In todays world money is quoted “the root of all evil”. It’s used to ultimately get what you want, when you want. People say “money talks” and in an instant will do damn-near anything if the price is right. It doesn’t matter what form it comes in either as long as that slip, app, or physical dollar comes with a good number on it. I begin to ask myself, how do we know it’s all real? How do we know that those numbers aren’t just there for satisfaction and to make us feel good?
Reading Milton Friedman’s “The Island of Stone Money” really opened my eyes and helped me understand how currency and it’s value all came about. It makes me question our currency today and how it really works being that there are all types of forms we use to transfer funds between one another. The government only tells us their price for what our currency is worth. For all we know it could be worth nothing at all. It could literally be what it is, a piece of linen and cotton with a number on it. In the article the German Government bombarded into the island of Yap and claimed everything that wasn’t theirs. They took control and claimed the paths and highways were in bad condition. The chiefs of the several districts were told that they must have them repaired and put in good condition. Whoever questioned it got their fei slapped with a big X of black paint, it was then the German Governments fei. That’s like my bank account being frozen for failure to pay off a bill or not keeping enough money in my account.
The islanders of Yap resorted to stone being that there was no metal supply. They needed a form of currency that allowed their people to be able to purchase goods and trade. Fei was then created of limestone found on an island 400 miles away. It consisted of large and solid stone wheels, which ranged anywhere from one foot to twelve feet in diameter. Some of them weighed more than what a car would today. They were not mobile at all. The way it worked was by ownership. If you traded a giant stone for something big in return it was now your possession and everyone knew it. There wasn’t any way of transporting it to their home if you will, it stayed where it was originally.
After listening to “The Invention of Money” on the NPR broadcast I started to think about where does all my hard earned money go after every week? Does the government keep the actual value as I hold a slip with computerized numbers on it? Brazil’s inflation rate hit 80% for every month, it lasted about 5 decades. A bag of chips could cost a dollar one month and by the next month they’d cost $2 and by the time the year is up the price could be $12 for that same bag of chips. Brazil was putting their trust in president after president. It was like a continuous cycle of failure. A virtual currency system came into play which was used to trick people into thinking that the currency was real. People still had and used the existing currency, the cruzeiro but everything would still be listed in the real. Everyone was promised to receive their wages and pay for all the prices in the new currency. The inflation basically ended and the economy was turned around. Brazil became a major exporter and 20 million people rose out of poverty.
In 1932-33 Bank of France worried that the U.S. would not stick to the gold standard at the traditional price of $20.67 an ounce of gold. It asked the Federal Reserve Bank of New York to convert dollars in the U.S. into gold. They wanted to avoid shipping the gold overseas so it requested to keep the gold in the Bank of France’s account. The Federal Bank Reserve went to their gold vault and basically did what the German Government did in Yap, they put a label on their separate drawers which made it known that it was the property of the French. The markets saw the U.S. dollar as weaker and the French as stronger, that led to the banking panic of 1933.
This whole topic has left me with the conclusion that our money isn’t really ours whether we work for it or not. Years from now physical currency will no longer be a thing and all currency will be virtual. It makes me want me to save as much cash as I can before it comes to an end. Then again who knows if it would even be valuable. It sucks that we can’t trust our government, who knows what else could be going on behind the scenes. Let’s create our own, new and improved form of currency!
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, and David Kestenbaum. “The Island Of Stone Money.” NPR, NPR, 10 Dec. 2010, http://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money.