Trust is essential to a societies prosperity. It is fundamental to economic coordination and underpins the way a society operates. If there is a lack of trust in society, transaction costs are high. There are many types of transaction costs that we incur when we enter into a transaction, and generally, one party always stands to gain more than the other if trust is violated. Therefore, the party that stands the most to lose will often expend resources to ensure that the other party does not violate the conditions of their agreement.
The society we live in today is obsessed with the idea that monies only role is operating as a medium of exchange. After all, this property of money is essential, if nobody wants to transact using it then it’s not exactly useful as money. However, there is always an opportunity cost when using money. This cost has a lot to do with a market participants time preference. Time preference refers to the ratio at which individuals value the present compared to the future.
In order to understand why scarce money has value we need to address time. Time, after all, is the most valuable thing we have. Some people are blessed with many years, whilst others are not so lucky. It is the one resource we all have in limited supply.