The concept of money is very counterintuitive to popular beliefs. Upon watching the NPR broadcast, The Invention of Money, I found a deeper insight into the way that money is viewed in our everyday lives. All this time I thought that money was of actual real value, when really it turns out that money is a fictional concept. The value of money is only what other people are willing to pay for it and what everyone believes is the correct amount of what it is worth. The value of money is not solid it can increase or decrease at any time, making the value very unreliable. In the village of Yap massive stone sculptures were used as money to trade, it did not need to be moved physically but the ownership of the stone sculpture would switch upon trading. To the people of Yap it was not a matter of physically owning the currency it was a representation of who had possession of the stone, meaning that they were only as rich as the value was worth. I find it interesting that in today’s day and age, physically being able to trade and possess money is very important in our society, but the people in this village found that it had no real meaning to physically possess currency in such an old society, the people of Yap were able to figure this out so why have things changed since then in today’s world? Because people value authenticity and we think that authenticity is proven in a physical object.
Also, in the NPR broadcast, The Invention of Money, a women interviewed older Brazilian citizens who lived through the worst time period of inflation in Brazil. Their value of money would increase as more and more time went by. This meant that people were paying a higher price for things that they originally bought for lower price and that they were losing money because the value would continue to go down. The government created more money which caused the value to keep going down overtime over the next five decades. Initially the government introduced a price freeze, which allowed the value of the currency to stay at the same price point so that people could afford to buy goods. The issue with this price freeze was that no one wanted to sell their items so they waited until the value of the money went back up so that the citizens were forced to pay the higher price. This was a problem because no one was able to buy the things that they needed, and they were losing money rapidly inflation was a horrific issue in Brazil and affected the daily lives of everyone.
Returning to the topic of stone money, the people on the island of Yap used large stone wheels as their monetary system which required a lot of labor to build out of heavy limestone slabs since the island did not have any metal. Their exchange of currency was called “fei” which was large, heavy stone wheels that ranged up to twelve feet in diameter. The wheels often contained a hole in the middle so that they could put poles through to make them easier to move. Friedman Milton explains in The Island of Stone Money “a noteworthy feature of the stone currency is that it is not necessary for its owner to reduce it to possession”. The wealth would not be acknowledged simply by having possession of the stone the ownership would be acknowledged by everyone in the village without anyone ever laying on a finger on the stone. One day on an expedition a storm approached the boat that the stone was on an it fell into the sea. The villagers accepted it and left it there knowing that whoever had ownership of the stone possessed whatever value it held. When the island was taken over by the German government, they claimed the fei when a citizen was charged with disobedience by having them mark the stone with a black cross. This was the government’s way of making sure that the citizens of Yap would be obedient to the new rulership of the German government and allow for them to spend money on new roads throughout the island otherwise the massive stone structures would be confiscated. As Germany is to Yap, France is to the United States. When France ruled over the US they decided to convert gold to dollar bills and the French government then claimed the gold, which threatened the American financial system so that the United States would continue to follow the gold standard. This just goes to show that our money system appears real and rational when it was really being controlled by the government. Friedman Milton also says in The Island of Stone Money, “What both examples illustrate is how important ‘myth’, unquestioned belief, is in monetary matters”. Meaning that money is simply an illusion and that we ultimately determine the value.
In today’s society, money can even be used virtually. A virtual currency called Bitcoin raised red flags when it skyrocketed in value and in a matter of three days plummeted back to nothing. In the excerpt The bubble Burst on e-currency Bitcoin, Bitcoin foundation chief scientist Gavin Anderson says “we believe that as the value of Bitcoin grows and the infrastructure around it grows and matures, the price relative to other currencies will get more stable”. The reason that the value of Bitcoin fluctuated so dramatically was because of pressure from investors. Unlike normal currencies there is no limit on how far down a virtual currency can go. It is difficult to generate new bitcoins. Anne Renaut, the author of The Bubble Bursts on E currency Bitcoin, explains “the high degree of a nominee could lead Bitcoin to become a monetary alternative for drug dealing and money laundering”. Bitcoin can be a very beneficial and innovative way to help the community, but it is also very vulnerable to cyber-attacks and is at risk of “Ponzi schemes” in which investors can receive returns.
There is no way to determine the true value of money when it is not backed by anything. The only value comes from what people place on it which proves that money is purely an obscure fictional concept that we all choose to believe in without question.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Renaut, Anne . “The bubble bursts on e-currency Bitcoin.” Yahoo.com. 13 Apr. 2013. 30 Jan. 2015. https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html/
Planet Money Team. “The Invention of Money.” This American Life, NPR News, 7 Jan. 2011