Money, Society’s tool
Money is very much a essential part of the society’s functioning. Through its value people are capable of buying/selling just about anything they wish. It seems simplistic enough, however very few people actually take the time and ask themselves the question ” How is my money even worth anything?” The answer to that is even more interesting. Why is money worth anything? Because society wants it to.
Money is only worth as much as the people who use it allow it be. Its through this shared idea behind the value of it that gives it well its value. Look no further than Milton Friedman’s The Island of Stone Money to further back this notation. The people residing on the island of Yap had their currency represented by large stones that were quarried and moved from an island about 400 miles away. These stones were often enough to large to move between locations when transactions were made so, what they did was simply state that the buyer now owned that stone. It didn’t even matter if they couldn’t physically reach it, one of the more wealthy groups on the island has a large stone under their ownership that’s currently sitting underwater 100 miles off the coast after the stone, which was being brought back to the island, sank during a storm.
(Friedman,1991) We don’t do this. The residents of the Island even took drawings on the stones as a change in ownership. Back when Germany was occupying the island, they repeatedly requested for the path ways to be fixed but the people refused to do it. So one day the Germans marked the Stones with a black cross and said the stones will be under the owner ship of the Germans until the roads were fixed. Low and behold with their currency in crisis the people quickly repaired the pathways on the island. With the pathways cleared the Germans cleaned the crosses off the stones signifying that they once again belonged to the people of the Island.
As I read through this article I could only think about how ridiculous it sounded. Money that is only valued through word and social agreement and not actual physical property? That idea just sounded so stupid, until I realized something. The world follows that exact principle today just a little different. Let me prove to you what I mean. Check your wallet right now, see how much money you have in their. You have how much? At most $100 in total maybe 200 depending on the person. Now we still can pay with a physical exchange on money. But how are a majority of todays transaction completed? Through the like of debit and credit cards.
Think about for a second, we use credit cards to handle money but the money that is used through those systems we never really even seen and much less likely to even touch. Similar to the people of Yap, who agree on the ownership of their stones, a large portion of the money we own we don’t physically hold onto, but rather we are in agreement with the banks in regards to the value of it in our accounts. For example when was the last time you physically handed money over when buying a plane ticket, or a car? Its a social agreement between everyone and the banks. If society wanted to it could reject the dollar turning it worthless to anyone who would still owned them.
Along with the paper, the NPR Broadcast also pointed out to me that as much as society can make money worthless it can also establish a currency’s value. During that podcast they talked about how Brazil economy was basically rebuilt on a lie. At the time Brazil was dealing with a incredible amount of inflation, so much so that the prices of most items were increasing daily. Their money was becoming worthless because of their rapid inflation. I found it remarkable that the government pulled the country out of this spiral by creating fake currency and getting everyone to believe that it held real value. It pushes the idea that money only holds the value society wants it to because of how well Brazil’s economy responded to this lie. Once the people were convinced of the “fake” moneys value, they would pull themselves out of their ricket and become the 8th biggest economy in the world. Not because the fake money actually held legitimate value, but because the people of brazil (society) decided that it held value.
This idea continued to make sense to me as I read through the transcript in regards to the interview with Jacob Goldstein. I was intrigued with his telling of the creation of paper money. How back in ancient China Kublai Khan basically enforces paper money as the countries currency rather than lugging around Iron coins that were previously used. Honestly it made sense to me because around that time Chinese citizens were starting to prefer using receipts over the iron coins, so for Kahn to just make the process quicker seemed like a reasonable step. But what I also found interesting is how quickly currency can be swapped out in order to avoid a major crash. For after originally swapping to paper money they ended up printing to much money leading to several large inflations of money. Enough for the Chinese to actually give up on paper money in order to go back to using grain.
Finally I never considered why society created money in the first place. How we as people created money as a means to help solve some sets of problems, but through its creation it also created problems. But to simply exist without it would also be near impossible. (Goldstein)
I had somewhat of an idea about society’s value to money prior to reading/ listening to the articles. But after going through these pieces of information I realized that were several factors in regard’s to that, that I didn’t even consider. It gave me something different to think about in terms of money’s value.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, 1991.
What is MONEY? Jacob GOLDSTEIN’S book Explains ‘SHARED FICTION’. (2020, September 08). Retrieved February 17, 2021, from https://www.npr.org/2020/09/08/910586930/what-is-money-jacob-goldsteins-book-explains-shared-fiction
“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.