Stone Money – CarsonWentz11

Everybody’s lives revolve around one thing and one thing only, money.  Money is the reason we go to school, so we can eventually get a job, which in return for our labor will then give us money.  Money is needed to buy resources for us to survive, and if one is lucky enough to have excess money, they can purchase more luxurious items.  Though the most crazy thing about money is, it isn’t even real.  How could something that is needed for everyone to survive not be real?  It is actually quite pretty easy to recognize once one thinks about it.  Besides the few dollars people keep in their wallets, the rest of their money is kept in the bank.  With this money, that we never see, we can pay our bills, do online transactions, and buy almost anything we want, and the only thing that happens is the numbers in either party’s bank accounts either increase or decrease in a blink of an eye.

This idea of having currency that is not real has actually been going on for awhile.  In Martin Friedman’s “The Island of Stone Money”, he discusses the money system used on the island of Yap, about 100 years ago.  The people of Yap used a system where different people owned these giant limestones, and if you owned the stone you owned the “fake” value of it.  Another interesting part of this currency system is that the owner of the stone could change all the time, but the stone could stay is the same spot.  It was all about who was the said-be owner of the stone who owned the value, even if they never possessed it.  There was a crazy example of this when people of Yap were carrying a large limestone across the sea with them on a boat but unfortunately they had to drop it into the water for them to make it back.  Even though they lost possession of the stone, they still received the value.  This whole system that Yap used sounds really crazy at first, but the more one thinks about it, the currency system we use right now is just like it.  Once our money is in the bank, and we start making online transactions, its not actual money that is being sent back and forth, the numbers of the accounts are just changing.  In “The Island of Money”, Friedman also talks about the situation in 1932, when the Bank of France asked America for gold, and America just took their gold and moved it to another vault and said that was France’s.  France was alright with that even without actually getting possession of the gold.  This is very similar to what happens in our online transactions today.  We never see the actual transaction, and the bank is just changing the name of the owner of that amount of money in a split second.

If money is not real, then why do American’s rely on and value it so much?  It’s because of this, that the currency system in our country is able to succeed.  A good example of the importance of the need for people to place value on their money is what happened in Brazil during their economic turn around.  In the broadcast, “The Invention of Money” broadcast, they talk about how four economist solved Brazil’s failing economy by creating a new form of currency called a URV, that didn’t exist.  The whole plan would work if just one thing happened, they needed the people of Brazil to believe the URV was real.  After listening to this broadcast, I now realize that I have put real value in my bank account, when the closest thing for me to actually hold my account balance is just the little slip of paper from the ATM with some numbers on it. The craziness of the importance of implied value continues with the actual cash currency.  The bills we use are just linen with numbers and other marking printed on them and yet this linen means so much in our society.

Even though money is not real, the Federal Reserve has the power to create or destroy money.  When the Federal Reserve adds money, loans tend to become easier to get and interest rates tend to decrease, but adding too much money can cause deflation.  If money isn’t real then how is it possible to just add money?  “The Invention of Money” broadcast discusses that when this happens, money is just created by a press of a button, which is sent to banks in return for treasury bonds.  The banks then lend of the new money with lower interest rates.  Money appearing out of no where and being sent to different banks all over the country in a split second is mind-blowing and adds to the point that money is not real.  This is not only done in America, but in Krugman’s “The Curious Case of Japan’s Economic Stimulus”, it discusses how Japan added ¥10.3 trillion into their failing economy and it has had successful effects so far.

Money is not real but the value we as a society put on those pieces of linen and the items we get in exchange for the linen is very important.  The pieces of linen that we call cash only works if we as a society all agree that we are going to use the linen with numbers printed on them as a way to exchange goods.  So if someone went up to buy ten dollars worth of apples with a rock that has a ten dollars written on it, the apple seller will obviously decline the rock, but what is so different about that than just having a piece of linen with ten dollars printed on it?  The difference is we as a society have all accepted these economic rules of what counts as money. Now talking about the goods we actually exchange the money with can be valued differently by everyone.  A good example of this is sports memorabilia.  If I have an autographed football by everyone from the 2018 Super Bowl winning Philadelphia Eagles, and I go up to a random person who never watched a football game in their life and have no clue about the NFL, they will value my autographed football at nothing.  On the other hand, I could ask a huge Eagles fan what they would pay for it and the value would be very high.  The value of many things in life will be valued differently by everyone, but the one thing that will be valued the same by everyone is cash.

References

Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.

Krugman, Paul. “The Curious Case of Japan’s Economic Stimulus.” Truthout, Truthout, 22 Jan. 2013

“The Invention of  Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.

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