“Money, it’s a gas; grab that cash with both hands and make a stash.”
An idea that remained elusive to me during much of my life was the concept of money, and with good reason; as there is little in this world that compares to the paradoxical nature of modern capital. Consider for a moment, that while nearly the entire population of the planet believes in the value of paper money, the vast majority of it does not actually exist beyond numbers in a computer system! As Pink Floyd once philosophically noted: “Money, it’s a gas”.
While such a statement may be representative of how one sees money in a modern economy, such intangibility was not always the case. The article, “The Island of Stone Money,” by Milton Friedman tells of a small island in the Pacific, Yap, which stands as a peculiar example of the various conceptions of money over time. On this island, the currency is represented via absurdly large stone discs (the most valuable of which stood higher than the average human). These discs were sometimes too large to move easily and therefore would remain in place, and merely the owner would change. One of these discs even sunk to the seafloor during a storm, and the value of said disc is still uncontested. Someone owns it, that person has just never seen it before.
While the notion of these massive stone discs representing wealth may seem ludicrous at first, consider for a moment how modern economies consider money. Most of it does not exist! At least the massive stone discs were tangible, even at the bottom of the ocean! It seems almost hypocritical to label something as “silly” when our economy rarely shows itself. However, in modern times there is a new movement taking steps towards complete invisibility.
Bitcoins is an electronically based currency system used to transfer money unrestrained by space, made achievable through the internet. The possibilities seem astronomical when considering the nullification of paper money, though the implementation of a completely “valueless” currency is not something to be taken lightly. In the article “Bitcoin has no place in your-or any-Portfolio” Jeff Reeves explains the negative outcomes of Bitcoins becoming a recognized system of currency. He explains that while many see the idea of no central bank within the system as a positive, what it really means is “…a lack of true value”. In addition, Bitcoins would be a completely anonymous endeavor, leaving any thefts to remain largely untraceable. So while convenience is surely improved through bitcoins, the entire system of electronic currency remains largely questionable.
On the other hand, a National Public Radio radio broadcast titled “The Lie that Saved Brazil” discusses how after years of major inflation difficulty, Brazil finally overcame a financial crisis upon adopting a fully electronic system of currency alongside their tangible money. This virtual money saved Brazil from economic collapse, and reestablished faith in money among Brazilians.
Now this is truly bizarre. It seems upon initial glance as if there is no money, though when observing the current economic status of Brazil it is no secret that this little trick worked wonders. Brazil currently ranks among the highest economies in the world, after coming from one that failed horribly. It would appear that there is something to digital money. After all, how different is it than storing hoardes of money that does not exist beyond the numbers in a computer?
To be honest, my perception of the money system has not changed much from this literature on the subject. To me it has always seemed to be an insane idea based around human greed and more importantly: convenience (which in my opinion is the bane of any healthy society).
“Bitcoin Has No Place in Your – or Any – Portfolio.” MarketWatch. Web. <http://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28>.
“Bitcoin: What to Expect in 2015.” CNBC. 15 Dec. 2014. Web. <http://www.cnbc.com/2014/12/15/bitcoin-what-to-expect-in-2015.html>.
Goldstein, Jacob, and Davd Kestenbaum. “The Island Of Stone Money.” NPR. NPR, 10 Dec. 2010. Web.
Friedman, Milton. “The Island of Stone Money.” Working Papers In Economics (1991). Web.