What Is Money? The 3 Functions Nobody Teaches You

You work your entire life to accumulate euros. But do you really know what a euro is? And more importantly... what it's really worth?

Table of Contents

1. Introduction: The Collective Illusion
2. The 3 Fundamental Functions of Money
3. Money vs Currency: The Crucial Distinction
4. What Makes Good Money: The 6 Essential Properties
5. What Bankers Know (And Hide From You)
6. Why Nobody Teaches You This?
7. Practical Implications for Your Wealth
8. FAQ: Frequently Asked Questions
9. Conclusion: The First Step Toward Sovereignty
10. Sources and References

Introduction: The Collective Illusion

The euro you accumulate loses 2% per year: it's mathematical.

Every day, you exchange your time, energy, and skills for numbers on a bank screen or pieces of paper in your wallet. You call it money. But have you ever taken the time to ask yourself what it really is?

Most people confuse three fundamental concepts: money, currency, and fiat. This confusion is no accident. It's maintained by a system that has every interest in you not understanding the rules of the game.

Some numbers to start:

• The euro has lost 30% of its purchasing power since its creation in 1999
• €100 saved in 2000 now only buys the equivalent of €65 today
• The money supply in the eurozone has been multiplied by 4 in 20 years

In this article, we will dissect what money really is, why the current euro no longer fulfills its historical functions, and what this concretely means for your wealth.

"The first step toward financial sovereignty is understanding what money really is."

The 3 Fundamental Functions of Money

Medium of exchange, unit of account, store of value: the euro fails on two fronts.

For millennia, economists have agreed on three essential functions that money must fulfill to be considered as such. Let's analyze each of them and see how the euro performs.

1. Medium of Exchange: Facilitating Transactions

Definition

The primary function of money is to serve as an intermediary in exchanges. Before the invention of money, barter reigned supreme. The problem? The double coincidence of wants.

Imagine: you're a baker and you need shoes. You must find a cobbler who precisely needs bread, at the exact moment when you need shoes, and in corresponding quantities. Nearly impossible mission.

Money solves this problem by becoming a universal standard accepted by everyone.

Does the euro fulfill this function?

Yes, partially.

For local and intra-European transactions, the euro works fairly well:

• Instant payment at merchants
• Relatively fast SEPA transfers (D+1)
• Near-universal acceptance in the eurozone

But limits quickly appear:

The traditional banking system operates on office hours: no transfers on weekends, not during holidays, not after 5 PM. In 2025, this seems anachronistic.

Good to know: A transfer from Paris to Tokyo via the traditional banking system takes an average of 4 business days and costs €25-40 in fees. A Bitcoin transaction takes 10-60 minutes and costs a few euros, regardless of the amount.

2. Unit of Account: Measuring Value

Definition

The second function of money is to serve as a measurement standard to compare the value of goods and services between them. Without a common unit of account, impossible to know if a car is worth 10 cows or 100 sheep.

The unit of account must be stable over time to allow relevant comparisons.

Does the euro fulfill this function?

Partially, and less and less well.

The fundamental problem: a euro from 2000 is not equal to a euro from 2025.

Let's look at price evolution over 25 years:

Alarming observation: Prices have increased much faster than wages. Real purchasing power is eroding.

When the unit of measurement constantly changes size, how can you establish long-term contracts? How can you plan for retirement? How can you compare economic performance from one year to the next?

"Imagine measuring your house with a meter that shrinks 3% every year. After 25 years, your house seems to have doubled in size, but it's the meter that shrank by half."

3. Store of Value: Preserving Your Purchasing Power

Definition

This is the most crucial and most neglected function. Good money must allow you to store your wealth over time without it degrading.

You work hard for 40 years, you save part of your income, and at retirement, that savings should have preserved its purchasing power. This is the implicit promise of any sound money.

Does the euro fulfill this function?

No. Absolutely not.

This is the central lie of the current monetary system. The euro (like all fiat currencies) systematically loses value year after year.

Numerical demonstration:

With an average inflation of 2.5% per year (ECB target):

• After 10 years: €100 → €78 purchasing power
• After 20 years: €100 → €61 purchasing power
• After 30 years: €100 → €48 purchasing power
• After 40 years: €100 → €37 purchasing power

You lose 2/3 of your savings in a working lifetime.

And this calculation uses official inflation, often underestimated. The real inflation felt by households is generally higher.

Warning: The ECB's 2% inflation target is not an accident. It's a deliberate policy of slow but constant erosion of your savings. It's an invisible tax that doesn't say its name.

Historical Quote

"Paper money eventually returns to its intrinsic value: zero."

— Voltaire, 1729

This quote is over 300 years old, but it remains burning topical. Of the 775 fiat currencies created in history, 599 no longer exist (collapse, hyperinflation, monetary reform). The average lifespan of a fiat currency is 27 years.

Money vs Currency: The Crucial Distinction

Three words, three realities: understanding this difference changes everything.

These three terms are used interchangeably in everyday language, but they designate very different realities.

Money (True Money)

Money in the original sense designates what truly stores value over time. Historically, this was gold and silver metal (hence the name).

Characteristics of true money:

• Limited supply (cannot be created arbitrarily)
• Preserves its value over centuries
• Universally recognized
• Is nobody's debt

Gold has met these criteria for 5,000 years. Bitcoin has met them since 2009.

Currency (Fiat Currency)

A currency is what circulates in an economy to facilitate exchanges. It can be issued by a government or central bank.

Characteristics of a currency:

• Legal means of payment
• Can be created in unlimited quantities
• Loses value over time
• Is a claim on the issuer

The euro, dollar, yen are currencies. They fulfill the exchange function well, but fail as a store of value.

Comparative Table

What Makes Good Money: The 6 Essential Properties

Durability, portability, divisibility, uniformity, scarcity, acceptability: the complete test.

Economists have identified six properties that money must possess to effectively fulfill its functions.

1. Durability

Money must not degrade over time. Bills wear out, coins oxidize. Gold withstands the test of time. Digital data, if properly replicated (like the Bitcoin blockchain), is eternal.

2. Portability

It must be easy to transport. Gold fails here: try traveling with €1 million in gold (about 15 kg at current rates). Digital currencies excel: you can carry billions in your head with a 24-word phrase.

3. Divisibility

Money must be able to be divided into small units for small transactions. The euro is divided into cents. Bitcoin is divided into satoshis (100 million per bitcoin), allowing micro-transactions.

4. Uniformity (Fungibility)

Each unit must be identical to the others. One euro must be worth exactly one euro, whether it comes from Paris or Berlin. One bitcoin is worth one bitcoin, regardless of its history.

5. Limited Supply (Scarcity)

This is the most important property for the store of value function. If money can be created arbitrarily, it will inevitably lose value.

6. Acceptability

Money must be recognized and accepted by the community. This is Bitcoin's current weak point: its adoption is progressing but remains limited compared to traditional currencies.

What Bankers Know (And Hide From You)

Admissions from central banks themselves: creating money from nothing.

Before understanding why nobody teaches you these truths, listen to what the architects of the system themselves have said:

Admissions from Bankers and Economists

"The process by which banks create money is so simple that the mind rejects it."

— John Kenneth Galbraith, Money: Whence It Came, Where It Went (1975), Chapter 3

"Let me issue and control a nation's money, and I care not who makes its laws."

— Mayer Amschel Rothschild, cited in The Creature from Jekyll Island by G. Edward Griffin (1994)

"Commercial banks create money, in the form of bank deposits, when they make loans."

— Bank of England, "Money Creation in the Modern Economy", Quarterly Bulletin Q1 2014, p.14 📄 Official source: bankofengland.co.uk/quarterly-bulletin/2014/q1

"The bank benefits from interest on all the money it creates from nothing."

— William Paterson, founder of the Bank of England, cited in A History of Central Banking by Stephen Goodson (2014)

What They Never Tell You

Fact #1: Ex nihilo money creation

When you deposit €1,000 at the bank, the bank can create up to €10,000 in loans from your deposit (fractional reserve system). It earns interest on that €10,000 it created from nothing.

📄 Reference: ECB Regulation No. 1745/2003 on reserve requirements - 1% reserve rate in the eurozone since 2012

Fact #2: The mathematical trap of interest

The money to pay the interest on loans doesn't exist in the system. It must be created by... new loans. It's a mathematical pyramid.

📄 Demonstration: Documentary "Money as Debt" by Paul Grignon (2006) - Mathematical analysis of the debt system

Fact #3: Nixon's televised admission

On August 15, 1971, Nixon admitted on television that the dollar was no longer worth anything tangible: "I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold."

📄 Archive: Nixon Presidential Library - Address to the Nation Outlining a New Economic Policy, August 15, 1971 📄 Video: Available on C-SPAN archives

Fact #4: The total control project via CBDCs

The Bank for International Settlements (BIS), the "central bank of central banks," published a document acknowledging that CBDCs would allow "absolute control" over citizen spending.

📄 Source: BIS Working Papers No. 880 - "Central bank digital currencies: foundational principles and core features" (2020) 📄 Exact quote p.3: "A CBDC would give central banks absolute control over the rules and regulations that will determine the use of that expression of central bank liability, and also the technology to enforce those rules."

Why Nobody Teaches You This?

Collective ignorance is necessary for the current system's survival.

Non-existent Financial Education

In France, financial education is virtually absent from the school system. We learn mathematics, history, sciences... but not how the money we'll handle our entire life works.

What school doesn't teach:

• How the banking system works
• What inflation is and who benefits from it
• How banks create money
• How to protect your savings

This ignorance is not an accident.

Government Interest

Governments have a direct interest in citizens not understanding the monetary system:

1. Inflation is an invisible tax that doesn't require parliamentary vote
2. Public debt melts away thanks to inflation (repaid in depreciated currency)
3. Savers passively fund public spending through loss of purchasing power

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

— Henry Ford

The System Relies on Collective Ignorance

The current monetary system works on trust. As long as people believe the euro has value, it does. If everyone understood that the euro loses 2-3% per year guaranteed, behavior would change radically:

• Flight to real assets
• Demand for indexed wage increases
• Loss of confidence in the system

That's why the system's complexity is maintained, and financial education remains absent.

Practical Implications for Your Wealth

Saving in euros guarantees a slow but certain loss of purchasing power.

Keeping Savings in Euros = Losing Money

With current savings account interest rates (2-3%), you're at best breaking even against official inflation. In reality, you're losing purchasing power.

Simple calculation:

• Livret A (French savings account): 3% return
• Real inflation: 4-5%
• Result: -1 to -2% per year in purchasing power

After 20 years of "safe" savings, you've actually lost 20-30% of real value.

Real Estate: False Solution?

Many turn to real estate as protection against inflation. This is partially true, but with limits:

Advantages:

• Real asset that generally follows inflation
• Generates income (rent)
• Leverage effect via credit

Disadvantages:

• Illiquid (impossible to sell quickly)
• Not portable (impossible to move)
• Heavily taxed (wealth tax, capital gains, property tax, inheritance)
• Seizable (the State can confiscate)
• Maintenance costs (repairs, charges)

Assets That Really Protect

To protect your purchasing power long-term, favor assets with limited supply:

1. Physical gold: 5,000 years of track record as store of value
2. Bitcoin: Digital gold with superior portability and divisibility
3. Quality stocks: Participation in companies generating real profits
4. Productive assets: Anything that generates real income

Tip: Don't put all your eggs in one basket. A diversified allocation between real assets (gold, real estate), digital assets (Bitcoin), and productive assets (stocks) offers the best protection.

FAQ: Frequently Asked Questions

But the euro is guaranteed by the ECB, isn't it?

No. The euro is guaranteed by nothing tangible. Since the end of the gold standard (1971), no major currency is backed by a real asset. The ECB can create euros in unlimited quantities by simple decision. The only "guarantee" is collective trust in the system.

Isn't gold the best store of value?

Gold has proven its value over 5,000 years of history. It's an excellent store of value. Its limitations: difficulty of transport, secure storage, division for small transactions, and risk of confiscation (as in 1933 in the United States). Bitcoin offers the same monetary properties with superior portability and divisibility.

Isn't Bitcoin too volatile to be money?

Bitcoin is volatile short-term because its adoption is still in progress. But long-term, its trend is clearly bullish (+150% per year on average since creation). This volatility gradually decreases with increased liquidity and adoption. The euro was also volatile at its beginnings.

Why don't economists say the euro is losing value?

Most mainstream economists are trained and employed by the current system (banks, governments, institutions). Criticizing money creation means sawing off the branch they're sitting on. Austrian School economists (Mises, Hayek) have been criticizing this system for a century, but they remain in the minority.

My parents saved their whole lives in euros, is it really lost?

Not entirely lost, but significantly eroded. If your parents saved €100,000 25 years ago, that sum now only buys the equivalent of €65,000 today. That's 35% of purchasing power volatilized. That's why it's crucial to understand these mechanisms as early as possible.

Conclusion: The First Step Toward Sovereignty

You just understood a fundamental truth that most people ignore: the fiat currency you use daily is a wealth transfer tool—from savers to borrowers, from citizens to governments, from the prudent to speculators.

This is neither a conspiracy nor a plot. It's simply the mechanical functioning of a system where money can be created without limit.

Key points to remember:

1. The euro poorly fulfills its 3 functions: acceptable as medium of exchange, failing as stable unit of account, catastrophic as store of value

2. Good money must have limited supply: this is the sine qua non condition to preserve value

3. Ignorance is not an accident: the system has an interest in you not understanding

4. Alternatives exist: gold, Bitcoin, real assets with limited supply

Understanding money is the first step toward financial sovereignty. In the next articles in this series, we'll explore:

• How we got here: the history of money
• The creation of the Federal Reserve: Jekyll Island 1913
• How banks create money from nothing

Related Articles — Monetary Sovereignty

• Mass Manipulations Verifiable Facts
• Financial Censorship Account Freezes
• Bank vs Bitcoin Money Transfer
• Psychology of Money Morgan Housel
• Fed Creation Jekyll Island 1913

Sources and References

• Eurostat: Eurozone inflation data 1999-2025
• ECB: M3 money supply and monetary policy
• INSEE: Price evolution in France
• Saifedean Ammous: "The Bitcoin Standard" (2018)
• Morgan Housel: "The Psychology of Money" (2020)
• wtfhappenedin1971.com: Post-gold standard historical data
• World Gold Council: Data on gold as store of value

⚠️ Disclaimer: This document is provided for informational and educational purposes only. It does not constitute financial, legal, or tax advice. Crypto-assets are high-risk investments. Consult a qualified professional for your personal situation.

Article written in December 2025 | Category: Money, Debt & Financial Sovereignty