It is interesting that the thing that is said to “make the world go ‘round” is scarcely more than a fabrication—at best, an idea. The concept of money is one that, while seemingly reasonable on the surface, makes very little logical sense. Money, for the most part, is simply an idea that allows for people to buy and sells things, but lacks any sort of physical substance. While people may use money to exchange goods and services, there is seldom any sort of physical exchange. Money is, simply put, barely even real.
When first listening to NPR’s broadcast about the stone money used on the island of Yap, I was incredulous. The idea that giant stones, called fei, could have any sort of value struck me as so foreign and irrational that it was nearly impossible to believe. Even stranger seemed the idea that when these fei are used as currency, they do not exchange hands—there is simply an understanding that the fei now belongs to someone else. I was particularly skeptical of the notion that one of these stones, in spite of being lost to a storm, was accepted by the entire population of the island. However, as I thought about and researched this idea to a greater extent, I began to think to myself, is the concept of stone money fundamentally different from the concept of any other money? After hearing the broadcast titled, “The Lie that Saved Brazil,” I began to realize that money does not have to be a physical thing at all. This broadcast explained an economic crisis in Brazil that was solved with a currency that was invented—in other words, it did not actually exist. However, the people of Brazil accepted the idea of this currency, much like the people of Yap accepted the idea of the stone that was said to go missing. In both cases, there was no actual currency being used, but simply an idea. This allowed me to better understand the fact that money does not have to have any substance in order to have power. The only thing that money requires to work is the belief of those who use it.
Upon further investigation, it became even clearer that faith is the only real thing that powers money. As stated previously, an economic crisis in Brazil was solved with a fictional currency. However, it was a lack of faith in money that played a large role in shaping this very crisis. As outlined in the article titled “How Fake Money Saved Brazil,” decades of failed attempts at controlling inflation resulted in the Brazilian people having no faith in their money. However, their faith in the new currency, called the URV, helped pave the way to what is now the eighth largest economy in the world. It was the faith in the currency that allowed it to function. Further evidence of this concept can be found in Milton Freidman’s article, “The Island of Stone Money,” in which he describes the reaction of the people of Yap to their money being claimed by the German government in order to coerce the construction of roads on the island. While the only thing that the Germans did was mark “a certain number of the most valuable fei with a cross in black paint to show that the stones were claimed by the government”, the people of Yap were so frightened by the idea of losing their perceived wealth that they immediately constructed roads for the Germans. In this case, as in the case of the Brazilian URV, it was faith in the money that allowed it to function. There is also further evidence that money requires faith in order to function, which can be found in Jeff Reeves’ Marketwatch article titled, “Bitcoin has no place in your—or any—portfolio.” Bitcoin, a digital currency that has been rising in popularity during recent years (and, quite interestingly, has no physical representation whatsoever), has been received in a number of ways. While some celebrate it for being easy to use and for its ability to protect the anonymity of the user, others, such as Reeves, criticize it for having “no real value.” Interestingly, as outlined in Reeves’ article, Bitcoin is extremely volatile, having ranged in value from $13 to $1,150 per Bitcoin, but dropping as low as $178 per Bitcoin only weeks before reaching the latter value. While it is true that correlation does not equal causation, it should nevertheless be noted that Bitcoin has been a very unstable currency and has not had the complete faith of those who use it.
As stated earlier, while the concept of money initially seems very logical, it quickly becomes clear that it is in fact an idea that makes very little sense. In a very short amount of time, I have come to realize that no single form of currency makes more or less sense than another, be it a giant stone or a piece of paper with numbers on it. I am now aware of the fact that the only thing that gives money any value is the faith that is held by its users. While money may be largely a fabrication, I now know that this is not necessarily a problem—provided that it is a convincing enough myth for people to believe in.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, 1991.
Reeves, Jeff. “Bitcoin Has No Place in Your – or Any – Portfolio.”MarketWatch. CNBC, 31 Jan. 2015. Web. 6 Sept. 2015.
“The Invention of Money | This American Life.” This American Life. N.p., 7 Jan. 2011. Web. 06 Sept. 2015.
Joffe-Walt, Chana. “How Fake Money Saved Brazil.” Npr.org. NPR, 4 Oct. 2010. Web. 6 Sept. 2015.