Store of value

This is distinct from the standard of deferred payment function which requires acceptability to parties one owes a debt to, or the unit of account function which requires fungibility so accounts in any amount can be readily settled. It is also distinct from the medium of exchange function which requires durability when used in trade, and a minimum of opportunity to cheat others.

When currency is stable, money can serve all four functions. When it isn't, or when complex and volatile forms of financial capital are involved, it becomes important to identify stores of value, of which common ones are:

• real estate - actual deeds in protectible land
• gold - once the basis of the gold standard
• more stable currencies, e.g. the Euro
• less globally connected currency, e.g. the yuan
• collectibles, e.g. original art by famous creators, antiques
• livestock

While these are clumsy to use in daily trade or to settle accounts, and may vary in value quite significantly, they rarely or never lose all value. This is the point of any store of value, to impose a natural risk management simply due to inherent stable demand for the underlying asset. It need not be a capital asset 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; gold is favored because its economic utility far exceeds its supply, which puts a higher floor on the value of gold than on many other commodities.

See also: Bretton Woods, fractional-reserve banking, Value of Earth

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