Stone Money – beachgirl6

In life, we come to a realization that money rules the world. But how is this done? Most of the money in the world is money we cannot even see, but we know is there. Most people nowadays go online, check their account, see a number, and assume that the amount they read is their money. However, this money will be loaned out to people, and another person’s money will become yours when you need it. So, how can we trust that this money will always be ours? More importantly, how do we know this money is real?

The Yap on the Micronesia islands, according to Michael Freidman in The Island of Stone Money, had a different approach to their monetary system. In addition to their currency being made of stone, they people of Yap learned to trust one another. A group of them were returning to the island with their stone, but after a storm hit, they lost their stone and it fell to the bottom of the sea. Traditionally, we would think that the Yap does not have any money now, but that is not the case. The other Yaps on the island did not think anything of it, and believed that the stone’s value and power still remained (Friedman). Although the money could not be seen, it was still valid.

The German government designed this concept of money to be built on trust. They made crosses on stones when it belonged to them, then just erased the cross to signify that it was the Yap’s money again. This is synonymous to what France did with their gold in the US. Instead of mailing the gold from the US to France, the US just stored away France’s gold in a different drawer. France could not see their gold, but still thought of themselves as wealthy. How can this be? Money is just a myth that we believe to be true.

At first, I thought the ways the Yap thought of money was something that could never happen in today’s society. However, after listening to the NPR podcast Weekend at Bernanke’s, I realized this is what our economy is based off of. Like the Yaps, we cannot see our own money. We see the numbers in our checking account, and that essentially is trust. Trusting the bank that the amount we see is our money. The Federal Reserve Bank essentially just creates money out of nowhere. When it all just comes down to its simplest form, the Federal Reserve Bank just changes numbers on a computer screen (Blumberg, Kestenbaum). Money is not real. It is created, and we just believe it to be real.

In The Lie That Saved Brazil, NPR states that money is fictional, and proved this in the country of Brazil. Inflation was very high in Brazil, and prices of different goods would change every single day (Joffe-Walt). In addition, Brazil did not have enough money to create a new capital, so they hired four economists to create a plan to fix the economy. The thing they did could be considered preposterous. They created a virtual currency. Not only did they create this new currency, but they also created a new trust in the nation, just as the Yap’s had trust in the German government. The new virtual currency was just a fake one, but it lead to people understanding how this fake currency influenced their use of their own cruzeiros. In the end, Brazil’s inflation ended up going down massively, and the four economists proved that money is fiction.

Another article I read was The Bubble Bursts on E-Currency Bitcoin by Anne Renaut. Bitcoin is e-money and can be sent from one virtual wallet to another (Renaut). The people who own the money are completely anonymous, yet the people who choose to engage with these users trust that their money is there. This is just like the Yap, France, and even ourselves, we form a sense of trust in money and trusts that everyone knows how much they have. Bitcoin users are the same, as they can only cash this money if they trust other users will buy them (Renaut). Although Bitcoin is praised that there is no error to it, there are many risks. But there are also risks to our monetary system we use now. Cyber-attacks could take any user’s money away from them. In our system, inflation can raise prices and cause us to pay for items we know that cost less. This is especially true during the time when Brazil was going through their problem of inflation. Before the virtual currency, Brazilians were losing their money due to soaring prices. But because of their new virtual system, prices went back to normal and trust was instilled in society again. Bitcoin is becoming a new trend, and although somewhat sketchy, it can make millions for some people.

When it all comes down to it, money is created out of nothing. It is not real. Personally, I have developed a better understanding from the Yaps as they have shown, along with their German government, that trust is one of the most important aspects of money. This is true along with Brazil. As long as their people understood their virtual money, inflation came down, and prices were set to one price. The Federal Reserve Bank essentially just creates money to give to the banks by buying bonds, and just constantly types numbers in their computers. What does this mean then? If money is fake, why is it the number one thing ruling our country? Why does it need to be real? Unfortunately, nothing can be free, but what can happen is a sense of trust that we as a society can create to understand where money comes from, and who has what amount of money.

 

References

Friedman, Milton. “The Island of Stone Money.” Working Papers in Economics, E, no. 91, ser. 3, Feb. 1991. 3, counterintuitive2015.files.wordpress.com/2015/01/stonemoneyessay.pdf

Glass, Ira, et al. “The Invention of Money.” This American Life, 7 Jan. 2011, www.thisamericanlife.org/423/the-invention-of-money

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

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s