What is the value of money? Will it ever be worthless in the future?

Hello Anon,

This is my first ever answer posted on Seedly and I think this question is worth answering. I'm Nat (@silver.fortress in IG) and I blog and learn about the beauty of precious metals. Hopefully my sharing can be beneficial for you.

Disclaimer: I am not a financial advisor. I am a stacker who believes in the value of gold and silver. All points are only my opinions. We are responsible for our own decisions. I did not have a financial education in the past. I am very grateful for all Seedly's wonderful contributors. I get to learn financial literacy for free and it's awesome! Still reading and learning :)

Too long to read, direct answer

Value of money(currency) depends on its purchasing power. Money($) will definitely be worth-lesser due to inflation. Your $1 today is $1 lesser in the future.

Value of Money

Money is money because of its characteristics. Some have already been mentioned from the previous comments. There are 7 characteristics of money:

1) Medium of Exchange

Historically, men exchange goods through trade. 'I want your chicken, you like my eggs.' trade! But what if 'I want your chicken but you do not like my eggs?' That's a problem. Therefore, there is a need for another party/medium to complete the exchange/transaction. That's the main purpose of money. It is first and foremost a medium of exchange. Perhaps water, as an example, would be a good medium of exhange.

2) Unit of Account

Like chickens and eggs, money should be measurable and easily counted. Water is measurable in ounces.

3) Durable

Unlike chickens and eggs, money needs to be durable. It should last long enough to be inherited at the very least. Chickens get sick and old while eggs expire and get broken easily. Water last long if it is in a bottle.

4) Divisible

Chicken dies if you divide it. Eggs break. Water can be poured to another bottle.

5) Portable

Bringing a flock of chickens in the street is a hustle. Eggs are fragile. Water in a bottle is defitley portable. It should easily carried or transported.

6) Uniform

The medium of exchange must hold the same intrinsic value universally. Your USD$2 is equal to my USD$2. Chicken and eggs definitley do not qualify. My fresh water can be the same as yours.

7) Stores value

Money must store value. The medium of exchang should retain it's purchasing power for a long time because it is scarce. Fresh water is precious. It could be a good form of medium of exchange.

Things outside store of value are currencies. US Dollar for example definitely depreciates due to inflation. I guess that is why people invest at the first place to beat inflation. It is not backed by a tangible asset but backed by faith and trust collectively.

Fresh water will always be needed. They are scarce and definitely precious. Elements H20 cannot be printed many times. So they store an intrinsic value. But well.. we aren't using water probably because it's a medium for living things to live.

Literally right down to as small as the element itself, Gold(Au) and Silver(Ag) qualify all these characteristics. We do not need Gold and Silver for living things to live but it's definitely a great form of medium of exchange that worked for many civilisations throughout histroy.

Value of money therefore depends on the store of value it holds and how much is its purchasing power. If our $1 can buy us a shiny blue (i like blue) lamborghini car, the value of our dollar would be high because of its purchasing power.

Will it be worthless in the future

Your money will be worthless in the future unless you grow it. Starting a business or investing early are a few ways to increase/maintain the value of your bank account. Since one of the characteristics of money is storing value, I believe that the precious value we worked and earned hard for (with blood,sweat and tears) should at least be inherited as a generational wealth. Real assets like an actual plot of land is a good example of a storer of value. But it cannot be a good example of a medium of exchange.

In terms of currencies, it has to inflate. $1 today does not hold the same value in the future. Inflation is good to encourage consumers to buy more today before price increases tomorrow (Because 'my $1 is more powerful today than tomorrow'). The better the purchasing power, the stronger the GDP. Without inflation, there are too much people saving. Lesser customers for businesses. So a delicate balance needs to be in place to allow businesses to grow and create value. I guess that's how our modern civilisation could advance so rapidly. But that's just my take.

Central Banks creating money 'out of this air'

I do not think this is entirely true. The MAS (Monetary Authority of Singapore) has an important role to balance the money supply and demand for our currency to ensure stability in prices. You can literally destroy a country by hyper-inflating its currency. I am sure there are strict measures to prevent that from happening and I guess that is why our nation remains strong. Central Banks does not create money out of thin air. That is suicide for any nation. Central Banks of other nations like Russia and China are big buyers of Gold for their reserves.

Although I believe that gold as a medium of exchange is the future we are heading to, our currencies today will not be too worthless and I trust our dollar. Unless of course we become a socialist welfare state like Venezuela and create a hyperinflation. Your $1 literally can become $0.01 or even lesser. Future is always uncertain. Let's just hope we do not end up that way.

Hi anon,

Your question and description really reminded me of this Netflix show 'Money Heist' (check it out, it's really good!) and got me reflecting a bit on what I think is the value of money.

I agree with HC that money is all about "exchange". From the early days, homo sapiens have been making exchanges with one another for whatever we felt had greater utility, money was created as a more homogenous tool to facilitate the exchange for utility. Utility - in my opinion - encapsulates the meaning of "value" very well. "Value" operates as a noun (the worth of things) and verb (quantity attached to it). Utility, similarly, can represent the worth of something while being pegged with a quantifiable amount too.

In the past, mankind started out by exchanging resources they had comparative advantage in exchange for resources they lacked - this helped them gain extra utility. Soon, the exchange enlarged in scale when it began involving money. The utility in money had a greater emphasis on its quantifiable aspect, which in my opinion, led to the start of capitalism. Capitalism, in my opinion (again), was fueled from our desire for our economies to grow larger, and therefore reign sovereign. Growth has to be quantified, thus, we focused on the quantifiable aspect of money than its worth.

In short, you can argue that money seems "worthless" if we only focus on the quantifiable aspect of its utility. But i think what paints a vague picture of our future relationship with money is the platform money operates under. Cyrptocurrency and e-payments are still foreign to some parts of the world, or even if they aren't stranger danger to us, people remain unreceptive to something relatively new to us (Think: Singaporeans reliance on cash/card still, despite MANY e-payment platforms being released to us!).

Additionally, if we can simply "create money out of thin air" then yup, money will seem "worthless" because inflation will probably reduce its utility to us from a quantifiable point of view. Venezuela's inflation crisis is the perfect example - they're taking origami to a whole new level and folding their dollar bills into new structures to sell and earn from it instead. I'm like .....?????

To wrap up, I personally doubt money will be "worthless" per se, the value - and therefore, utility - attached to it will just change over time.

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