Money is, to this day, primitive. While the monetary system has certain adapted over time through different cultures and time periods, the basic principles that rule our wealth have never shifted from its concrete foundation. Whether a strip of paper, a hunk of metal, or a towering, chiseled stone, money’s value has never resided in the physical form, but rather in the abstract concept of trust. Trust in one’s community or in a higher power has, since the invention of a monetary system, dictated the value of an area’s currency. In times of crisis. asking ”Where did the money go?” is a fruitless effort, because we will never hold the value of a lost dollar, a lost hundred dollars, or especially not a lost trillion. This concept that has ruled our civilization is no more than an abstract thought, accepted as fact.
As mentioned before, money has taken on many forms throughout our history. Let us begin with the island of Yap, a society that has based their monetary system on gargantuan chunks of stone. These stones hold tremendous value to the people, yet, while occupying a physical form, the ownership of these stones are imaginary. Large transactions would have no effect on the physical world, as some stones of larger value would be too heavy to move. The people were content with the knowledge that the ownership of the stone was traded, and that trade was honored and respected, without the stone moving so much as an inch out of place. While many may think this practice is ridiculous, idiotic even, I beg to differ, as the U.S. followed a system very similar to that of the Yap people. It could even be argued that we made this system more complicated. Our system began with chunks of metal rather than stone; blocks of gold ruled our idea of wealth. This gold, becoming too much to carry at one time, began to be deposited into banks. With the gold stored away, our version of ownership were dollars, a paper token that proved one person owned so many pieces of gold. When this got to be to much, the value was shifted from the gold to the dollar, the piece of paper that rules our system today. Over the course of however many years, the U.S. collectively agreed and honored the idea that the dollar now held value, and made this idea fact. The Yap don’t seem so crazy now, and at the very least were decisive enough to keep their money in one physical form.
This idea that monetary value comes from trust is evident in several instances. The Yap had an event where a ridiculously valuable piece of stone fell overboard on a trip back to the island. When those on the ship shared their story that could have very well been faked, the people of the island had the power to deem whether or not this family would have possession of this money, even though the physical evidence of it was at the bottom of the ocean. By the power of trust, the people made that family rich, without so much as a blink. On the flip side of this, Brazil was recently in a bit of turmoil in their economy. Inflation was rising to ridiculous percentages, and the people were losing faith in the value of their hard earned cash. Every day priced rose, but thanks to four friends, crisis was averted. They had created a new unit of money which they referred to as Unit of Real Value, or URV, which, in my opinion is hilarious due to the fact this money was as fake as fake can get. This system worked as follow: URV’s were a constant value that did not change, as opposed to the current in place currency. Because the URV prices did not rise, the people were much more comfortable in spending their money, and the value of their URV would skyrocket over time due to the sheer confidence and trust that this money was real. Then, in some weird otherworldly way, the overpowering idea that URV was real actually made URV real, viable currency in Brazil. In a way, when the imaginary is pleasing, we make it real.
The U.S. has recently been facing a new style of currency as well, referred to as a bitcoin. Bitcoins are strictly virtual and are a potential small scale version of the U.S. dollar, blown ridiculously out of proportion. Its value is placed solely in the people who exchange them, as there is no central bank to regulate how much everything balances out to. This measure of currency follows the same rules as all others around the world, with a few changes. The transactions have no service fee or protection from banks. While transfers of bitcoins are easy and instant, they are also dangerously drastic and shows how powerful trust in an idea can be. In just two years, the value of a bitcoin went from $13 in January 2013 to $1,150 in November 2013 to $178 at the end of December 2014 (Reeves, 2015).
The power of trust in an idea is truly remarkable, especially when viewed through such a short window as is with the bitcoin. Perhaps, this is where the future of money is headed, a high-paced, instant transfer of terrible unstable currency. The bitcoin, in this case, is the perfect example of how feeble our monetary system is. After all, the value is simply imaginary, and universally accepted without much debate by those who use it. By a simple shift of the mind, a society can flip its economy right side up. An island can give a fortune to a family without actually handing them anything. A country can put itself itself on the edge of crashing all because we have collectively decided to tack a number to a worthless piece of paper. Money, while based on this idea of trust, truly is intangible, dangerous, and a spectacular display in the power of a community.
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“The Invention of Money | This American Life.” This American Life. Planet Money, 17 Jan. 2011. Web. 07 Sept. 2015. <http://www.thisamericanlife.org/radio-archives/episode/423/the-invention-of-money>.
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Reeves, Jeff. “Bitcoin has no place in your—or any—portfolio.” Market Watch. N.p., 31 Jan. 2015. Web. 4 Sept. 2015. <http://www.marketwatch.com/story/bitcoin-has-no-place-in-any-portfolio-2015-01-28;.