Robustness of Money in Facing Crisis

There are two factors to measure the strength of money. First, its strength through time and second, its strength facing storm of economic crisis. These two if the key to measure robustness of money. If a currency fails to pass the test using these two factors, that money is weak, does not have strength at all.

Money has three functions (according to lecture from our teachers), as medium of exchange to avoid inefficiency of barter system, as divisible, fungible, and countable unit of account, and the last, as store of value. Today’s fiat money fail to fulfill the last function of money as store of value because this fiat money (whose value is not backed by gold) can not to be reliably saved, stored, and retrieved — and be predictably useful when it is so retrieved. Today’s nominal values is different with nominal values at 10 years ago and forward.

So today’s money surely does not have strength at all. Almost like robustness of rotten and weakly maintained wooden building facing storm and earthquake. Coarse observation can be viewed from price of gold per troy ounce since abandonment of gold standard post Bretton Woods System. In 1971, gold price was US$ 41.25 in market (officially US$ 35), today gold price is around US$ 800. The value of US dollars has much decreased, and still continuing.