Objects of Nothing

The fact of the matter is, money is worthless. It is a figment of society, if you will. We say that a certain piece of paper has x amount of value, and we believe that with the upmost faith that it is true. I say we do so blindly. How can we be sure that the number in our bank account is actually real and what would happen if you, along with everyone else, decided to one day stop believing that the number in your bank account actually holds value. Wouldn’t that be the end of an economy? I say that if a population were to undergo economic mistrust and disvalue their own currency then that would be it.

From the beginning solid items such as rocks and gems have been considered to possess monetary value. Circular limestone discs that were carved from mountains, coal, iron, goal, diamonds, and so on. You may be saying, What? Limestone? Let’s elaborate. The Island of Yam in Queensland, Australia was home to indigenous peoples that utilized limestone discs the height of a person and the weight of a car as currency. According to an episode of, “This American Life,” titled, “The Invention of Money,” by The Planet Money team, the people of Yam would mine these circular stones and put holes in them. In other words, they looked like coins. However, since these gigantic stones were so enormous they were extremely difficult to move. Therefore, these stones were marked to denote who owned it. These stones signified wealth, or lack thereof. So, basically these people wouldn’t actually have their stones in their own possession, but everyone would agree and believe that they had this wealth even if they couldn’t see it. Taken from Milton Friedman’s, “The Island of Stone Money,” it was stated, “a family whose wealth was unquestioned, — acknowledged by everyone — and yet no one, not even the family itself, had ever laid eye or hand on this wealth.” There was also evidence discovered in the ocean that the people of Yam had lost some of these stones in transport due to a big storm. In order to survive they had to cut the stones loose; when they got back to the island the assured their people that the stones were grand and of size like none other. The tribes believed them, and allowed them to use them even though they were at the bottom of the ocean. To translate this, now, to modern day, how is this any different from electronic banking? We take our money, which is just a number, and our told that because this number is transferred from a company to our bank account that we know own this money.

Another baffling example of how fictitious our money really is, is the Federal Reserve in the United States. The role of the Federal Reserve is to create and store money from the entire country. During the financial crisis in 2008 the Federal Reserve printed 1.75 trillion dollars and entered it into the market. To put this into perspective, The Planet Money team on their podcast noted, “$1 trillion is to $1 million what $1 million is to $1.” What an absurd analogy. How can a government just print money and create it out of thin air? Let’s travel back in time for a second. Back in 1933 the Bank of France had a multitude of assets within the United States. One day France was concerned that the United States would devalue the price of gold and ruin the French economy. So, what do they do, they request that the New York Federal Reserve to convert their assets to gold. In Milton Friedman’s, “The Island of Stone Money,” he relays this information, “(The Bank of France) asked the Federal Reserve Bank of New York to convert dollar assets that it had in the U.S. into gold.” Furthermore, (and keep in mind this is 1933) the French didn’t want their gold to be shipped by boat so they requested that the Federal Reserve, “simply store the gold on the Bank of France’s account.” So, in response, the Federal Reserve marked the gold and put it into separate drawers. For all intents and purposes this could be the same thing as the, “Stone Money,” that the people of Yap had at the bottom of the ocean.

More modernly, we have experienced a birth of new currencies that are independent of politics and central banks (like the Federal Reserve); For example, Bitcoin. Recently, Bitcoin has been under fire for its first official burst. In other words the Bitcoin bubble burst. The main issue, as I aforementioned, is that money is based off of the belief that a governments currency has value. So how does Bitcoin obtain its value and how does it stay viable in the market? This is a key flaw in Bitcoin and the fact that Bitcoin is a fictitious currency based off of encryption and lines of code it leaves itself open to tremendous speculation which can extremely damage its value. However, Yahoo! News’ Anne Renaut had the opportunity to interview with Bitcoins’ Foundation chief scientist Gavin Anderesen, “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.” In other words, the longer Bitcoin is around, the more trust there will be as a result.

After reading/listening to all of these sources my view on money has definitely been altered. I never realized how fake it really is. Money is based off of the idea that it has value and people believe that and trust that. Until they don’t obviously. Its kind of scary; because its made me realize how fragile our economy really is. I’d even go as far as to say its unsustainable, but that might be the pessimist in me. I don’t understand how we’ve come this far from our, “Stone Money.” The pieces of paper that we work for everyday and strive for are just nothing.

References:

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/ 

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