Money makes up a big part of our lives and it consumes everything we do. We are constantly buying items and paying bills with what we call money. There are different forms of monetary systems. There is one money system that caught me by surprise when I learned about it. The form of money was an actual stone with a hole in the middle. The people on the islands did not need to physically have the money in their possession. At first this seemed crazy to me because how can you own money and not have possession of it. Then I started to realize that their concept was no different than our concept of money.
After reading Friedman’s essay on “The Island of Stone Money” I began to understand the island of Yap money system better. The Island of Yap was part of the Caroline Islands in Micronesia. The island was apart of the German colony. The islanders adapted an interesting currency. Their money consisted of huge stones with a hole in the middle for easy transportation. They called their currency fei. In part of Friedman’s essay, he talks about how the owners of the stones did not need to have it in their possession they just needed the acknowledgment of ownership. They also did not need to document any exchanges. This was the case when an expedition to collect the fei and bring it back to the islands went wrong. While on the way back a storm appeared and caused the stone to sink. When they returned they explained what happened and the owner still had the value of the fei even though it was at the bottom of the ocean. This is similar to our money system. We never actually get to see or physically hold all of our money in our hands. Many of us have debit/credit cards, checks, and accounts that inform us about our money but that is the only knowledge we have of it.
The idea of just convincing people that money has value has been around for a while. This idea showed to be true in an NPR broadcast. Brazil suffered from inflation for many years and had presidents who tried to fix the problem. One way was freezing prices but that lead to business’s hiding merchandise. Another was not allowing the citizens to get their money from the bank. These fixes were not at all what they needed. Turns out all the government needed to do was make the people of Brazil think their money had value and that is just what they did. The government asked four friends to come to Brazil and help fix the economy. When the friends arrived they created URV’s which was a stable way of currency. The people of Brazil still had their old currency but would just convert it to URV. Eventually, everything from wages to taxes was put onto it. The currency started to be known as Brazilian Real. Over time, the country tricked themselves into thinking the currency had value. The idea of money being real and having value is what the federal reserve does as well. They create the money out of thin air and have control over it. The Feds play a role in balancing our economy and support us in case of a financial emergency. It is easy to conclude that in some form there really is no such thing as money. We are led to believe that our money has value so we continue to spend it. We never get to physically hold or see all the money we own. All we know is that our money is in our bank accounts.
The article Invention of The Economy yet again proves that money is just one big idea. After the depression, many knew that there was something wrong with the economy but they just did not know what. The government decided to create money. They set up national income which was the value of services and goods produced in a year. Eventually, the national income becomes known as gross domestic product. This was all just based on an idea and not a physical thing. After this was created people started to compete by seeing who was better based on the amount of money they had. This seems crazy to me because some person in the world created certain guidelines on money that affected where you ranked socially. The rankings were upper class, middle class, and lower class. For some reason, we just follow these guidelines and continue to do so all because someone made them. Again the GDP is an idea that keeps changing and the US is constantly messing with its calculations.
I never really thought much about the whole concept of money until this assignment. After listening to and reading these sources my outlook on money has changed. I see now that money is more of an idea than a physical thing. Sure we have dollar bills that we can hold but we never get to have all our money in our hands. We supposedly know that all of our money is in the bank but even that is not fully true. The money goes into a balance sheet and from here the bank sees what others have in their savings. If people have a lot in their savings they can lend it out to balance everything. When it comes down to it money and currency is just a creation made by others that do not really hold any value. A creation that countries continue to use and build off of. As long as people believe that their currency has value as in Brazil it will continue to be used and believed in for many years.
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, http://www.thisamericanlife.org/423/the-invention-of-money.
Goldstein, Jacob. “The Invention Of ‘The Economy’.” NPR, NPR, 28 Feb. 2014, www.npr.org/sections/money/2014/02/28/283477546/the-invention-of-the-economy.