Stone Money – mhmookaysure

Cash or Trash?

“Money makes the world go round” is something we’ve all heard before. When speaking of value, the primary assumption made is how much money something is worth, or what is its monetary value. What turns this question upside down is the fact that “money is fiction” as Jacob Goldstein, author of Money: The True Story Of A Made-Up Thing says. It’s existence isn’t fiction, but instead the power it holds is theoretical, being based off of the agreement of society. Throughout history, there have been many examples of value being fictitiously assigned to objects, in order to consider them “money”. Whether it was the exchange of paper for coin, stone for house, or the click of a button to transfer ownership as is the case today, the constant change in what is considered money throughout time leads us to believe that money is not a physical concept, but instead a theoretical one.

A seemingly comical, yet anchored in truth example of this phenomenon comes in the story of the Island of Yap. Located in the Pacific Ocean, the island nation showed financial innovation in the invention of its own currency. Moving on from the age old barter system, where an exchange occurred in the form of product for product, the island people decided to bypass this in the form of a currency. Instead of having to give products in order to acquire something, people of the island were now able to make purchases instead of exchanging goods. In an attempt to limit islanders’ ability to create this new currency, they chose limestone rocks which were found on a separate island found two hundred and fifty miles away as a means of exchange. Sculpted into large disks, some being taller than man, these limestone rocks were called fei, and were agreed upon as the currency of the land. This size proved to be an issue however, with exchange of the currency being strenuous, so the island came up with a method of exchange that stands to this day, payment based on belief that the currency exists. Instead of having to physically possess the fei, islanders would in turn trust one another that the fei existed, and would exchange ownership of a specific stone. This went on to such an extreme, that for decades, a fei lost at sea during a storm was passed on as payment from generation to generation.

In some cases however, the trust in a currency is dashed by the increased production of it, as was the case in Brazil during the 1950s. Spurred by then President Juscelino Kubitschek’s wishes to create a new capital city in the jungle, the Brazilian government went on to print more and more money in order to cover the cost of this endeavor. Seemingly flawless logic, “let’s just make more money” does not realistically work however, due to the economic phenomenon known as inflation. Today the more money that is in circulation, the less the currency itself is worth, as it is not tied to a tangible asset such as gold as it was in the past. Because of this, by printing more and more money, the Brazilian government essentially lost all faith from its citizens, as the money was essentially worthless. Because of this, the nation was faced with inflation rates as high as 80% a month, meaning that an item that cost 10 cruzeiros, which was Brazil’s currency at the time, would cost nearly 10,000 cruzeiros a year later. This issue went on for decades, with no solution in sight, until four economists decided what better way to solve the problem of distrust in currency than to make up a new currency. “People have to be tricked into thinking money will hold its value” says economist Edmar Bacha in NPR’s Planet Money article How Fake Money Saved Brazil conducted by Chana Joffe-Walt. Thus the Unit of Real Value or URV was born. Completely virtual, the new currency had weight against the Cruzeiro, meaning that while prices in URV remained constant, how much Cruzeiros one URV was worth fluctuated. Seeing that prices remained constant, although the value of the currency changed, the people were led to believe that inflation was no more, and that the currency once again had strength. This psychological change worked so well that within months people once more trusted the currency of the nation, which eventually fully replaced the old Cruzeiro. Just the idea of a new and “stable” currency turned an entire nation’s economy around, so what’s to stop any country from declaring their currency to be more powerful than it is?

Well, frankly nothing can stop the concept of money. It is created from thin air, and established across the globe as legal tender. Who governs these unwritten rules and has the ability to conjure money out of thin air? In the United States, that would be the Federal Reserve. With the concept being explored by Alex Blumberg and David Kestenbaum of NPR’s Planet Money, one learns that the way that money is created is by a simple click of a button. Something that one cannot live without, arguably one of the most important things needed for survival in today’s time, is simply created by someone in a position of power tacking on a couple of extra zeros into a bank account, allowing it to be distributed via loans or bonds. That’s right, a select group of people, working independently from the federal government itself decides when and if the country is in need of adding a couple billion or trillion dollars into circulation.

As a society, we have advanced from the concept of physical value. No longer is precious metal dictating what something is worth, instead a concept of worth is assigned to an otherwise worthless object. We’re able to transfer money virtually, without ever seeing it or knowing that it exists based on the trust that it in fact is there. Money as we know it is no longer a tangible asset, it has no real value, instead as a society we agree on the fact that it is the method of exchange. This leads to the question: is cash anything other than a load of trash?

References


King, Noel. “What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’.” NPR, NPR, (2020, September 8), Retrieved 20 September 2020, from http://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction.

Glass, I., Joffe-Walt, C., Blumberg, A., & Kestenbaum, D. (2018, February 19). The Invention of Money. Retrieved September 20, 2020, from https://www.thisamericanlife.org/423/the-invention-of-money

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

Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. (2010 October 4), Retrieved 20 September 2020, from http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil/

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