Stone Money-wildwood89

The thought of money nowadays seems so simplistic and normal. Having a job naturally comes with having a paycheck and that paycheck pays bills and pays for things that people need to live. Going out with friends or buying the new iPhone all happens because of having money. When somebody does work for their respective company, that company, twice a month deposits money into the workers bank account. That worker then is able to pay for their living expenses. But what did the company actually give the worker? Say it’s a construction business and the employee built a shed, the shed is a physical object, it is in a backyard somewhere where a person can touch it and use it. That shed becomes a tangible asset that the customer can now use. All the employee received in return is a higher number in their bank account that is supposed to represent their savings. A made-up number in a bank account is all that the employee receives after doing manual labor for somebody else. Sweat and hard work translates to receiving a green piece of paper that you trust represents something you can use again in the future. Again, it seems so basic and crude but when you stop to think about it, it makes one wonder how it all came about.

 

After reflecting on a piece by Milton Friedman, “The Island of Stone Money,” the idea of using a giant piece of limestone as a form of currency seems so lucrative, but in actuality, makes more sense than modern day banking. In the article, the author discusses that in the early 1900s, an island of natives, called Yap, on the Caroline Islands, located in Micronesia, had an extremely interesting monetary system where they used stone as currency. This stone was nothing ordinary, these were massive stones with a hole in the middle that a pole could be inserted and wheeled around, making for easier transport. Some stones were so historic and widely talked about, it turned into folktale and the heirs of such stone were living lavish lives, based on the rumors of their family owning it. Some families have never seen their stone, for some was lost years before, but the community still accepted them as wealthy. When the people of Yap were in debt, the government would send teams out to the people in debt and mark their stones with thick black paint, marking an “x” on it until the debt it paid. When the stones had an x painted on it, the community no longer considered that as a sign of wealth and would even shun the family with an x painted on their limestone. As soon as the debt was paid, the government would send out another team, removing the mark. The fact that the community based their belief off of a gigantic stone and an x, says all you need to know about the monetary system.
A sophomoric idea I had when I was little and just starting to understand the idea of having to pay for things I want, was to simply print more money. This was obviously before I even heard the word inflation. After a family trip to the United States Mint, it further backed my idea of using the massive, loud, shiny machines to just print more dollar bills so that everyone has a little more in their pockets. After growing up and realizing it is not that simple, I was very pleased that the government did not follow my lead and print the money.

 

After listening to a segment of an NPR broadcast regarding an economic crisis in Brazil in the 1950s and an unprecedented inflation rate which crippled the economy, it struck me how easily inflation could handicap a population. The inflation crisis continued for 5 decades until the government needed a new idea, something to change the system. The Brazilian government hired four experts and gave them free range to save the bleeding economy. They introduced a new form of currency, one where the population could believe in, and new legislation which slowed down the money printing presses. After a short while, their new procedures actually worked, and once disastrous economy started to level off and stabilize. After analyzing where they went wrong and what caused the multiple decade long economic downturn, they realized that the excess of money floating around the economy caused the money to lose value at an extreme rate. Printing more money to build, buy and expand an economy is not the answer.

 

Another segment in the NPR broadcast discusses the United States and the history of where the modern-day banking has got its shape. All superpowers have a central bank that controls the inflow and outflow of its currency, and the United States central bank is called the Federal Reserve. The fed does what is right for the economy free of political restraints, regardless on which side of the aisle the Fed President votes. The presidents of the different banks are located in 12 different districts and they vote every 6 weeks on whether or not it is a smart decision to add more money into the economy. Pumping more money into the economy means the ease of lending more money to businesses and expansion of the economy but be weary of inflation rates. The publics’ fear of their money losing value is a huge factor when determining to print new money. If the population is losing trust in their economic leaders, they may want to cash out of the banks and have their money in their possession which could cause a ripple effect across not only the nation, but the globe. The problem with that is, there may not be enough physical money for everyone to “cash out.” Money nowadays is just information, numbers on a receipt that Americans trust will be there when they need it. The banks are just revolving doors for cash which they lend out, so they can make their money.

The world has certainly come a long way from the early days of discovering fire to discovering electricity to eradicating certain diseases from our crowded planet, but have we really come a long way in our monetary system? What has changed? We still use symbols of wealth to represent our hard work and those symbols nowadays are nothing more than a green piece of fabric. Any day now could be another financial crisis and the question will sure to be asked, do we need more money?

 

 

Friedman, Milton. “The Island of Stone Money.” Counterintuitive, Stanford University, Feb. 1991, https://counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Glass, Ira. “The Invention of Money.” This American Life, 19 Feb. 2018, https://www.thisamericanlife.org/423/the-invention-of-money.

Goldstein, Jacob. “The Invention of ‘The Economy.” National Public Radio, February 28, 2014, https://www.npr.org/sections/money/2014/02/28/283477546/the-invention-of-the-economy

 

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