This is one thing my friend states, quite frequently (he's extremely pro-Austrian, but he has a view diverging belifs, like having debt holidays once every 7 years, a ban on usury, etc).
In any event, one thing he states quite frequently is that "money is not a store of wealth" I can understand this as a valid comment within the confines of a fiat currency such as the USD, but I'm not sure (thus my question) if this would be true if gold were to be used as money.
Resident Christian Minarchist.
So far, I haven't found a single, sufficiently qualified, store of wealth. And maybe this is why capitalism produces growing economies and more wealth.
In the first place a sufficient store of wealth would at least hold the same realtive value when you put it in the store as when you take it out. Lets take any 20 year period. $USD always fails this test. Diamonds or gold would do better, but still not sufficient because the values of both are controlled; diamonds by deBeers and Gold by our government acting with others and the IMF. Stock markets do well sometimes and miserably at others. Storing wealth is risky. Investing it is also risky but you have more ability to manage the investments you make.
Since you are somewhat forced to invest your wealth the economy you invest in will probably grow.
But do not confuse a 'store of wealth' with an economic collape doomsday need for exchange. Such a need does not depend upon storage qualities but upon acceptance qualities. Gold and silver historically have had the widest acceptance as exchange for other goods.
Fiat money is not a store of wealth. It's value is only as good as the goods and services that it can buy. With a Central Bank (Federal Reserve) counterfitting billions of more dollars daily, this activity is only adding more money to the supply of dollars. That means that each dollar will buy less when the increased supply of money starts to flow in the economy. This is inflation. Therefore the money will buy less when prices rise. Therefore, fiat money is not a store of wealth. If the Federal Reserve stopped inflating the money supply then the money would retain its purchasing power. Actually, as productivity increases the number of products to market and the money supply stays fixed, the money will gain purchasing power. Therefore, the value of money and the store of wealth actually increases. Unfortunately, fiat debt based money systems don't work in our favor that way.
The best way to store your savings, as wealth, is to spend the dollars you earn for assets of value or things you will use. Like stock piling the necessities of life. These material things are true wealth. It is unfortunate that we can't forsee all the things we will want in the future and just go out and buy them today. You could stock pile those things instead of owning depreciating dollars. However, economies can't grow if you take such action. For economies to grow and become more productive someone has to save (not consume). Real goods like steel, wood, concrete, whatever.., has to be not consumed for consumption but rather saved to be put toward investment in increasing productivity. That means someone has to save their money and let the companies and producers consume the commodities in their investments, which creates jobs. But the fly in the ointment here is that if people don't want to save their money because they're afraid of inflation then they're consuming goods that can't be diverted toward increasing productivity. It's stifling production and job creation. This is what the government is promoting with their stupid stimulus policies. It's also the reason why productivity and prosperity was so great while we were on a gold money standard and the government didn't have a fiat dollar they could create with their printing press.
Not to pick nits, but ...
Fox McCloud:he's extremely pro-Austrian, but he has a view diverging belifs, like having debt holidays once every 7 years, a ban on usury, etc
he can't be pro-Austrian if he is for debt holidays or a ban on usury.
If you find something evil that wobbles, push it. - Gary North
Store of wealth seems to be a meaningless expression. Wealth is consumption goods and capital goods you can use to acquire consumption goods.
liberty student:he can't be pro-Austrian if he is for debt holidays or a ban on usury.
Sure he can. Austrianism is value free. As long as he awknowledges the implications of the two from an Austrian standpoint he's an Austrian.
@the question.
Money is a means of exchange. It's future value is always uncertain. Insofar as that is the case, the value of holding or exchanging for it is intertemporal. It can "store wealth" if it is commonly accepted and retains a constant value, but this doesn't have to be the case. The propensity for money to "store value" (be a means by which one can trade current goods for future goods) only derives from common utility and steady value, not from the fact that it is money.
Fox McCloud:In any event, one thing he states quite frequently is that "money is not a store of wealth" I can understand this as a valid comment within the confines of a fiat currency such as the USD, but I'm not sure (thus my question) if this would be true if gold were to be used as money.
The primary purpose of money is to facilitate indirect exchange - its use value is negligible (a common characteristic of all enduring forms of money over the centuries). Important side effects of it's use for indirect exchange are that it can serve as a common unit of account and thus facilitates price signals etc. All very important stuff.
Now some people may hold money hoping that it will hold it's value until some future point in time at which point they plan on putting it to use (in order to obtain whatever it is that they really value)... but whether it will in fact hold it's value (purchasing power) until that point and whether or not they will eventually obtain the wealth they seek (the real thing they wanted) will depend on all sorts of things beyond their control... such as the supply and demand for both money and the thing they hope to exchange their money for.
To think of money as a "store of wealth" would be to ignore these uncertain factors that impact on it's ability to serve that function. Money, like all commodities, has a price that fluctuates - it does not matter particularly that money is the most commonly traded commodity... its price can still be caused to fall by either a sudden increase in the quantity of money or a sudden decrease in the quantity of the other goods and services that it is traded for.
Basically, people may attempt to use money as a store of wealth... but this does not actually make it a store of wealth any more than trying to saddle your dog spot will make him a pony. Money might be a slightly more suitable subsittute for a store of wealth than dogs are for ponies... but you get my general drift... just because people tend to treat it as a store of wealth doesn't make it an appropriate tool for that job (and certainly doesn't make it a "store of wealth" by definition, as some people try to claim).
Ludwig von Mises Institute | 518 West Magnolia Avenue | Auburn, Alabama 36832-4528
Phone: 334.321.2100 · Fax: 334.321.2119
contact@Mises.org | webmaster | AOL-IM MainMises
Mises.org sitemap