What is the function of money?

The essence of money is reflected in the function of money, and the so-called function of money refers to its role in social and economic life.

Under the condition of market economy, money has five functions: value scale, medium of exchange, means of storage, means of payment and world currency.

Among them, value scale and exchange medium are the basic functions of money, while storage means, payment means and world currency are additional functions derived from their basic functions.

1. Value scale

The first basic function of money is as a measure of commodity value.

The unit price of money, as a measure of value, is a measure of the value of all exchangeable items, while money, as a measure of value, can convert all valuable items into monetary units for operation.

Just as the ruler for measuring the length has its own length and the weight for measuring things has its own weight, the currency for measuring the value of goods is also a commodity and valuable.

What is worthless cannot be used as a measure of value.

When money performs the function of value scale, it does not need real money, but only conceptual money to express the value of goods, and price is the monetary expression of commodity value.

So value is the basis of price, and price is the monetary expression of value.

2. Exchange of media

The medium of exchange is also one of the basic functions of money, also known as the means of currency circulation.

Different from the value scale, the currency as a medium of exchange cannot be a concept currency, but must be a real currency.

The function of money as a medium of commodity exchange divides barter into two trading behaviors: the first step is to exchange money with goods, and the second step is to exchange goods with money.

The transaction with currency as the exchange medium greatly reduces the transaction cost and promotes the development of the market and division of labor.

3. Storage means

Storage means that money is temporarily not circulated in society for various reasons, but is preserved as an independent value form and social wealth.

As a means of storage, money develops with the development of commodity production and circulation.

In the early days of commodity circulation, some people changed the surplus products into money to save them. This behavior of storing gold and silver is considered as a manifestation of wealth and a simple form of saving money.

With the expansion of commodity circulation, the role of money is increasing. Everything can be bought and sold with money, and currency exchange extends to all fields.

Under the modern credit currency system, people who hold money as a means of storage will be affected by inflation risk.

Relatively speaking, precious metal currency has more advantages in maintaining purchasing power.

When currency performs the function of storage means, it has the following two remarkable characteristics: (1) It must be realistic and sufficient currency.

(2) Money, as a means of storage, must exit the circulation field and be in a static state.

As a means of storage, money can spontaneously adjust the circulation of money and play the role of a reservoir.

When the circulation of commodities in the market shrinks and there is too much money in circulation, some money will withdraw from the circulation field and be stored; When the circulation of commodities in the market expands and the demand for money increases, a part of the stored money will re-enter the circulation field.

4. Payment instruments

As an independent form of exchange value, money plays a role as a means of payment when it is transferred unilaterally.

The so-called unilateral transfer refers to the time interval between the occurrence of economic behavior and monetary payment.

As a means of payment, money originally originated from credit transactions in commodity transactions.

Commodity sales on credit and payment in advance are two forms of credit transactions. The former is that goods are sold first, and then payment is made. The latter is to pay for the goods first and then sell the goods.

But no matter which form, it is the separation of timely delivery and payment.

When the commodity economy develops to a certain extent, the function of money as a means of payment extends beyond the field of commodity circulation, which is manifested in paying taxes, rents, wages, labor services and so on.

5. World currency

World currency refers to the function of currency in the world market as a universal equivalent.

Due to the occurrence and development of international trade, currency circulation transcends the scope of a country and plays a role in the world market, so currency has the function of world currency.

Gold and silver used to be the world currency for a long time. Since the mid-1970s, due to the dishonoured currency system adopted by countries all over the world, the currencies of some countries with strong comprehensive national strength have been recognized by most countries, and the currencies of these countries have played the role of world currencies in the international market, such as US dollars and British pounds.

At present, the main function of the world currency is to balance the balance of payments as an international payment means.