Money: What is its worth?

Does anybody know what is the value of money? In terms of economics, money serves a few purposes, namely:

1) Medium of exchange
2) Store of value

Many centuries ago, when economic transactions were mainly barter trading, the medium of exchange were in the forms of actual goods e.g. trading of cows for sheeps, etc. Later, the medium of exchange evolved into seashells (no joke - very good ones and I have seen it) because it really did not make sense to carry 500 dead cows with you to exchange for 1000 coconut trees. Much later, we started to use gold and silver. Why not other type of metals or material or seashells? Most likely, they realized that there were too many good seashells around and it became 'fiat money' (worthless seashells). And, of course, we do not have a lot of gold and silver. You can keep your hard earned gold and silver under your bed, and get rest assured that you will not wake up the next morning to find your neighbour's dog digging out one ton of gold from the backyard. It will never happen because the amount of gold ever digged out from Mother Earth is about 20 metre cube - maybe the size of a large swimming pool.

So, gold and silver were used as a medium of exchange to buy houses, horses, cows, etc. But, gold and silver is still quite heavy. Imagine carrying ten kilogram of gold to HDB to pay for your flat. So, we have the gold standard - pegging papers to gold. Realistically, paper is quite useless until you need to go to the restroom to do 'big business'. With the gold standard, you can carry 'expensive' paper that can be converted to gold. But, gold is just a medium of exchange. So, ultimately, this paper was meant to replace gold as the medium of choice. Then, came the Bretton Woods system when every country could sell gold to US at $35/ounce with the promise that they could get back the gold in the future. Do you believe this can work? Of course not. This system broke down in 1971. So, now, the medium of exchange is in paper money backed by full faith of the government.

So much for the history. Regardless of the form of money - be it seashell, gold or paper backed by anything, what matters most is the value that it carries. One kilo of gold is worthed about SGD$48k today. So, one SGD is worthed about 0.02gm of gold. Ten years ago, one 1300 sqft 5-room HDB is about SGD$200k. At that time, one SGD is worthed about 0.0065 sqft. I am not sure what is price of a new HDB flat now. But, assuming the new 1000 sqft 5-room flat costs about SGD$300k, one SGD is worthed 0.0033 sqft.

As you can see, the value of paper money is declining because there are simply so many of them. That is why it is worthed less now. You can try keeping your money under the bed for the next ten years and I can guarantee you that it will eventually be worthed less than what it is today. That is also the reason why it looks like the prices of houses, food, etc are getting more expensive. The reality is that the value of your dollar is getting cheaper.