Evaluating the differences in currency around the world can help us understand the abstract of what money is at its core. And how we use physical objects with less material significance to gain ones with more value. In This American Life, “The island of Stone Money,” “The bubble bursts on e-currency Bitcoin,” and “The Invention of Money” can help with the understanding that society has to believe in the value of money for there to be a supported currency.
Across the Pacific ocean, In a german colony on the Island of Yap, provides the most illuminating idea of the concept of money. This Island has a small population of natives with an underdeveloped civilization, according to William Henry Furness III, the author of The Money Mischief. The people had few resources and adapted to the use of stone. Unlike modern societies, the people of Yap used the stone as a form of currency called fei, making the massive thick stone wheels a prominent part of their economy. And because of how inconveniently large it was, fei wasn’t obligated to leave a previous owner’s land if bargained to a new one. It was unquestioned and acknowledged by everyone with a mark of symbolizing the exchange. These same principles apply to one family that has never seen their riches that had fallen to the bottom of the ocean after an accident shipping it across seas. And Furness highlights that “That a few hundred feet of water off shore ought not to affect its marketable value. The purchasing power of that stone remains.”
And when the German colony tried governing the people of yap, they sought to fix their defective roads: but the people were unreceptive until Milton Friedman the author of “The island of Stone Money” empathizes that “most valuable fei was crossed in black paint to show that the stones were claimed by the government.” These events had encouraged the people to repair any damages to regain their capital. And although the stone isn’t ordinary for the rest of the world, their actions are no different from an economy that uses gold and paper currency. The Bank of France requested the Federal Reserve Bank of New York to convert its dollar assets into gold in fear that the U.S would not stick to the gold price standard. And in doing so, the Bank of France avoided shipping the gold overseas: went to the gold vault labeling and separating what was the property of France. There is no difference in the manifestation of money between the French and the people of Yap. The value they hold on stones and metal from the ground has equal value to their society. As long as there is a system and a community to support the construct of currency, there will be a valuable currency.
WBEZ Chicago host a public radio show This American Life, during the talk show they stated that “You don’t have to touch money. You don’t have to see it. It’s just information.” And this one quote resonates a lot with The Lie That Saved Brazil. In 1950, the president wanted to build a massive and expensive city in the middle of the jungle, which they could not afford. As a result of this, the government created money. Forty years later in 1990, Brazil was in economic mayhem, inflammation was as high as 80% per month. Businesses would raise prices by the day but, four economists had a viable solution as stated by Chana Joffe-Walt in the radio show “You have to stop the printing presses, stop creating money so quickly. But you also have to stabilize people faith in money.” The entire idea was to trick people into thinking that the money they had was valuable supported by an artificial currency. The virtual currency URV didn’t necessarily exist and converted into the cruzeiros currency. Although inflammation was still going up people based their capital off of URV. Eventually, the inflammation went down and URV became the new currency completely replacing cruzeiros. So what happened in Brazil? In the simplest way to put Joffe-Walt said that “Everyone in Brazil, collectively, as a country, tricked themselves into believing that this fake currency was real.” Believing that the money they transitioned into was sustainable, made it more real than ever.
This belief in value in money is also seen in one of the world’s top virtual currencies. Bitcoin is popular for its high trading value and a cryptocurrency that skips over finical institutions or central banks. Anne Renaut the author of “The bubble bursts on e-currency Bitcoin” affirms that “Bitcoin is made of strings of dazzlingly complex code created by raw computing power… that can in theory be carried out by anyone with a computer.” It’s another example of how money is a creation and is supported by a belief. Although the creation is quite complex, in its simplest form the idea of manifestation of money. Almost like the people of Brazil, anyone can use their real currency to buy virtual currency for trade or gain capital.
Interestingly, money is just a creation. And in “The Invention of Money” underlines this concept as stated by Ira Glass “when we went off the gold standard, somebody had to decide how much money there would be” and somebody did just that. The Federal Reserve is responsible for the creation of money and deciding how to run the economy. In 2008 the United States underwent a finical crisis and the solution was to put more money into the economy. Where does this money come from exactly? Its created out of thin air. Few clicks with a mouse and change of some numbers, and the economy can easily gain trillions of dollars.
What do all these events tell us about money? A few days ago I would’ve said money isn’t real, money is nothing. But that isn’t true at all. Money is more than real and it’s also just created. But for money to magically come from thin air, it has to have a support system and a society that believes in the value of trading. Then anything can be a currency, like how the people of yap traded stone, the french traded gold, or the virtual trade of codes. With trust, there is currency.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015. http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil/
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.