Currency hasn’t changed much in its purpose for people to buy services and goods or sell their own goods for exchange in cash by hand or credit/debit card only. Appearances of currency have changed throughout the years from using minerals; such as in Milton Friedman’s The Island of Stone Money where the small island of Yap had used large coin-like structures by the height of one to twenty feet made out of limestone called fei. Their own currency was first used to pay important events or for provisions of livestock as the people would do early transactions with their limestone discs. Their money was also very much more as ownership through trading with others. In Yap tradition, one’s money would still be valuable even on the bottom of the ocean, even to this today may still be a part of their family’s possessions, “the fei was of magnificent proportions and of extraordinary quality.” Silver and gold was primarily used in many countries from ancient times like in Mesopotamia and Israel in the middle east called shekels. It can also be said that the modern era uses paper money like Europe and Asia that have different values of how much the paper money is than the rest of the paper money outside each country. So this currency can be stored or collected in banks nationwide within their bank accounts. Nowadays cryptocurrency which uses bitcoins in order for the exchanges for services and goods through digital purchase or transactions on the web. Money has revolutionized the national government to create their own currency to have value for citizens while organizing the currency by lowest to highest value.
But in some countries; money has been disdained due to the inflation and deflation problems that cause prices of such goods and services to undergo higher or lower prices by the treasury’s choice to lower the value of money into nothing more than just useless paper in the economic world. Brazil was one of those countries that experienced inflation contributing to the fall in value of money which had harmed the government and its people into shambles. But Chana Joffe-Walt, who wrote “How Fake Money Saved Brazil” said that only four individuals with Bacha being one of them were able to quell the people’s distrust of the useless money with a trick. That is making them believe worthless money had value once more through a fictitious government policy. Prices were changing all the time going higher and higher which was the government’s own fault for not coming up with solutions for this crisis. The inflation was solved by using the Unit of Real Value currency that in hindsight has nothing in value. But every store and service prices were categorized for URVs only rather than using cruzeiros. It works to the extent of a psychological experiment to have people gain trust through a placebo to test if it can work naturally. The people wouldn’t believe the “prices to always go up.” Afterwards, The treasury and Bacha’s team replaced the URV currency with virtual currency for the better economy.
Another country in 2009 had its own currency becoming not worthless to the eyes of the public, but actually the money was scarce for anyone trying to get the money from the bank. Japan being one of the advanced countries in the world has no money being printed out all due to the crippling debt, which any country would be fearful of paying their debts would cause businesses and goods to have interest rates going higher than ever. However, in Paul Krugman’s “The Curious Case of Japan’s Economic Stimulus” prescribed how Prime Minister of Japan Shinzo Abe having no common knowledge of economics was able to get Japan out of debt in 2009 by not following “Austrian orthodoxy” and have the treasury to print out 10.3 trillion yen as an emergency stimulus. This caused the interest rates to stabilize while yen prices have been lowered, “which is a very good thing for Japan.” These two countries were able to rise again from their economic crisis through policy plans to manipulate the currency to stop inflation/deflation of debt without causing more mistakes in the process.
In the economic world; no other institution in America has any power over currency and finance than the federal reserve that plans out the actions for how currency would be printed out or not in terms of the economic status. During the Great Depression; as the stock market crashed, the deflation rates were greater than the scarcity of money as well for the prices dropped, if the federal reserve would’ve helped the great depression by inflating the sums of money and treasury bonds to people to buy them for money to be made from banks during the preparation of World War II. But this sort of action of printing money doesn’t always help the economy. As Alex Blumberg and David Kestenbaums’ “Weekends at Bernanke’s” states that “it is a balancing act, with the fate of the US economy hinging on the Fed’s decision. Not that anyone there acts that way.” This act could lead to inflation, making the value of money worthless just like how it was in Brazil’s Cruzeros became useless. In 2007, there was also a financial crisis for both the “ banks and firms up and down…all these assets that were plunging in value.” The Federal reserve would have gone for their “last resort” to open one trillion dollars rather than sorting everything out within six weeks.
Money creates the means for the economy to bloom for businesses and goods that people want and need without the use of bartering or trading to be in use rather than wanting the item that both parties can be satisfied with. As for it’s consequences of the collective debt, deflation, and inflation is to be checked and balanced by whether policy necessary to fix the economic value of money and having people believe in the value once more.
The invention of money. This American Life. (2018, February 19). Retrieved September 29, 2021, from https://www.thisamericanlife.org/423/the-invention-of-money.
Joffe-Walt, C. (2010, October 4). How fake money saved Brazil. NPR. Retrieved September 29, 2021, from https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil.
Krugman, P., author…, P. K. M. by this, & Fang, L. (2013, January 22). The curious case of japan’s economic stimulus. Truthout. Retrieved September 29, 2021, from https://truthout.org/articles/the-curious-case-of-japans-economic-stimulus/.
Friedman, M. (1991, February 1). The island of Stone Money. Collected Works of Milton Friedman – Collected Works of Milton Friedman. Retrieved September 29, 2021, from https://miltonfriedman.hoover.org/objects/56723/the-island-of-stone-money.