In ancient times, when a person had a certain need, he had to exchange a good that he had in his possession and that he did not need for another good that satisfied that need and that, obviously, was owned by another person. This mode of exchange, called barter, had the problem of the double coincidence of needs, that is, that the other person needed something that we had in my possession and that we valued less.
To overcome these difficulties, our ancestors began to use intermediate goods to carry out transactions, what is now known as money. Money has become an essential element within the economic circuit. However, money is still intermediate merchandise, with the particularity that it serves as a means of payment. For this reason, money, as an intermediate good, must also serve as a store of value. The right Value Network and Collaboration is perfect now.
The General Options
In general, in our daily life we associate money with the possession of income and wealth. This or that person is very rich because he has a lot of money, and not necessarily because he has a lot of properties or assets. However, as we explained at the time, having a lot of money does not have to be synonymous with having wealth, although it is true that this money is used to acquire wealth; that is, money serves as a means of payment.
In reality, money is not only a means of payment, although this is its main characteristic. It also serves as a unit of account, that is, as an indicator of the prices of a certain good or service; and as a store of value. These three characteristics make up the essential functions of money.
Money must maintain its value over time
That money is a store of value means that the intermediate good used to make exchanges must have characteristics of durability or permanence in time that allow savings, that is, transfer present consumption to future consumption.
Any good that does not meet this characteristic can never be used as money, since any variation in its value or price would make our future consumption decisions unable to be adequately satisfied due to the uncertainty that knowing the future value of that good would generate and , use it, therefore, as a means of payment.
What’s more, we couldn’t save either
The probability that the asset will lose part of its value is more than enough reason to think that hoarding it or keeping it in our possession is a waste of money, and never better said. In other words, what makes a good money is the certainty that there will not be significant variations in its value.
For example, let’s imagine that tomorrow we want to buy a car. However, today we do not have all the money necessary to purchase it. If my decision was to wait until we collected all the money needed to buy the car and the money was continually losing value, we would eventually enter a loop without solution. We would reach a point such that, despite having collected all the money that was necessary at the first moment to acquire the car, the value of the property has fallen so much that we have to save it again, since today it is needed a larger amount of money to buy the car.