Money: The Mythical Currency That Never Was

When the topic of money is brought up in conversation, most people in North America will think of green rectangular-shaped bills with former presidents or founding fathers printed on the front. However, what I perceive as most interesting is that almost anything can be seen as money. Stones, coins, gold, and even something abstract like a paper bag is considered money. Depending on where you live, money is considered and represented by different things. Green paper bills represent money to us in North America but somebody in France who uses colored-coded rectangular bills called Euro would recognize that as money. For something to be considered money, it must have a value attached to it. Is the value that we put onto money real? Is money a real thing or a made-up concept?

In the NPR broadcast, Jacob Goldstein tells the story of a book he read in 1910 about an island called Yap. Yap is in the South Pacific and they used huge stone sculptures in the shape of coins as their currency. The stones weighed thousands of pounds and were too heavy to move so the idea was that the stone didn’t have to move for it to belong to someone and be traded between people. It’s a very familiar concept society takes today with banks. Banks can deposit and withdraw funds from your account without physical money ever actually being transported. When paying for your car insurance through GEICO each month, the bank doesn’t physically take your $278.81 from your account and give it to GEICO. As Ira Glass from the NPR broadcast says, “It really is just numbers going back and forth in the computer.” It’s insane that we view money as something we strive and work for daily but, in this current day and age, money is nothing more than numbers being bounced between WiFi connections. Another interesting question asked by Dave Kestenbaum in the NPR broadcast was “how much money is out there in dollars?” It’s a complicated answer to a seemingly easy question. When you put money into the bank, the bank loans your money out to others. Your money in a numerical value is still there but the physical money is with somebody else, that money is then used to pay other people which turns into an infinite cycle. There’s no full-proof way to count all the money there is in the world, you would end up counting the same five-dollar bill multiple times causing inaccurate data. If there is no known amount of money, are we able to put a value on it? Can we be under the impression as a society that money is even real?

In Milton Friedman’s essay “Island of Stone Money,” he went into detail that in 1932 – 1933, the Bank of France was afraid that the U.S. would not stick to $20.67 per ounce of gold. They then asked the Federal Reserve Bank of New York to convert their dollar assets into gold, later requesting that the gold be put into their gold vault drawer and labeled that it was the property of the French. When headlines were made about the news, the U.S. dollar was declared weaker than French gold. This led the U.S. and the Federal Reserve Bank to believe they were “in a weaker monetary position because of some marks on drawers in its basement.” The Yap also believed they were poorer because of marks on their stone money. This is similar to the NPR broadcast when the Yap was bringing back the limestone to make their stone money because their island did not have the limestone, they had to throw their stone into the water during a storm to save their boat. When they arrived back in Yap and told the story of what happened to the stone, everyone believed them and told them that their stone still had value because someone still owns that stone even though it was at the bottom of the ocean and not in front of them. Our concept of money is very similar to Yap as we put a value on money even when we cannot see it. The value is still there when it’s sitting in our bank accounts, or written on a paper check to give to the local supermarket clerk as payment. The illusion of having money and the figment of value that is systematized with it is ingrained in societal normality. Yet, society believes money is less valuable in other countries or even if the corner of a dollar bill is cut off. Can money become less valuable? Is the worth of money based on physical attributes or numerical quantity?

Something that caught my eye and genuinely shocks me to this day is Bitcoin. In “The bubble bursts on e-currency Bitcoin” by Anne Renaut, the virtual currency constantly changes how much each Bitcoin is worth. Trading of bitcoin can be as high as $266 and then a couple days later down to a low of $54. Who decides how much a single Bitcoin is worth on Wednesday vs how much it is worth on Friday? E-currency is risky with crashes and ever-changing price swings. Bitcoin caps out at 21 million but what happens when one day it’s saying you are a millionaire and the next day you only have $500,000? Were you really ever a millionaire or were you one for the day because that is what society’s value of Bitcoin told you that you were?

Friedman said it best “Our own money, the money we have grown up with, the system under which it is controlled, these appear “real” and “rational” to us. The money of other countries often seems to us like paper or worthless metal, even when the purchasing power of individual units is high.” Money only seems of value when we are familiar with it. We as a society give power to the currency we are accustomed to. Canadian dollars would not mean much to us even though at this current point in time it is almost double what a U.S. dollar costs. This shows us that as a society, unquestioning belief is an important part when it comes to monetary matters. Money as a concept may be a figment of our imaginations but that doesn’t change the value it still holds for us as a collective. You could try buying a new $60 smartphone with a $100 laptop and they wouldn’t take it even though the laptop is worth more money than the smartphone by monetary standards. Money is a mythical currency that was never truly there.

References

Friedman, Milton. 1991 Island Stone Money – Hoover Institution. https://miltonfriedman.hoover.org/internal/media/dispatcher/215061/full.

Renaut, Anne. “The Bubble Bursts on e-Currency Bitcoin.” Yahoo! News, Yahoo!, 13 Apr. 2013, https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html.

WBEZ. “423: The Invention of Money.” This American Life, 14 Dec. 2017, https://www.thisamericanlife.org/423/transcript.