customs govern giving a gift in a gift culture; although there ...
relationships – value is stored as social reputation *
Labor notes (currency) Labour vouchers (also known as labour cheques, labour notes, labour certificates and personal credit) are a device proposed to govern demand for goods in some models of socialism and to replace some of the tasks performed by currency under capi ...
* Livestock ownership and control (see African currency) * Fine wine * Precious metals – ownership in gold, silver, platinum, and palladium *
Real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...
– ownership in actual deeds in protectable controllable land * Stored-value cards – value is physically stored on the cards in the form of binary coded data While these items may be inconvenient to trade daily or store, and may vary in
value Value or values may refer to: Ethics and social * Value (ethics) wherein said concept may be construed as treating actions themselves as abstract objects, associating value to them ** Values (Western philosophy) expands the notion of value beyo ...
quite significantly, they rarely lose all value. It need not be a
capital asset A capital asset is defined as property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or in ...
at all, merely have economic value that is not known to disappear even in the worst situation. The disadvantage for land, houses and property as a store for value is that it may take time to find a buyer for those assets. 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 associated with increased production and supply. Cryptocurrency's role as a store of value is currently a matter of debate. The Internal Revenue Service has issued guidance on "virtual currencies" that refers to them as "a medium of exchange, a unit of account, and/or a store of value." The cryptocurrency Bitcoin is often compared by advocates to gold. In their role as a store of value, cryptocurrencies often elicit concern, due to their extreme volatility, or due to concerns about the emergence of regulation and contradictory handling by governments. Note that the Bitcoin blockchain ledger is unalterable and that Bitcoin cannot be taken from someone, except by force, known as the 'five-dollar wrench attack'.


See also


References


External links

* {{Means of Exchange Currency Valuation (finance)