Hundreds of years ago money was a physical concept. As the world began to evolve, the value of money changed. I always thought that a one hundred dollar bill was worth more than a one-dollar bill, but in the end of the day each bill is just of sheet of paper. While listening to the podcast “The invention of Money”, I have come to the conclusion that “money is fiction”. Money does not exist the way it used to. We now use a system from the bank that theoretically states how much money we have, rather than carrying bricks of gold or giant limestone wheels to prove our riches.
On the island of Yap, the civilians kept massive limestone used as coins, which is equivalent to carrying gold. In Milton Friedman’s essay “The island of Stone Money”, he states limestone revenue is simply about acknowledgement of ownership. The stones on the island were too heavy to constantly transport so people drew black crosses on their stones to indicate possession and the coins remained undisturbed in their original place from the previous owner. This concept soon died out when Germany took over the island.
My idea of money was very similar to the people of Yap’s. The higher the number on the dollar bill or the more stone you have represents your riches. Now I believe that money is just an idea. If money is an idea then where does it go? Since “money is fiction”, everyone can agree that the money is never really there. The value can disappear because the physical money is never actually there. The crash of the stock market in 1933 started to happen when the United States decided not to use gold (physical) money but instead use a banking system (idea) to transfer and keep money. This caused France to be “richer” than the U.S. because they had more physical gold.
The article “How Fake Money Saved Brazil” by Chana Joffe-Walt tells us how four grad students came up with an idea to use a fake currency called Unit of Real Value, URV, to save Brazil’s economic problems. One of the students said URV is virtual and it does not actually exist. URV is very similar to real money since physical money does not actually exist. URV is very similar to the new Bitcoin, a digital currency. The money is not actually there, people are borrowing numbers to purchase goods.
After reading these articles my opinion has changed about money. I have realized that money is an idea. While money is in the bank it comes and goes without anyone realizing because you cannot physically see it. Money is no longer about how much you have sitting in your house; it is about the number we see on our bank statements. Each dollar bill is the same size piece of paper. If the numbers were not written on it then each bill would have the same value. Therefore, money is fiction. Yes it does exist in theory but not physically.
Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.
Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015.
Reeves, Jeff. “Bitcoin Has No Place in Your- or Any-portfolio.” Market Watch. N.p., 31 Jan. 2015. Web. 4 Sept. 2015.
“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.