Everything about Store Of Value totally explained
To act as a
store of value, a
commodity, a form of
money, or
financial capital must be able to be reliably saved, stored, and retrieved - and be predictably useful when it's so retrieved.
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, such as during times of
hyperinflation or when complex and volatile forms of
financial capital are involved, it becomes important to identify alternative stores of value, of which common ones are:
While these items may be inconvenient to trade daily or store, 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 isn't 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.
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