Pondering macroeconomics: Money is not a store of value

[jon_leonard]

At an individual level, money is a store of value (and that's even part of the definition). If I want to be able to get something later, a good strategy is to save some money, and then buy what I want

Comments

[motleypolitico]

I'm not sure, but somehow information under certain conditions should have value.

[jon_leonard]

Makes sense: If you want to know something later, it's a pretty reasonable thing to do to learn it now, and not forget it. Information usually stores pretty well.

[estokien]

Did you ever listen to the Global Pool of Money show on This American Life (I think it aired 2008)? It talks about the role that the excess capital that countries that have trade surpluses played driving up the demand for "safe" places to keep money hedged against inflation that helped cause the proliferation of the Mortgage Backed Securities.

One thing that the Chinese have been doing with their extra money lately is trying to make deals with oil producing nations to secure oil for the future demands of their country. All monetary transactions are bets on the future though.

[beth_leonard]

I remember that one. The idea at the time of a global pool of money out looking for safe investments was interesting and new to me.

--Beth

[corpsefairy]

My first off the cuff answer is that an educated and labor-skilled populace is a store for the future.

[beth_leonard]

That's my first thought as well.

Educated Populace
Educational Institutions
Culture
Transportation networks
Communication Networks
Rule of law

--Beth

[mrc80238]

To take a lesson from history: There's a reason that royalty throughout the ages has invested in land and art. Land always holds value in the long run, art you may have to be careful to invest in Picasso versus Joe Shlabotnik. Precious metals/gemstones as well.

I'm not saying this is the right advice, but it is what wealthy people through the centuries have invested in.

[jon_leonard]

Those are especially reliable, yes. There may be some bias in terms of what sorts of investments were available at various points in history, but that more or less confirms their robustness: Land and art have had known value for essentially all of recorded history.

Re: Options

[jon_leonard]

That's a lot like saving money, though. If I sell you an option, it gives you more flexibility, and me less flexibility. Accumulated at a macro level, they can't store value (they're zero-sum), and I was trying to ask for non-zero-sum value storage.

Options are interesting, of course, and mix in complicated ways with other investments. It's just that the total value of all options positions is exactly zero.

Re: Options

[jon_leonard]

"What kinds of things store value for the future that aren't claims on someone else's wealth?"

So, not exactly the same as ways that one person could store value. Alternatively, ways that society as a whole can store value.

I may be mixing up "value" and "utility", perhaps: Something like an insurance contract can make both the insurer and insured, on average, happier.

I don't think I buy land ownership as being zero-sum. You can do things to make land more (or less) valuable.