Money: a Complex and Sometimes Intangible Force
We cannot typically pay for a pair of shoes with a sandwich, but there is an ingeniously powerful thing that allows us to essentially transform shoes into sandwiches, or any given thing into another thing, simply because we say that it can. Interestingly, this thing is physically very weak–scarcely more than a small, thin strip of linen with a few numbers on it, or a tiny rectangle of plastic with bits of information. While physical at times, it can also lack any tangible substance, and sometimes exists only in the world of computer screens and debit cards. In spite of this, it is arguably the most powerful force in the world–money, which is said to make the “world go ’round,” is 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, particularly when hearing about a fei that was lost to a storm, yet still implemented into the island’s economy. However, while reading, I began to realize that the only real difference between the Yap currency and any other currency is external. If someone on the island of Yap wants to exchange a pair of shoes for a smooth piece of stone, and exchange a smooth piece of stone for a sandwich, who is to say that he or she cannot? Furthermore, is it that strange to accept the existence of money without seeing it? While the answer may initially seem blatantly obvious, this idea is no different than accepting the number on the slip from the ATM—in spite of not physically seeing or holding the money, I remain certain that it is there and that it is mine. As I thought about and researched this idea to a greater extent, I began to realize that the concept of stone money is fundamentally no different than any other currency.
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 initially have a physical form. Notes were printed at a later time, but there was a period during which no physical representation of this currency was in existence. Despite this, the people of Brazil used this currency to convert shoes to sandwiches, regardless of never having seen it—much like the people of Yap used the stone that nobody had ever seen. In both cases, there was no physical currency being used, but an understanding that there was an exchange of a substance that had some value and power. This allowed me to better comprehend the fact that money does not have to have any tangibility in order to have power. The only thing powers money is the faith of those who use it.
Upon further investigation, it became even clearer that without faith, physical money is only good for blowing our noses, or for sitting in front of a villager’s hut, growing a very attractive shade of green moss. An economic crisis in Brazil was solved with an intangible currency, but 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 believing that their money could no longer convert as many shoes into as many sandwiches as it could the day before, and even fewer shoes could be turned into sandwiches the next day, and so on until ultimately it was questioned if the currency was good for anything but toilet paper. However, their faith in the new currency, initially called the URV and subsequently the Real, 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 transform any number of items into other things, because the Brazilian people believed that it could.
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. Although this may seem silly and primitive at first, let us imagine what our own reactions would be if someone were to take our own debit cards and claim them as their property. Although the card itself is worth very little (after all, it’s just a piece of plastic—isn’t it?), it represents the entirety of the wealth that we understand to be ours. Naturally, we would be quite distraught, and do whatever the captor of our cards wanted, in order to ensure their safe return. Therefore, the people of Yap were rightly upset; like our debit cards, their fei have very little true worth (after all, they’re just pieces of stone—aren’t they?), but they represent much more than that because of faith. In the case of the marked fei and the Brazilian URV, it was confidence in the money’s ability to transform shoes into sandwiches that allowed to it do just that.
There is 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 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, Reeves criticizes it for having “no real value.” And why shouldn’t he? After all, there is nothing to say that a Bitcoin is worth anything. The United States dollar, whether it exists in the form of a strip of cloth or a piece of plastic, is guaranteed by the government (to a point) to be worth a certain amount. Bitcoin, however, has no such authority to back it, and relies fully on the faith of its users. Reeves’ claim is even less unreasonable when considering the earliest forms of currency—in the days of gold and silver coins, the idea of any intangible currency would seem simply laughable. What good is any sort of currency if it can’t be taken to a shop and traded it for a sword, a sandwich, or a pair of shoes? This skepticism is reflected 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. Any statistician will tell you that correlation does not equal causation, but it is nevertheless noteworthy that Bitcoin has not been entirely trusted, and also has not been entirely stable.
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, whether it is a flimsy piece of cloth, a plastic card, a gold coin, or even a giant stone. Ultimately, what matters most is that the people who use a currency believe in its value. If nobody believes that their money can turn shoes into sandwiches, it certainly cannot, and will certainly fail. While money may often have little physical substance, I now know that this is not necessarily a problem—as that its users are convinced that it can transform things into other things, the world will still go ‘round.
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.