1. Money is a medium of financial exchange. 
2. Money is a measure of value.
3. Money may be used as a store of value. 
Most definitions of money have these elements:
Although sometimes it is written as:
Other items or comments written into or around the definition include:
Money is a human invention to facilitate the exchange of goods and services.
The use of money tokens overcomes the inefficiency of barter.
Money has value because it has a limited supply and a has a demand created by a government for the payment of taxation.
Money has no value to the creator, but maintains value to the citizens by scarcity and by enforcement.
Money is socially accepted as a means of exchange.
Money is authorized by government.
Money is used as a measure of the values of goods or services.
Currency and coin are money that is guaranteed as Legal Tender by the government, a regulatory agency or bank.
Cash is the Legal Tender of the nation. Other forms of money, including Bank Credit, are not Legal Tender, but are generally accepted for the extinguishment of debts including taxation debts.
There is no uniform agreement as to what qualifies as money. Some economists include more mediums of exchange than other economists.
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts.
Money can be used as a unit of account.
Money can sometimes be a standard of deferred payment.
Money obtains its value because the government declares it to be Legal Tender which means that it must be accepted as a means of payment for all debts, both public and private.
Because there is so much to gain from the authority to create money, any level of trickery, deceit and violence may occur.
The definition of money has a similar problem to the definition of gravity. The definition is inadequate. To my mind, the definition restricts the comprehension of the money system.
One major statement is missing from the standard definition of money: money has ‘no value to the creator’. The definition suggests that money always has value and this is not correct. Money is created at no cost and obtains its value at time of transaction. The value is tied to its potential value released at the next transaction. The value of money is completely tied to its ability to transact. The creator can create any amount of money at no cost and so it is effectively a ‘free’ resource to the creator and the nation.
The value of money to an individual equals the value that can be realised at the next transaction. As individuals, we perceive the value of a one-hundred-dollar note to be one-hundred-dollars because we can buy food to the value of one hundred dollars at the next transaction. The value of this one-hundred-dollar note to society is significantly higher. A one-hundred-dollar note will travel from individual to individual in a continuous cycle of transactions releasing many thousands of dollars of life-sustaining and wealth creating transactions. Money itself does not have value, the transactions it enables have value. Money starts with no value and finishes with no value. To the simple human brain, the value is perceived as the value at the next transaction. But money is way more than a single transaction. Its value is what it does for society rather than what it does in a single transaction.
Money was invented by humans. It is a social construct. It has value because there is demand for it. Without demand, it has no value. The demand for money needs to be created. The traditional view is that the government creates the demand by requiring that taxes be paid with the money tokens. In this traditional view, without taxation, there would be no demand for the money tokens. The volume of tokens would become excessive and the purchasing power of the tokens would fall significantly. But this thinking is flawed. Under a debt-banking system, the demand for interest by banks creates much of the demand for money. The government only creates cash currency which it does not itself use. It borrows Bank Credit from banks and other creditors in a system involving the issue of bonds. It is the banks that create the credit when they make loans. The banks demand interest and principal repayments which cancel the debt. The demand for repayment creates most of the demand for money.
The government has been relegated to a user of bank-credit and only recycles bank-credit that it collects in tax. It effectively cannot increase the demand for money as it simply spends bank-credit that it collected as taxation back into society. Taxes are collected as bank-credit, stored in a bank account as bank-credit and spent by the government as bank-credit. Other avenues for the government to obtain bank-credit include the sale of public assets and borrowing. Borrowing is usually done by borrowing from any creditor by the issue of certificates, (called bonds, gilts or securities depending on where you live.), promising repayment at a fixed future date with interest payments at regular intervals. The government does not conduct business using cash currency. Demand may be created by taxation, but the volume of money is not altered by taxation. The volume of money is regulated by the rate at which banks lend money compared to the rate at which they take repayments. Because interest is added to the debt, the steady state tends towards a slight reduction in the Money Supply. Thus, the need to have an ever increasing list of items requiring debt to maintain the Money Supply. It is not surprising that the rate of inflation is of the same order as the interest rate.
In Islamic economics, it is accepted that money itself has no intrinsic value. To Islamic economists, money is simply a medium of exchange. This is much closer to reality. The Muslims got it right on this one. Money is something that is created at no cost and passes from person to person enabling trade. The value of money can disappear rapidly to be replaced by a new money. This should have no consequence except to those that hoarded that which should constantly change hands. The hoarders are damaging to the ability of money to lubricate transactions. Money was not invented to be hoarded. The Quran has this to say about hoarding:
On that day, it (that hoarded wealth) will be heated in the fire of Hell and, therewith, their foreheads and their sides and their backs will be branded (and they will hear): “This is the treasure which you hoarded up for yourselves; taste now what you were busy hoarding!”
O you who believe, many religious leaders and preachers take the people’s money illicitly, and repel from the path of God. Those who hoard the gold and silver, and do not spend them in the cause of God, promise them a painful retribution.
The day will come when their gold and silver will be heated in the fire of Hell, and then used to burn their foreheads, their sides, and their backs: “This is what you hoarded for yourselves, so taste what you have hoarded”.
Money obtains its value from the value of the goods or services that it will exchange at the next transaction. If, for any number of reasons, it ceases to be a viable means of exchange then it will have a value of zero. The value of money is, therefore, dependent on its ability to transact. Money can be used as a store of value, but it is only has stored value so long as it is a viable means of conducting transactions. Hoarded Money thus only has stored value whilst the money is transactable. As soon as the value of a transaction falls, so does the stored value. This creates a problem for the hoarder, but also for those who have money passing through their hands in trade. Hoarded Money returning to regular circulation will cause an increase in the volume of Circulating Money which will cause a proportionate fall in purchasing power. Large quantities of Hoarded Money converted to Circulating Money will cause a dramatic fall in its purchasing power. Thus, Hoarded Money should not be considered a Store of Value. Hoarded Money only has value if an equal volume of Circulating Money is converted to Hoarded Money at the same time. A rapid conversion of Hoarded Money to Circulating Money is potentially the onset of hyperinflation.
Consider a situation where 80% of the Money Supply is Hoarded Money and 20% is Circulating Money. If 20% of the Money Supply moves from the Hoarded Money component to the Circulating Money section, the volume of Circulating Money is doubled to 40% of the Money Supply. This has the potential to halve the purchasing power and double the prices. This is commonly reported as an inflation of 100%. This corresponds to a doubling of the velocity. This is ugly enough, but the problem may create a bigger problem. This inflation of 100% may cause the remaining 60% to come out of hoarding and reduce the purchasing power to one fifth of its original value. This would be reported as inflation of 400%. We have moved to levels of inflation occurring during hyperinflation. We have created hyperinflation simply by spending Hoarded Money into circulation. Excessive hoarding is thus a trigger for hyperinflation. Hoarded Money is like the snow on a hill, above a ski lodge, waiting to avalanche. When 80% of money is hoarded, it is false to believe that its purchasing power is the same as Circulating Money as any release, above a small percentage, dilutes the pool of Circulating Money.
If hoarding was banned, money would still function as money. Money can be used as a measure of value, but it does not need to be used as a measure of value. Under inflation, or even hyperinflation, money is functioning as money because it is still used as a means of enabling transactions. Under these conditions, it fails as a ‘measure of value’ and fails as a ‘store of value’, but it is still money.
Hoarded Money is not a store of value because its purchasing power is eroded as it comes out of hibernation in a proportionate manner. If a small percentage comes out of hoarding, little will be noticed. Hoarded Money retains value if it is converted to Circulating Money at the same rate as Circulating Money is hoarded.
The most common definition of money is:
1. Money is a medium of financial exchange.
2. Money is a measure of value.
3. Money may be used as a store of value.
The first item is always valid. If money does not facilitate transactions, it is not money. Items two and three are often valid but are not defining characteristics of money.
Missing from the definition is:
Money is that which enables transactions. It does not necessarily follow that everything that enables transactions is money. At the start of a money system in a nation, it is quite common to use an item that already has value. Particularly convenient mediums include gold and silver. These two metals have some downsides. They are difficult to obtain, requiring digging big holes and using nasty chemicals. Mining soaks up significant human effort just to maintain a supply of new silver and gold. It also tends to create a permanent recession as it is difficult to expand the Money Supply as needed. It also suffers badly from hoarding which again causes a permanent recession or worse. Gold and silver are too easily hoarded which then causes a steady and prolonged contraction of the economy. The money system is prone to corruption by those that obtain a monopoly or those that lend certificates for non-existent gold but who require repayment in gold. Silver and gold are true metal money. Substitutes arrive in the form of Silver Certificates issued by the government and Bank Credit issued. The Silver Certificates are issued for silver that usually does not exist and the bank credit is issued for gold that does not exist. The metal system has now become a Credit system. The notes gradually change from being credit for silver and gold to being credit for tax payments. Gold and silver metal money may maintain its value even if the government does not tax. Notes based on physical money may maintain value when backed by precious metal, but as the volume of notes starts to exceed the volume of metal, the taxation starts to be the dominant feature maintaining value.
Another form of credit arises, both in the metal money system and the government credit paper note system. Moneylenders issue certificates or statements of credit for government issued money. Moneylenders issue these certificates or statement by lending them without any physical backing. The backing for the bank-credit they issue is the associated debts and the backing for the debts are the assets of their customers. The bank credit issued by the banks is thus backed by the housing stock of the nation. They create a million units of credit with a million units of debt. The moneylenders, being private, do what private does best and maximise the situation to their advantage.
In the modern world, most countries are using about 5% government issued currency notes, and about 95% bank-issued credit. [UK 3%, USA 7%, Australia 3.5%.] The strength and validity of the government issued currency notes last as long as the government is creditworthy and the bank-issued credit maintains strength and validity as long as the private banks are solvent. Any violent swing in the ratio of 5% to 95% destabilizes the system.
In reality, the money we use in the modern world is in fact credit. Those with a pie in the finger, would prefer us to call it money, so we call it money. It is difficult to decide whether credit should be called money. Money might be described as that which the government deems to be money or that which it accepts as payment. The government accepts bank-credit as payment, but only states that central bank created currency is Legal Tender. So it is possible that the government does not accept Legal Tender as payment of tax.