Money
Definition
Money is a medium of exchange that is widely accepted in transactions for goods, services, and the repayment of debts. It typically serves three primary functions: (1) medium of exchange, (2) unit of account, and (3) store of value. Modern money exists in physical forms (cash and coins) and digital forms (bank deposits and central bank reserves).
Why It Matters to Investors
- Money is the foundation of all financial systems and investing activity
- Central banks influence the supply of money through monetary policy, which in turn affects interest rates, inflation, and asset prices
- Investors need to understand the difference between "sound" and "debased" money, especially in inflationary or deflationary environments
- The type of money used (fiat, or metallic-based like gold) impacts purchasing power over time
The TiltFolio View
Both TiltFolio systems treat money as more than just a stable placeholder of value. Fiat currencies can and do lose purchasing power over time, especially when central banks expand the money supply aggressively. That's why TiltFolio Adaptive often allocates to hard assets like gold and commodity equities when monetary debasement is likely. TiltFolio Balanced includes gold (GLD) as a permanent 20% allocation to provide consistent protection against monetary debasement. It is also why cash, while useful in volatile regimes for TiltFolio Adaptive, is not considered a long-term store of value in either system. TiltFolio Balanced does not hold cash positions.
Money is always moving, and the goal is to own what it flows into next. TiltFolio Adaptive seeks to capture these flows through dynamic allocation, while TiltFolio Balanced maintains consistent exposure to hard assets through its gold allocation.
Real-World Application
• During the 1970s inflationary period, the value of fiat currencies fell dramatically in real terms, and gold surged in response
• In quantitative easing cycles, central banks expand the money supply to stimulate economic activity, often fueling asset price inflation
• In emerging markets, where local currencies are less stable, people often convert their money into U.S. dollars or physical assets for safety
• In digital economies, stablecoins and central bank digital currencies (CBDCs) are emerging as programmable forms of money