September 30, 2014 in Uncategorized
However, the statement that “money is a store of value” is not entirely true and valid. In fact, it is a partly false, partly deceiving and partly misleading statement.
Money is not a store of perfectly stable real value during low and high inflation or hyperinflation.
The world money supply is mainly in a state of inflation.
Money is, on the other hand, a store of increasing real value during deflation. See the Japanese economy.
In principle, the generally accepted statement that “money is a store of value” is never completely true during inflation and deflation.
Because money is a decreasing store of real value during inflation and an increasing store of real value during deflation.
The CPI is not perfectly stable on a sustainable basis over time.
The longest period I have seen the CPI perfectly stable was during a period of two months. That certainly does not qualify as “perfectly sustainable over an indefinite period of time” or “perfectly stable over a sustainable period of time.”
Money is only a perfect store of constant purchasing power (real value) over time when it is either inflation or deflation-indexed on at least a daily basis, i.e., when it is inflation or deflation-adjusted in terms of the change in the general price level – i.e., at least daily in terms of the Daily CPI.
Examples of money in a state of being “a store of real value” is when it is maintained in the form of government daily inflation-indexed bonds, e.g., US Treasury Inflation-Protected Securities (TIPS).
Money in the world economy is only a perfect store of constant purchasing power in the USD 3 trillion + maintained perfectly stable in real value in the global government daily inflation-indexed bond market plus the 25% + of the Chilean money supply that is inflation-indexed on a daily basis plus all mortgage bonds (monetary items) in Colombia which are inflation-adjusted on a daily basis in terms of their Daily Real Value Index.
Summary: Money is not a store of value.
Shares (a variable real value non-monetary item) are – generally – a store of increasing variable real non-monetary value over the long term.
Nicolaas Smith Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.