Stone Money- Minutemen14

Fugazi, The True  Measure of Currency

The idea of money is much more abstract than we make it out to be.  The very key to  what motivates all of us to get out of bed in the morning lacks tangibility tremendously.  Our present day monetary system was born out of convenience and fluidity in a free market economy.  However, this leaves us wondering what the value of this convenience is.  Although money is  the  key to our financial freedom, in an instant it has the power to bring it to a complete standstill if its value is stripped.  

A fascinating point of view on the thought provoking concept of money was written about in the essay “The Island of Stone Money,” by Milton Friedman.  We immediately flashback to a more simple, concrete currency where Friedman explains “fei”, which is a means of currency using stone wheels on the Caroline Islands where Friedman was studying.  These stones were useful for transportation and ranged in size which is a great example of an  early form of denomination in currency.  A peculiar detail about this trading of stone was that the stone did not actually have to be in your possession to own it.  This was due to the extreme difficulty of transporting these large discs.  As ridiculous as this sounds, NPR’s Planet Money team brings up an interesting point that other than the actual objects being used for payment, this is very similar to what we do now.  They go on to say that at one point we used gold and other precious metals to buy different items from others.  However, this was still very heavy and troublesome to carry around everywhere with you.  As a solution, we came up with paper money which held its value by representing the amount of gold someone had.  There is nothing that different about a civilization using limestone wheels to trade and pay for items of value.  The team then went into their current lives and the transfer of money.  They come to realize that the physical transfer of money is very obsolete.  The bank doesn’t physically deliver physical money to the places to which your bills are due.  This is the same case for your employer paying you. It is simply numbers being added or subtracted from your account.  The team says that the only value these numbers actually have is based on the bank’s acknowledgement of it and everyone else’s agreement that this is what we use to purchase goods and services in our society. This leads into their next point about the problems related to the economic  issue in Brazil.

The team says that the currency’s value was unpredictable and grossly inflated for decades without repair.  Supermarket prices would change dramatically every day, forcing consumers to pay fluctuating rates, where the  money in their pocket yesterday was marginally better than the continuously rising and helter-skelter behaviour of the money value itself.  This roller coaster of empty value started when Brazil’s government wanted to complete a project of which they did not have adequate funds for.  This resulted in them essentially printing the money which immediately caused inflation within the economy.  They were then faced with the daunting task of somehow slowing down this inflation.   The podcast tunes in to an interview with Maria Leopoldina Biarenbeck, as she is a first hand account of living through these hard times.   Biarenbeck broke down each president’s plan to somehow rectify this extreme problem.  The first plan was to prohibit vendors from raising prices.  However, this  only made products unavailable, as merchants were hiding their products in hopes that there would eventually be an increase  in the future.    They soon realized that there was no way of completely reversing the damaging effects of the inflation.  This  is where they decided to restore the faith of the people rather than continuously trying to right their wrongs.  They came up with the plan to put up a facade of “new stable currency ” that would be easily accessible within the economy.  The public was hesitant at first, not having any clue what this new currency was, but the plan worked and people became confident in this made up way  of paying  for goods.   They then showed a comparison of old to new currency which they made to look as much more valuable.  This gradually lowered inflation as more and more had faith in this “URV” currency.  The public was delighted to see that everyday goods were staying at the same price consistently for the first time in years.  

From this we can see similarities to our current way of transferring money.  It is not so much the actual value of money, but the collective belief by everyone to solidify a standard of value.

It is miraculous to see that the same economy with the same money, fixed itself merely based on belief in the value of it.  It is amazing, but almost a bit anxiety ridden because it puts the value of money in a much more vulnerable position.  If something were to occur where the value of money plummeted and the value was miniscule it would send our economy into chaos.  When broken down in this way, we are left teetering on the edge of complete confidence in a currency and a colossal devaluing over a short period of time.

This was eye opening as I have been consumed by this process of transferring money in the U.S.  I receive direct deposit, pay for monthly subscriptions and any other expenses used via debit/credit card or mobile pay.  All of these are added or subtracted from my account and there is no paper money being transferred.  Right now the small wealth that I have is only a number that I have contact with all day every day.  This puts a standard of money right at your fingertips which can make the money almost feel as if it doesn’t exist other than when looking at it through your phone.  Our monetary system is becoming a game of basic math rather than an exchange of goods and services for physical payment.  While this is extremely helpful and convenient, it solidifies how dependent we are on this value that we assign to our money even at the electronic level.

We are left with the thought that we could possibly be chasing wealth by building up a somewhat imaginary number in order to be comfortable and be able to afford certain things in our lives.  This is a great convenience to have, but we also see its fragility.  After going behind the scenes of problems in economies throughout the world, we realize just how important it is to keep this standard of value and that if we did not uphold this we could be in complete disarray on the streets trying to receive goods for paper and electronic digits that simply mean absolutely nothing.

References

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.

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