What is a Store Of Value?

Value storage is the storage of valuable items. One of the functions of money is to achieve long-term storage of purchasing power.

Value store

Value storage is the preservation of its purchasing power in the process from obtaining to consuming income. This function of currency is very useful, because most people don't want to consume it immediately when they get income, but they are willing to spend it when they have time or when they need it more. ^[1]

Money is not the only means of storage. Whether it is money, stocks, bonds, land, houses, art, or jewelry, any asset has a value storage function. Because the interest income of these assets is usually higher than currency, or can add value, or provide various service functions such as residence, most assets are superior to currency as a means of value storage. However, currency itself has irreplaceable advantages. Since currency itself is a transaction medium, it can be directly used for purchasing activities without conversion into other assets, so currency is the most liquid asset. In the process of converting other types of assets into currency, transaction costs are incurred. For example, when you sell a house, you have to pay a commission fee. If you urgently need cash to pay the bills due, you may be forced to accept a lower price. Because money is the most liquid asset, people are willing to hold money even if it is not the most attractive way to store. ^[1]

The effectiveness of money as a store of value depends on the price level. For example, if the entire price doubled, the value of the currency would fall by half; conversely, if the entire price fell by half, the value of the currency would double. During the period of inflation, due to the rapid rise in prices and the rapid depreciation of currencies, people often use forms other than currency to store wealth. In an extreme inflation state where the monthly inflation rate is greater than 50%, also known as

After the First World War, Germany experienced hyperinflation, sometimes with monthly inflation rates exceeding 1,000%. After the end of hyperinflation in 1923, prices have risen to 30 billion times two years ago. Even if you buy daily necessities, the amount of money needed is surprisingly large. At the end of hyperinflation, buying a slice of bread is said to require a cart of cash. The currency is depreciating so fast that on paydays, workers are forced to put down their jobs many times so that money can be spent before it becomes worthless. ^[1]