Stone Money- kingofcamp

Paper Promises

Money is an abstract value system used to dictate the lives of the very same people who believe in the system. The idea of money itself is completely meritless, holding no true physical or materialistic value. Money simply “comes from nothing” while the idea of its “supreme value” is ingrained into the minds of all people from around the world.

NPR’s podcast, The American Life, featured an episode presented by the Planet Money team. The episode was divided into two acts. The first segment of the podcast discussed Brazil’s complicated economic history. The once stable belief in Brazilian currency (called the “Brazilian real”) came crumbling down due to new power and poor management. The people of Brazil faced many hardships during (almost five) decades worth of high inflation rates and mismanagement. It was not until the early 1990’s when four brilliant-minded economists tricked the Brazilian people into believing their money had any value. The new and made up currency was called URV. Simply by believing in URV, the people of Brazil began to believe in currency again. Once the belief in currency was reestablished, the economic state of the country began to experience dramatic improvements. The case of Brazil’s own economic struggles discussed by the Planet Money team makes for a perfect argument that money is simply a belief and nothing worth any inherit value.

Milton Friedman, an American economist, wrote about the bizarre and abstract currency of the distant Island of Yap in his essay titled, “The Island of Stone Money”. Unlike Brazil, this civilization used limestone “wheels” as their form of currency. For twenty years (1899-1919), Germany owned the Caroline Islands, which the Island of Yap was part of. It was when Yap was under German control that the world learned of their strange currency. Instead of physically carrying paper or metal and dubbing it currency, the people owned carefully crafted limestone wheels. Their currency was called fei. The rocks ranged in size which also affected their value. The larger a stone was, the more the stone was worth. Ownership of these stones were established through verbal agreements, nothing more. As Friedman retells, there was a family on the island that inherently owned a large sum of fei. Though, a couple of generations before the current family, the notoriously valuable stone was lost at sea due to a bad storm. The current residents of Yap, including the family who “own” the stone, have never actually seen the stone in flesh. By simply trusting the story of the lost stone, the family was still entitled full ownership of the stone- still making them a wealthy family.

As Friedman continued in his essay, the German government asked Yap to comply with new rules and regulations. At first, the people of Yap were reluctant and unwilling to comply with the Germans. All it took for the people of Yap to obey the German orders were for the Germans to paint crosses on their fei and claim it as their own. The Germans did not take their fei or even destroy it, they simply claimed it by panting crosses on them. Painting crosses on valuable fei was equivalent to the economists in Brazil tricking the people of their country.

Now one may ask, what do these two examples have in common? Brazil and Yap have completely different currencies and ways of processing that currency. But both civilizations instill a belief that their currencies holds important value to their systems and ways of living. Both currencies hold no actual value- it is all made up. But why is that people believe in such an abstract and impractical idea? Because, simply, it controls the people believing in that very concept.

In NPR’s podcast, The American Life and Milton Friedman’s essay “The Island of Stone Money”, both parties mention a brief time in American economic history where the United States dollar was equivalent to a fixed amount of gold. For example, one United States dollar was equivalent to a dollar’s worth of gold. This system allowed a higher power to determine how much money the United States could print and make out. This power is handled by the Federal Reserve. In retrospect, the Federal Reserve controls the value of money and the amount of money regulated in the United States.

Now in the twenty first century, the Federal Reserve does not describe United States dollars to being equivalent to a fixed amount of gold. And now we ask, how does the Federal Reserve do it? The Federal Reserve simply creates money out of nothing. There is no gold or nothing that equivalents to a dollar bill. The trick is you. You believe in the worth of a dollar bill. That is what makes the value of a dollar bill a dollar bill.

There are even more complicated systems than the United States dollar, Brazilian real, or the Yap’s fei. A decade after the turn of the century, in 2011 a new currency was established. Bitcoin is a completely formless and virtual currency, highly valuable in today’s market. Jeff Reeves author of the article “Bitcoin has no place in your – or any – portfolio” published with MarketWatch, focuses on this modern currency in his article. Like many other currencies, Bitcoin has no real value. Reeves also mentions that Bitcoin is not for everyone. Bitcoin is very expensive, and an everyday consumer would not be able to “own” this type of currency. Bitcoin was made for the rich- excluding many consumers and people.

Over the course of human history, there has always been some form of currency. Whether that be trade, fei, a Brazilian real, a United States dollar, or even Bitcoin, currency has always played a role in society. With currency came value and with value came power. The power was given to those who controlled the currency or “owned the most” (of a specific currency). The sheer fact that people believed in this system is what makes money so valuable. In truth, we know money has no real value or impact on our physical lives, but we still choose to believe its value and allow for it to control us.

References

NPR. (2018, February 19). The invention of money. This American Life. Retrieved September 30, 2021, from https://www.thisamericanlife.org/423/the-invention-of-money.

Friedman, M. (n.d.). Tter?” ” i mean – miltonfriedman.hoover.org. Retrieved September 30, 2021, from https://miltonfriedman.hoover.org/internal/media/dispatcher/215062/full.

Reeves, J. (2015, January 31). Opinion: Bitcoin has no place in your – or any – portfolio. MarketWatch. Retrieved September 30, 2021, from https://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28.

 

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