The Value of Money

In today’s society, money is what the world revolves around. We use money for payment, to exchange for an item with the same value in cost. However, what is the true value of money and what if all of a sudden it just disappears? Physical money has become less frequent over the past years. Money has been transferred over to online banking and cards. That makes me wonder if money is truly real. Ira Glass from The NPR broadcast “The Invention of Money”, states that “money is fiction.” Yes, we are given a number to show the amount of money we have, but is that money all there? 

The NPR broadcast “The Invention of Money” explains how money is not necessarily real. It’s more of something to believe in. They stated that if you were asked to count all the money in the world, you wouldn’t be able to. Since money is liquefied it’s impossible to count. If some random person was wanting to buy a store, he would have to take money out of the bank to pay a deposit. However, the bank wouldn’t have all of the physical money to give to them. So they would have to transfer some of your own money to him. The banking system is all about transferring and borrowing money, so that everyone is satisfied without having wads of paper in storage. There is a book called, “Yap in the South Pacific”, and during that time their currency worked kind of like how ours work today. These pre-industrial people would use big stone coin shaped structures for currency. They’ve decided instead of physically trading coins or some sort of money, they would have ownership of these stone sculptures. They used this type of currency for bigger purchases. For example, if their warrior was killed in another village they would exchange ownership of the stone for their soldier. It has now evolved into how currency works today. Money has become more of an idea, numbers in the bank. Instead of being paid hundreds of dollars in cash, you’re paid online with numbers transferring from computer to another. Similar to the Yaps, we acknowledge the fact that we have money in our bank account due to the number we see. But, if you think about it, the money isn’t really there, it’s an idea. 

Similar to what the NPR broadcast talked about in the previous paragraphs, Milton Friedman, author of “The Island of Stone Money” shares the currency throughout time. His main point was about the Yap and the unique currency. How they pay forward a giant coin shaped stone sculpture in return for something treasurable.  Another point that he made was the French were frightened that the U.S would leave the gold wage currency. This led to the Federal Reserve Bank to trade dollars for gold, which caused the US to be able to exchange with other countries who have different currencies. 

In 1990, Brazil was in desperate need of help due to the extreme inflation rates with it increasing 80% per month. Sunglasses that were ten dollars in the beginning of the year would end up being 10,000 dollars by the end of the year. Brazilians didn’t realize that the value of cruizeros could change so much in such little time. Money was being printed so fast that the value of money became less and less everyday, causing inflation. However, Brazilians were so obsessed with money that they let the inflation rise to an extreme. Four economic friends were hired to assist the economy’s inflation. They created a currency called URV, a unit of real value. This currency was virtual which meant that no money existed. People can still have their standard local currency in their pockets, but they started to get paid in URVs, as well as taxes and other groceries items. I think that it is bizarre that fake money can reverse a country’s inflation and help people’s concept of money change. 

Now that the world’s currency is mostly online, we have expanded to different ways of exchanging it. One of the more common ways is cryptocurrency. In the article “The Bubble Burst on E-currency Bitcoin ” by Anne Renaut, explained how Bitcoin, the most popular cryptocurrency, dropped from 266 dollars to 54 dollars in three days. This is because it is so fluid that it is easy to fluctuate. With money being so diverse nowadays, the value of it always changes. It might decrease or increase due to the stock market, inflation and how we as people value our own money. There is never going to be one value or currency because money is being made and changed everyday. So from what I’ve learned from reading these articles and listening to the broadcast was that money doesn’t have a set value nor does it exist, it’s just an idea.

References

“The Invention of Stone Money” 423: The Inventionn of Stone Money. This is American Life, WBEZ. Chicago. 7 Jan 2011 https://www.thisamericanlife.org/423/the-invention-of-money

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

Renaut, Anne “The bubble burst on e-currency Bitcoin”,13 Apr. 2013 https://phys.org/news/2013-04-e-currency-bitcoin.html