It is very easy to come to the conclusion that money is every society’s idea of wealth. Money can literally be any object that is tangible or represented electronically such as Bitcoins. Historically, money is any item accepted as payment for goods or services. Shells, coins, limestone, and even barley have been used as money.
The NPR broadcast by the Planet Money team tells the story of the Island of Yap. Yap is an island located in Micronesia where limestone is used as money. The people of Yap travel to a distant island by canoe to harvest pieces of limestone to bring back to their home. They call these pieces of limestone fei and they are sometimes as large as a car. One would consider this very impractical. However, the natives of Yap do not carry around their money in their back pocket the same way we do in the United States. The large stones are left in one location and it is just acknowledged by the islanders that the owner is good for the money. One could think of the stationary piece of limestone the same way as their bank account. We just carry around debit cards to link us to our hypothetical piece of limestone.
Milton Friedman further explains the value system put in place on the island of Yap in his educated article, “The Island of Stone Money.” The German government assumed ownership of Yap in 1898 and asked the chiefs of several districts to repair several roadways that were in bad condition. Upon inspection by the Germans, many roadways were not repaired like they had ordered. Therefore, by painting black crosses on various pieces of limestone to claim them as property of the German government the natives of Yap lost some of their precious wealth. The people of Yap saw this as a huge loss in value and began to repair the roadways. Germany then erased the black crosses to give back their stones. This is very similar to a situation that occurred between 1932 to 1933 involving the United States Federal Reserve and the country of France. The French government wanted to convert assets they had in the United States from dollars to gold bars. The Federal Reserve agreed to comply with France’s request but the gold remained in the Federal Reserve’s bank instead of shipping it across the ocean to the country of France. Even though the gold was labeled as France’s, the financial world saw this as a loss for the American financial system and which possibly contributed to the beginning of the Great Depression of the 1930’s. Based on these two situations, I can further see that money , gold or stone, has a fictitious value based solely on someone’s belief.
The article The Bubble Bursts on E-Currency Bitcoin reminds me of the Super Mario Brothers video game of my youth. Cryptocurrency, as it is called, is all stored online. It can go up or down in value and is literally its own type of money. Just like in Mario Brothers, I could collect a wealth of “coins” and with Bitcoin I can collect a wealth of virtual online bitcoins. For some, it can become a real game of keeping track every minute of the day to check in on your status of Bitcoin value. There are even special Bitcoin ATMs in most major cities.
From the beginning of time, there has always been some type of currency that people used to carry out their daily lives. Whether it was exchanging produce that farmers grew or selling pieces of gold. After thoroughly analyzing the sources, it is very easy to come to the basic conclusion that money is really a fictional idea of wealth. Back in the day, money was “real” per say. The United States government had enough gold to back the value of every piece of US currency in circulation. That is not the case in today’s world. If everyone living in the United States went to their bank and wanted to withdraw all their money in cash, it could not be done. There is more money in people’s bank accounts than their is cash in circulation.
As time progressed and the idea of currency changed, money became more of a tangible thing that helped people determine their status. However, what people do not realize about money is that money does not really have a set monetary value. For example, we see in the stock market that the value of company shares goes up and down all the time. One day, someone can be worth millions, but then the next day they may have lost it all.
Furthermore, money is an abstract concept that can mean many different things. In today’s society, many people traditionally used tangible items to demonstrate their personal wealth to the people around them. However, as we move forward into the future, we are seeing that having many material items or anything tangible to portray one’s socioeconomic status is becoming much more obsolete. Instead of people spending endless amounts of money on material items that they will eventually throw out , they are trending towards investing in the stock market or mutual funds. The purpose of people starting to invest their money I believe is because they realize that tangible items usually depreciate in value fairly quickly. If one was to invest money into bitcoin or another e-currency company that company may decrease in value, but it also may triple in value in a very short period of time. Having the knowledge of knowing when to hold or fold is the key to financial success.
The people of Yap recognized their wealth through large pieces of limestone. The people of the United States use paper and coins to carry out their means of exchange. We trust the fact that it is backed by the Federal Reserve Bank . It is this common belief that all of these items are worth some amount of value This leads me to believe that everyone everywhere can decide which item they would like to use as a form of currency.