The Religion of Money
Money is a belief system, not unlike that of a religion, that is only able to maintain its unrelenting grip on society if the everlasting faith that people have in it persists. If the value of money ceased to be recognized, then the value of money would cease to exist. This should not be confused with the necessity for a monetary system within a society, but solely the idea that it thrives on the support of its loyal “followers.”
In his essay, “The Island of Stone Money,” Milton Friedman highlights the highly abstract method of currency used on the Island of Yap. In the early twentieth century, Germany obtained power over this small civilization. They quickly recognized the islanders’ obscure currency, called fei, which consisted of the exchange of incredibly large stone wheels, ranging in size from one to twelve feet. The truly baffling nature of this system was not the peculiar physical characteristics of the fei, but rather that ownership did not require actual possession. Ownership was acknowledged through trade, and a verbal agreement was sufficient. Friedman relayed a well-known legend about a family on the island whose immense wealth was recognized by all, despite the fact that their fortune was never seen by a soul. An ancestor of the family lost their “…remarkably large and exceedingly valuable…” fei at the bottom of the sea. This event had no impact on the amount of wealth the family possessed. Even generations later, and still laying on the floor of the ocean, the fei was still considered property of this family. In fact, when Germany wanted to impose fines for disobedience on the inhabitants of the island, they resorted to painting crosses on the wheels to identify that they had obtained ownership. Once the new government’s wishes were obeyed, the fines were returned to the islanders by simply removing the paint. The people of Yap’s belief in these large stone objects is what inherently gave them their value. This extraordinary example of the power of faith in something conceptual is similar to the blind faith that one might have in their religion.
In NPR’s podcast This American Life, the team from Planet Money discusses the unusual economic history of Brazil. For many decades, Brazil’s economy struggled with brutal inflation rates that were eventually resolved by four men who creatively “tricked” the people of Brazil into “buying into” a new currency. In order to accomplish this, they first created a virtual currency known as URVs. The value of a URV varied daily, however the general public was only aware of how they were able to spend each URV. This plan instilled a sense of comfort and consistency in their currency that they had lacked in the past. As a result, the public had a renewed faith in the stability of their economy. At that point, the government was able to create a new currency called the Brazilian real which was easily accepted by the public and substantially reduced the inflation rate. This brilliant plan heavily relied on the ability to create a strong belief in the value of the real. Without that belief system, this currency would have failed.
If nothing else, these early examples prove that the value of money is not dependent on a concrete object itself, but rather a concept of its worth. In more recent years, this same truth is apparent with the creation of Bitcoin. Anne Renaut explains that Bitcoin is a completely virtual form of currency; no one ever sees them, and there is never really a need to spend them. They function in a similar manner to stocks. Their success and worth rely on their users to maintain a belief in their value, as “…Bitcoin users can only cash out their money if other people want to buy their Bitcoins.” If a universal disbelief in Bitcoin occurred, they would no longer have worth.
Like many of us, I have grown up with a basic understanding of money that is a gross misconception. I have learned its value through earning allowance and babysitting throughout my childhood. My experiences have given me a concrete understanding of the value of a paper bill, however through my research, this understanding has been questioned. It has become clear that the quarter that I inserted in the gumball machine as a child had a value more abstract than I realized. The value of that quarter is not constant, but simply reliant on the idea that others also value that quarter. For example, in any basic high school history class, we learn about the fragile nature of concrete money which was evident after the U.S. Civil War. Following the North’s victory, the Confederate currency that had been implemented was suddenly worthless. Once again, this clearly demonstrates that money is an abstract concept, heavily dependent on a universal belief in its value.
Even the United States Federal Reserve recognized long ago the lack of necessity for physical representation of currency. The Planet Money team describes the now abandoned gold standard for the accountability of our country’s money. At one point, each dollar in circulation was represented by one dollar worth of gold housed at the Federal Reserve. Ultimately, they concluded that they did not need gold to correspond with the amount of money within the economy. The blind faith of the people of the United States enabled the Federal Reserve to be empowered with the ability to create money out of thin air, as they deemed necessary for the good of the economy. In an extreme scenario, they even created 1.25 trillion dollars to bail out the major financial organizations on Wall Street.
There is certainly not a lack of desire for money. Overall, our society equates obtaining large quantities of it with success and happiness. As children grow up, their parents indoctrinate them to the ideals and beliefs by which they themselves live their lives. Religion, ethics, and traditions may vary from family to family, however one constant exists across all families and cultures—the necessity and innate value of money. What we are never taught is why these paper bills and metal coins have this hold over society. It is not because of their physical worth, but rather the shared belief that they are eternally valuable, just like a faith in God.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Renaut, Anne . “The bubble bursts on e-currency Bitcoin.” Yahoo.com. 13 Apr. 2013. 30 Jan. 2015. https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html/
“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.