Disadvantages of Money

Disadvantages of Money

Disadvantages of money or monetary system can be expressed in terms of artificial shortage created in the market, unequal distribution of income, and trade cycles at regular intervals, fluctuation in the money value, and creation of speculative market etc.

1.    Artificial Hike in Price

Artificial price hike by creating artificial shortage is possible in Monterrey system. Producer can store value in money for future production, and thus current production level may be reduced to create artificial shortage.

2.    UN Equal Income Distribution Issues

UN equal distribution of wealth is another disadvantage of monetary system. People are able to accumulate wealth in monetary system, moreover, in monetary system investment opportunities are only available to wealthy people, and thus they can create more wealth by using money.

3.    Trade Cycles at regular interval

Economy is not in a stagnant position, and changing its position regularly. Economy takes many positions i.e. Trade cycle. The economy is moving from one trade cycle to another i.e. boom, decline, recession, recovery.

4.    Value of money Changes

Though money stores the value, however, it is not a perfect medium of storage and money value tends to fall over the period of time. This is primarily due to inflation in the economy.

5.     Speculation is created

Money has ability to create a speculative demand for the product. This is especially is case, where the interest rate is low and money can be invested in speculative markets. Speculation has many disadvantages.

6.    Black Economy

Money has encouraged the establishment of black economy in the world. Due to easy transfer ability of money, the illegal activity can be easily funded by the money.