An Unexpected Manipulator
The pure idea of money is an interesting concept. Have you ever stopped to think about how we have agreed as a nation on what money is? As a society, we have been manipulated by people before who created this system of “money.” All money is, is a number in your bank account, a piece of paper, even a stone. Most people now have grown up with an idea of money put into their head already, without putting a second thought to it. It’s just always been like this. As a nation and worldwide, we have been manipulated into believing that the money system we have now is dependable and completely ethical.
Milton Friedman converses about the abstract paths taken for claiming money in his essay, “The Island of Stone Money.” The Island of Yap, part of the Caroline Islands in Micronesia, used an unfamiliar currency called fei. This currency consisted of large stones, created from limestone and shaped on another island, that just sat around the island. The strangest thing about this currency is that if during a bargain the fei needed is too large to move, the new owner is content with leaving it where it is. The other people on the island now know that that particular stone is that person’s after the deal. In William Henry Furness III book called “The Island of Stone Money,” it is mentioned how there was a family on the Island of Yap that there was “a family whose wealth was unquestioned,—acknowledged by every one—and yet no one, not even the family itself, had ever laid eye or hand on this wealth.” This dives further into the theory of being manipulated by money. This family has never seen their wealth, as it is on the bottom of the ocean miles away from them, yet every single person agrees that it exists and counts as money for them. The islanders’ just accept that this family has so much money, and therefore respect, but how are they so sure about it? I doubt any of them have decided to go scuba diving to find this so-called stone at the bottom of the ocean.
The Island of Yap was controlled by Germany from 1899 to 1919, a government that decided to tell the many districts of the Caroline Islands to repair their paths and highways due to them being in bad condition. These districts felt as though they were fine for natives, as they could walk barefoot and be completely fine. The government decided to fine the disobedient districts by sending someone to put a black cross onto some of the more valuable fei, claiming them as government property. This caused these districts to immediately start working on fixing the roads and voila. The government got rid of the black crosses and the districts regained their wealth back. This caused the people to become less wealthy and it shows how much the simple act of putting a black cross onto a stone, which “worked like a charm” according to Furness III, affected these citizens. How did the government just automatically gain this wealth by writing on the stones without really taking anything? Similar events have taken place within the Federal Reserve Bank, something we know a little more about than the Island of Yap. In 1932-33, the U.S. was thought to be untrustworthy by the Bank of France in terms of sticking to having an ounce of gold be $20.67. They decided to ask the Federal Reserve to convert dollar assets that were in the U.S. into gold. Instead of going through the trouble tf sending gold across the ocean, they just put gold into a drawer labeled “Bank of France.” It became a big headline in financial papers, which said that there was a “loss of gold” and a “threat to the American financial system,” and the U.S. gold reserves were down, while French were up. Friedman says, “The so-called ‘drain’ of gold by France from the United States was one of the factors that ultimately led to the banking panic of 1933,” indicating that this was a big deal in America. There is a clear connection between these two scenarios; nothing was moved or taken, but labeled differently, creating a massive uproar involving finances. The gold was sitting in the Federal Reserve Bank labeled as France’s, showing just how much we can be manipulated by money.
While listening to NPR’s podcast This American Life, 423: The Invention of Stone Money, I was intrigued by how these 4 men were called on to fix inflation in Brazil and they came up with URVs. In the podcast, Edmar Basha says, “We called the unit of real value, URV. Yeah, it was a virtue that didn’t exist in fact,” telling us upfront that this didn’t exist before these 4 men. People started to get paid in URVs and the central bank would update every night how many cruzeiros 1 URV would be, as people were still allowed to use their original currency. One day 1 URV could be 7 cruzeiros, and the next 12 cruzeiros. The people in Brazil adapted to this way of currency as if it was nothing, and when one store sold milk for 1 URV, other stores started to follow suit. When a place is struggling like Brazil and people turn to help them, they seem to not care that this currency is made up. They might not even know that it is. They were able to get inflation down by a huge margin, and no one even stopped to think about where this money was even coming from.
These past examples prove that people are blind to the fact that they don’t have to hold something in their hand for them to know that it has worth and value to them. Ann Renaut talks about how Bitcoin has come to people’s liking, and is accepted as a major form of digital currency in our day and age. Renaut says that “Bitcoins are stored on a user’s hard drive in a virtual wallet, and can be sent directly to another person, bypassing banks and remaining largely anonymous,” leaving some worried about how much anonymity there actually is. Many people blindly trusted bitcoin to become something worthwhile when they paid just a few dollars for only 1. There is a possibility for 1 Bitcoin to be worth hundreds of dollars now, letting people gain millions of dollars in Bitcoin. But where is this money? In a way we’ve been manipulated to believe that Bitcoin is important to have and that it could become worth more than you originally paid for it. What if one day Bitcoin is completely wiped and your money is just gone?
Money is valuable to many people, and it is a source many depend on too. Starting many centuries ago, money was created as a way to obtain power and a way to balance out bargains. Money has manipulated us. We have become too dependent on something that seems to have been created out of thin air. You can never truly know if the virtual currency you have is worth what you think, and it could change value tomorrow or in a month or year. Physical money is being used less and less, but how was the value of a $20 decided or the value of a $50 decided? It’s just a piece of paper. Just the click of a button, and you can spend money to your heart’s desire.
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.