Why does money have value?

📘 In Brief Money has no intrinsic value – a banknote is essentially just printed paper. Its value arises from collective trust and a social agreement. People accept money as a medium of exchange because they are confident that others will accept it too. This cycle of trust and acceptance is stabilized by government guarantees (legal tender) and the limited supply (central bank control of the money supply). Additionally, money fulfills three classic functions: it serves as a medium of exchange, a unit of account, and a store of value – precisely these functions make it indispensable in everyday life. 🔍 Why This Matters Money is the foundation of modern economies. Without a universally accepted measure of value, the division of labor in complex societies would hardly be possible – we would have to revert to direct barter of goods (e.g., 5 kg of wheat for 1 pair of shoes). The existence of money dramatically reduces transaction costs and enables specialization, investment, and long-term planning. For investors, understanding the value of money is central, because inflation (currency devaluation) and deflation (currency appreciation) directly affect the purchasi …