Concept of Money
To understand the absurdity of money, it is essential to examine its origins and evolution. Throughout history, various forms of currency have been used, from bartering to precious metals like gold and silver, and even large stone wheels as seen on the Island of Yap in the Pacific. These forms of currency serve as examples of how the value of money is not inherent; instead, it is placed on it by society. The significance of money lies in its widespread acceptance as a medium of exchange, without which trade and commerce would be severely impacted.
The investigation of money as a notion requires a deep dive into the annals of currency forms and subsequent comparison to our current currency systems. One particular instance of a unique currency system is depicted in Milton Friedman’s seminal work “The Island of Stone Money”. The island of Yap, where this monetary system existed, relied on large stone discs known as fei as their primary medium of exchange. These fei could range in size from a modest one foot in diameter to a towering twelve feet, posing a daunting challenge in terms of the feasibility of tracking ownership and transfer of these massive stones. The absurdity of this currency system does not end there. Upon being traded or exchanged, the fei would remain on the property of the new owner, who would simply acknowledge and respect their newfound ownership of the stone without the need to physically move it. This peculiar system of currency serves as a catalyst for introspection into the nature of money and whether our own design is any less absurd. Is it not true that money, like the fei, is merely a representation of value and ownership that we acknowledge and respect in our minds, without physically moving it around? This realization opens the door to rethinking our current monetary system and exploring alternative forms of currency.
The NPR Broadcast recently shed light on a fascinating topic concerning inflation in Brazil. Upon closer examination, the notion of inflation appears to defy logical explanation. The arbitrary fluctuation in the value of the currency, with a thousand dollars being worth significantly less the very next day, is a concerning prospect. This is further compounded by the simultaneous rise in the prices of goods, creating a vicious cycle of economic instability. Brazil has tried numerous methods to combat inflation, but these efforts only led to further erosion of trust in the government and, in some cases, even resulted in tragic instances of suicide. In a last-ditch effort to resolve the issue, the Brazilian government sought the help of four economists who presented a revolutionary plan. This plan revolved around the implementation of URV, a fictional virtual currency that effectively put an end to inflation in Brazil. This raises the intriguing question of whether money is merely a fanciful construct, as we seem to have the ability to fabricate any form of currency to resolve economic dilemmas.
Adding onto the NPR Broadcast shed light on the fact that the concept of money, which we commonly associate with tangible currency, has become increasingly abstract and virtual. With the proliferation of digital banking and online payment systems, it is increasingly rare for individuals to actually handle physical cash. Payments are made through the transfer of numerical values in one’s bank account, rather than physical bills or coins. This raises the question of whether money, in its present form, can be considered a tangible or real entity. Instead, it appears to be merely a collection of numerical data on a screen, only imbued with significance due to our collective belief and reliance on it as a means of exchange. The true nature and value of money are thus brought into question, as it relies on our perception and interpretation to maintain its importance.
The concept of Bitcoin, as described by Anne Renaut in her article “The bubble bursts on e-currency Bitcoin,” is indeed a captivating subject that deserves closer examination. Bitcoin was created in 2009 with the intention of being a currency independent of traditional financial institutions and banks. This was a revolutionary idea at the time, as it was the first time that someone had attempted to create their own currency without the backing of any central authority. However, this has also led to criticism and skepticism about the legitimacy and viability of Bitcoin as a currency. Some have questioned the morality of creating a currency outside the traditional system and the potential consequences that come with it. It’s important to note, however, that all forms of currency have been created by individuals, even the dollar bill that we use in our current monetary system. Currency has always been an ever-evolving concept that reflects the changing needs and values of society. The creation of Bitcoin was no different, as it was an attempt to address some of the shortcomings of traditional currencies and financial institutions. Despite its innovative nature, Bitcoin has faced criticism due to its association with illegal activities such as drug trafficking and money laundering, facilitated by the high degree of anonymity it offers. This has raised further questions about its viability as a currency and the ability to regulate it to prevent such issues. The fact is, currency has always been used for both legal and illegal purposes, and it’s up to society to determine what is acceptable and what is not.
Reflecting on the evolution of various forms of currency and their origins prompts us to contemplate the essence and purpose of money. It is a curious phenomenon that money holds little intrinsic value, yet it retains immense significance due to our collective perception and attachment to it. The notion of money is, in essence, paradoxical and raises questions about its eventual obsolescence. The physical manifestation of money, once represented by massive stones, has been largely replaced by digital currency stored in plastic cards, resulting in a shift towards a more intangible and virtual form of currency. This prompts the question of what will come after digital money, and whether the concept of money itself will eventually become redundant. Given the increasingly absurd nature of the current monetary system, it is not beyond the realm of possibility that this will come to pass.
Friedman, M. (n.d.). 1991 island stone money – hoover institution. Retrieved February 10, 2023, from https://miltonfriedman.hoover.org/internal/media/dispatcher/215061/full
Renaut, A. (2013, April 13). The bubble bursts on e-currency bitcoin. Yahoo! News. Retrieved February 10, 2023, from https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html
423: The invention of money. This American Life. (2017, December 14). Retrieved February 10, 2023, from https://www.thisamericanlife.org/423/transcript
Just some feedback on the structure of this and if I organized it in a decent matter
It’s beautifully written and extremely capable, PhilsFan. I’ve had to return to your other posts to learn about your voice, and as a result I find them more impressive than I did when I first evaluated them. (Your Claims choices are still mystifying to me, but they’re nicely observed.) (Your Summaries deserve a Regrade without any improvements from you; I’m applying one.)
Your Authorial voice is a little more “impressed” and “Public TV Broadcaster-y” than I personally think necessary, but I’ll never grade anyone on tone. Your voice is your voice.
Here’s the one place I think your explanation is lacking:
“further compounded by the simultaneous rise in prices” is akin to saying that the rain fell heavily “further compounded by the simultaneous soaking of the pavement.”
I say that because the way to measure whether 1000 dollars is worth less today than yesterday is by how much less rice it will buy. The fluctuation in the value of the currency may seem arbitrary, but it’s actually determined by how much money is in the economy chasing how much rice. The Brazilians brought on inflation by pumping too much cash into the economy, which enabled prices to rise, which caused buyers to want to buy at today’s prices instead of tomorrow’s, which further caused prices to rise. Right?
Other than that, your one-sentence explanation of the solution to hyperinflation:
doesn’t actually explain anything, does it?
Overall, as I said, I’m very impressed. Don’t spend a lot of time improving this one. It’s unnecessary, and it won’t pay. Work on your White Paper and Def/Cat essay instead. 🙂