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 ...

that would normally retain

purchasing power Purchasing power is the amount of goods and services that can be purchased with a unit of currency. For example, if one had taken one unit of currency to a store in the 1950s, it would have been possible to buy a greater number of items than would ...

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 Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...

, or a commodity 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 provi ...

. 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 ...

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 ass ...

, 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 In economics, unit of account is one of the money functions. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of rela ...

, 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

. 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

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

s. 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 In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

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

Bond of National Loan issued by Polish National Government 1863

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 chemica ...

s – value is guaranteed by a legal contract * Collectibles, e.g. original art by a famous artist or antiques such as ancient artifacts or ancient coinage * Gemstones * Gift economy 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 cap ...

Livestock Livestock are the domesticated animals raised in an agricultural setting to provide labor and produce diversified products for consumption such as meat, eggs, milk, fur, leather, and wool. The term is sometimes used to refer solely to animal ...

ownership and control (see

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. This started to change from the 17th century onwards, as European colonial powers introduced thei ...

) *

Fine wine Wine is an alcoholic drink typically made from fermented grapes. Yeast consumes the sugar in the grapes and converts it to ethanol and carbon dioxide, releasing heat in the process. Different varieties of grapes and strains of yeasts are m ...

* Precious metals – ownership in

gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile me ...

silver Silver is a chemical element with the symbol Ag (from the Latin ', derived from the Proto-Indo-European ''h₂erǵ'': "shiny" or "white") and atomic number 47. A soft, white, lustrous transition metal, it exhibits the highest electrical ...

, 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 general ...

– ownership in actual deeds in protectable controllable land *

Stored-value card A stored-value card (SVC) is a payment card with a monetary value stored on the card itself, not in an external account maintained by a financial institution. This means no network access is required by the payment collection terminals as funds ...

s – 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 i ...

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 In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curre ...

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

. 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'.

References

External links

* {{Means of Exchange Currency Valuation (finance)

Money as a store of value

Other stores of value

See also

References

External links