The year is 2015 and thus far we have seen the U.S. Dollar climb 22% year-to-date. The Euro has consequently fallen over 20% (1.40 to 1.09). The Swiss Franc rallied by over 30% in a single day during January. The Yen and Canadian dollar are floundering. And it appears that investors and individuals alike have forgotten what exactly a currency is and the purpose it serves. But this author hasn’t. To remind investors what ‘money’ is, I dusted off a copy of Ludwig Von Mises treatise, The Theory of Money and Credit. Whom better to ask than the man who has been deceased the past 4 decades and yet still predicted the 1999 dot-com bubble, the 2008 housing crisis, and the sooner-than-later to unravel auto loan, student debt, and global junk bond bubbles? 

Mises himself defined money as a universally used medium of exchange. Meaning instead of using the ever complex method of barter for our needs and wants, individuals use a currency that is widely accepted. Example of this is that a shoe salesman sells a pair of shoes for a currency, whether it be gold, silver, a dollar or a euro, and later gives that currency to a baker in return for bread. The cycle continues. Alas, money has an equally vita role—a store of value. This is the idea that instead of using the currency for consumption today it is saved for consumption at a later date. In fact, one of the Federal Reserves mandates during its inception 102 years ago was to “protect and stabilize the currencies purchasing power i.e. store of value”. 

Ironic isn’t it that the dollar has lost over 95% of its purchasing power since then. It appears Wall-St. has mandated their own use of a nations currency and the Fed has aided them in this venture: the use of money as a speculators asset. Remember money has a price, and prices can be manipulated, in the short run. And in a world starved for interest and fixed income— Thank you Fed— investors have gotten more crafty (desperate rather). Money is used for consumption, saving, and a means for investing in capital. Money is not itself a speculative asset, it is the blood that flows through capitalism. When individuals have their purchasing power swinging wildly within only weeks, no interest from savings, and a currency that is being inflated away over time; one better at least pray their respective currency will rise rather than fall.