We Never Grew Up

It is hard to think that all the money you own in your bank accounts and all the physical paper bills and metal disks we pass around, do not exist. We have created a physical object just to make people feel better about how we exchange real objects for something that was made up. This is the only way that currency can keep on existing, if people begin to lose faith it will lose its value. Similar to the idea of Santa, as long as you continue to believe in him all the things in his name will have value to you, the cookies will remain a plate of cookies with a purpose. The popular Christmas figure Santa Claus has been passed down through the ages and is a common lesson for the youth. Although it is not used to trick children, they fully believe that a jolly plumb man will come to their house and give them a present once a year for being good. Parents use Santa as a way to get the children to behave, by having them believe in something that is not real.

On the island of Yap in the Federal States of Micronesian, the people have a similar belief in their own currency. In an essay written by Milton Friedman called The Island of Stone Money, where he talks about the unique monetary system the people have. Large circular limestone rocks “ranging in diameter from a foot to twelve feet, having in the centre a hole varying in size with the diameter of the stone,” are known as Fei. Unlike the common paper money we see today, the islanders’ use these giant stones to pay for something big like a dowry or to retrieve a warrior’s body from another village. The stones, although they had been given to another person were not moved, the knowledge that it was now someone else’s was all that was needed for proof of purchase. As long as everyone knew the worth and owner of the stone, it was never questioned. There was an instance where the wealthiest family on the island had lost a stone at sea, and yet it was still acknowledged as theirs. A storm had caused the crew to cut loose the stone, they made it back unharmed and told everyone what had happened, the village had agreed that it was no fault of the owners and recognized it as Fei. The stone laid “a few hundred feet of water off shore [which would not affect] its marketable value, since it was all chipped out in proper form.” A stone that is at the bottom of the ocean is just as valuable as a stone sitting against a house. Even when something cannot be seen or held, it is still believed to be legitimate regardless.

Around the nineties, Brazil finally had enough with their ruined economy and recruited four economists to solve the inflation problem. In NPR’s podcast This American Life, produced by Planet Money, they talk about the steps they took in order to trick “150,000,000 people into believing their money had value again.” On March 27th, 1993 the finance minister called Edmar Bacha to ask if he would meet to discuss what they could do to combat the inflation. The four economists refused at first, yet the Brazilian government was persistent enough to invite Basha to meet the president, and when asked for an autograph for his children the President wrote, “Please tell your father to work fast for the benefit of the country.” Once the four were on board, their plan to create an entirely new virtual currency that was more “stable, dependable [and] trustworthy,” was set in motion. URV, known as Unit of Real Value was created not to replace cruzeiros, the currency at the time. Not only did they make a new currency, they had the government slow down on money printing and helped balance their budget. Once the URV was released to the public they did not force the people to use it, it happened naturally, once one store started using it, everyone followed suit. As a community they were able to make certain prices for goods and services fixed throughout the country. It was easier thanks to the help of a conversion table created to ease the people into using the imaginary currency. “Every night the central bank would put out a memo with the official conversion rate. And a table would get printed in the newspaper… Monday, one URV is equal to seven cruzeiros. Tuesday, 12 cruzeiros. Wednesday, 14.” On July 1, 1994 “the central bank deployed truckloads” of bills to the banks in the cities and provinces, waiting for the final green light from the economists. Everyone became happy, they believed that this was the way to fix inflation and as a country they achieved it by creating something that was completely made up. Brazilians a yeast ago had believed that their currency had any value, it would never improve to believing that its value could never change again.

Most people will spend their entire lives not questioning where money comes from or how it came about. They will just go on with lives focused on the here and now, but for those you are curious enough they will go down a very strange rabbit hole. Despite knowing where the money you earn throughout your life comes from is a good thing to understand, in order to know how certain economies work. It can be a very confusing discovery, not only because you learn that money only works if the people believe in it, but it is a made up thing entirely. Just like binary it is just a bunch of numbers that we as a community gave meaning and value. It is as outlandish as Shirley Jackson’s short story The Lottery, where a village has remained in the dark ages, keeping a tradition in which once a year a person is stoned to death. They no longer have a reason to continue this tradition, yet they still believe as a community that they must do this horrific act every year. This kind blind belief is what keeps these imaginary objects or unexplainable traditions alive in our world today.

References 

Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, 1991. https://miltonfriedman.hoover.org/internal/media/dispatcher/215061/full 

The Invention of Money – This American Life. (2018, February 19). This American Life. https://www.thisamericanlife.org/423/the-invention-of-money 

Jackson, S. (1948, June 18). The Lottery. The New Yorker. https://www.newyorker.com/magazine/1948/06/26/the-lottery