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, trade cycles,
fluctuation in the money value, and speculation in the market etc.
1. Artificial Shortages
Disadvantages
of money include creation of artificial shortage for profit making. Prices are
raised by artificial shortages. Producer reduces supply for increase in price
and hold money instead of investment until prices rises. The produce can hold
money is , because it store value quality.
2. Income Distribution Issues
Money
has vital importance in capital economy. In capital economy resources are
utilized for self interest and overall interest is ignored. Monetary system promotes accumulation of
wealth in few hands and discourages equal distribution of income.
3. Trade Cycles is Money Phenomena
Monetary
system creates trade cycles i.e. boom, decline, recession, recovery. This
phenomenon is only characteristics of monetary system. In barter system there
is no concept of trade cycle and the economy functions in smooth manner all the
time.
4. Money Value Fluctuation
Disadvantage
of monetary system include money value fluctuation. Money value tends to fall
with the passage of time due to raise in general price level. Therefore money
does not store value in real terms or in long term.
5. Money Create Speculations
Money
creates speculative trend in the market, which may not be representative of
actual market conditions. These speculative trends may bring heavy losses to
market stakeholder. Speculation can be more clearly observed in stock markets.
6. Illegal Activities
Monetary
system provides more convenience to carry out illegal activities i.e. drugs
trafficking, terrorism. Money can be easily transferred to one place to another;
therefore illegal activities can be easily funded.
