Store of value
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A store of value is the function of an 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 like gold, or financial capital. The point of any store of value is intrinsic risk management due to an inherent stable demand for the underlying asset.
Money as a store of value
Storage of value is one of the three generally accepted distinct functions of money. The other functions are the standard of deferred payment, which requires acceptability to parties a debt is owed to, and the unit of account, 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 to minimize fraud opportunities. (See functions of money)
Alternative stores of value
Examples for stores of value other than money are
- real estate - ownership in actual deeds in protectable controllable land.
- precious metals - ownership in gold, silver, platinum and palladium.
- precious stones
- collectibles, e.g. original art by a famous artist or antiques like ancient artifacts, ancient coinage.
- Cocaine - used in Guerima, Colombia as a store of value and currency
- livestock ownership and control (see African currency)
- stock - ownership in a company, which is a system to exchange human labor for value.
- Stored-value cards - value is physical stored the cards in the form of binary coded data
- Cryptocurrencies such as Bitcoin
While these items may be inconvenient to trade daily or store, and may vary in value quite significantly, they rarely lose all value. 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, 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.
- "Town where cocaine is the only currency" - The Telegraph 15 June 2008. http://www.telegraph.co.uk/news/worldnews/southamerica/colombia/2135436/Town-where-cocaine-is-the-only-currency.html
- Linguistic and Commodity Exchanges by Elmer G. Wiens, 2005. Examines the structural differences between barter and monetary commodity exchanges and oral and written linguistic exchanges.