Now you see Money, Now you Don’t
What is money? It’s a really good question that I never really thought about much until I was assigned to read about “Stone Money”. We all think of money as a tangible item which it is most of the time, but is it really there? Money is a very confusing topic and these lectures and readings really dive into how crazy money can be. Money is ever changing, new innovations on how money can be used and seen change rapidly.
As I sat down and started listening to the NPR podcast they started talking about a small island civilization called Yap. This island was home to about 5-6 thousand people. What could make a small little island with this small of a population so interesting? Money! The natives of this island use a form of currency called “Stone Money” . Yes I said it they use stone as money, not just some little pebble sized stone I’m talking about way over a 100 pounds of Stone. What is even more interesting is that these stones hold value even though the person who owns the stone does not even have to be in possession of it, In Milton Friedman’s essay “ Island of Stone Money” he said it was just the “ Bare acknowledgement”. It could be on someone else’s land but it was seen as their wealth. In Yap you could be the wealthiest family and you would never see any of that wealth because it is a giant stone somewhere in the ocean.Yap had no roads that allowed carts to be driven on them they were used for the people to walk on but when the German government came in and colonized them they were told that they have to repave the roads and if they did not they would be fined. The people of Yap did not repave the roads so the German government came in and saw these giant stones laying around so they painted black X’s on them so the people would know the government owned them. Once the people saw the paintings on their stones they repaved the roads and made them almost perfect. It’s the value of their currency that made them do this, they believed in the Stone Money so once they saw what happened to them it forced them to do the work.
If the people of Yap could see how currency is used in the United States they would think the most bizarre thing is that we can carry our money around in a wallet, inside of that wallet is a little plastic card that contains money also or even our cell phone that allows us to just tap and order something. Our government is trying to push for everything to be done online, right now there is a shortage of coins. How can there be a shortage when the federal reserve can just push more into circulation just like they do with money.
This reminds me a little bit like how the United States shows wealth. Right now 93% of Americans use direct deposit, we work 40 hours a week and then get a little notification that our money has been put in our account. Is that money real or is it just a number that is put there at the end of the week. When we use direct deposit sometimes we will never see that money in person, we pay most of our bills online so that is just another transfer of numbers online. Nothing tangible is being exchanged between two parties, it is just a tap of a button and the money is sent. Money nowadays is comparable to the island of Yap’s currency. You don’t always have to see the money infront of you, it’s just the idea of knowing it’s there.
In Act 2 of the NPR broadcast, “The Invention of Money” we learned about the struggles of inflation in Brazil. Brazil was stuck in a period of time where the market was so inflated that the crucero was practically worth nothing. The Brazilian government went through multiple Presidents and still could not fix their financial problems. Finally after years of inflation the government asked 4 economists to help them fix their inflation problems. It took a very long time for the government to get the 4 economists on their side to help fix the issue, they finally agreed to help out. They came up with a plan that would introduce the “URV”, this is a new virtual currency. The thing about the “URV” is that it is not real, it is just a virtual currency that was made to trick the people of Brazil. They would use the “URV” everyday until one day when the government would release the real Money. This virtual currency was made so they could erase the inflation in the Brazilian economy and it really worked and now Brazil is one of the best economies in the world.
The new thing in our world today is Bitcoin. Bitcoin is a virtual currency that was invented in 2009. Bitcoin came out of nowhere and took the market by storm. Bitcoin is very risky and many people try to stay away from it, Steve Hanke of Johns Hopkins University said this about Bitcoin “a very uncertain, speculative venture,” because it is not backed by a commodity.” Bitcoin is based on one person’s opinion versus another person’s opinion. Up until 1971 the United States was backed by gold until Nixon did way with the Gold Standard. We now go off of the Federal reserve and we trust that the government holds the value of our currency and does not let the market get inflated.
Paper money will soon be gone, our country will advance its technology and do away with paper and coins. Everything is starting to be done online, right now we are seeing a coin shortage because the government wants everything to start being online. Paper money will soon just be a thing off the past, just like the Gold Standard. There will be something better and more efficient for the economy.
Renaut, Anne. “The Bubble Bursts on e-Currency Bitcoin.” Yahoo! News, Yahoo!, 13 Apr. 2013, sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html?guccounter=1.
Friedman, Milton. The Island of Stone Money. Hoover Institution, Stanford University, 1991.
King, N., & Goldstein, J. (2020, September 08). What Is Money? Jacob Goldstein’s Book Explains ‘Shared Fiction’. Retrieved September 20, 2020, from https://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