My lack of interest in the economy and the way money works had left me with the naïve concept that money is extremely valuable. If I were to receive a hundred dollar bill I would be cautious with it. However, after listening to the NPR Broadcast, “The Invention of Money,” my idea of currency and money all together has changed. I realized that the value of money is manmade, which relates to the idea that was introduced in the podcast: money is fiction. The idea that money is made up is somewhat frightening since it is the reason people go to college and get jobs. Even after researching, my opinions on this idea are mixed. Although it may be easy to not physically carry around money, it may also be risky to be so trusting of just the idea that one has a certain amount of money.
When I first read about the Yap’s currency in Milton Freidman’s “The Island of Stone Money,” I immediately thought their concept of money was more abstract than ours. I thought it was illogical that the people used extremely large pieces of limestone as their currency. I questioned why the limestone was so valuable in the first place. Plus, since the fei was too difficult to transport, Freidman explained that a new owner would simply claim acknowledgement of the fei, and the stone money would remain with the previous owner. I thought of this as unfair since the fei was not physically in their possession, but then I realized that this concept is not much different than ours. When someone gets a paycheck from their workplace, they do not physically have the money they earned. They instead have a piece of paper, or an acknowledgement that they do own more money. This comparison further proves the idea that money is fiction because it is not physically within ownership. I do not see the acknowledgement of owning fei is risky. Since it’s a complicated task to physically move the fei to a new owner’s possession, it seems as though a simple acknowledgement between people would suffice.
In the article, “How Fake Money Saved Brazil” Chana Joffe-Walt explains that four economists created the Unit of Real Value in order to fix the inflation issue in Brazil. The goal was to get the people to stop expecting prices to increase, and to start thinking of things in URV’s instead of the original currency, the cruzeiro. The URV solved the economic problems and Brazil flourished, which again supports the idea that money isn’t real because the URV was a currency that was never in anyone’s physical possession, therefore the money was completely made up. In this instance, the fact that URV was not an actual physical form of currency was a good thing, since it resolved the issues Brazil faced.
Bitcoin is an example of the risky side of money being fiction. In “Bitcoin has no place in your — or any — portfolio” Jeff Reeves explains that a bitcoin’s worth is equal to whatever a random person is willing to pay, therefore, the value of this currency is fiction. Plus, if one’s account were to be hacked and their bitcoins stolen, it would be difficult to find the hackers and get the bitcoins back.
After all of the research, my concept of money has evolved. Money is only an idea, created in different forms. Money is an acknowledgment, a marking on a stone, or a number on a piece of paper that proves one’s wealth.
Freidman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, 1991.
Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015.
Reeves, Jeff. “Bitcoin has no place in your—or any—portfolio.” Market Watch. N.p., 31 Jan. 2015. Web. 4 Sept. 2015.
“The Invention of Money | This American Life.” This American Life. N.p., 7 Jan. 2011. Web. 6 Sept. 2015.