A01 Stone Money- Dublin517

Money, it’s something most people use everyday. Why is its existence so perplexing? The factor that it is a mere representation of something of a greater value can be a cause. How could a dirty sheet of green paper come to represent a trust of gold or other wealth? How, is hard to explain, but why is a simpler question; it all falls into the hands of the people who are going to use the currency. Users have to have faith and trust in the economic system in order for it to work. If one takes a look at “Stone Money” written by Milton Friedman, they could see this idea, but in a purified state. On the island of Yap, the natives have taken up, what some may call, a strange monetary system. For large purchases, such as a dowry or buying land, they can pay for them with large stones known as Fei  (Friedman). This is not to say that someone is rolling a huge boulder to their neighbors yard when they want to buy their cow, the transaction can happen without even moving the stone. It is basically the same thing as buying something in store with a credit card, the shopper gets what they want and all they have to do is make an agreement with what was once their money. This fundamental theory is used in Yap, “One person gives it to another person. But the stone doesn’t move. It’s just that everybody in the village knows the stone now has a new owner.” (Goldstein). Buying a cute pair of pumps with a visa card, is essentially the same as buying a farm with a large boulder. Neither the islander’s “fei” or the shoe buyer’s money actually gets moved, just a change of title, and they can get what they want. A more specific example, can be found in 1932-33, between the French Bank and the Federal Reserve Bank of New York (Friedman). France wanted their dollar assets changed to gold, and to save the trouble of shipping it across the ocean, they settled for simply putting the French gold aside in the same United States Bank (Friedman). This mirrors the situation when one islander has a rock on their property that actually belongs to someone else. The idea of non-literal possession, that is so stupefying, is agreeing that the gold belongs to the French because they claimed. The French government felt comfortable knowing their gold was safe, simply because everyone else knew it was theirs. It is kind of like a game of “playing pretend” because nothing is actually happening, the rules are made up as they go. The trick here is the public’s trust in the system. If one Yap islander decided to physically take someone’s stone and claim it as theirs, chaos would ensue. The islanders would then have to fight over the stones instead of the peaceful transition of ownership they had been enjoying. When Brazil began to become desperate in their economic situation, their government too relied on the faith and good intention of the people. Edmar Bacha, a Brazilian economist, came up with a solution for the inflation crisis in Brazil (Joffe-Walt). The important factor in his solution was trust from the people “But, just as important, you have to stabilize people’s faith in money itself.  People have to be tricked into thinking money will hold its value.” (Joffe-Walt). Bacha is counting on the positive response of the Brazilian people for this idea to work. It eventually was successful, causing the people to believe in the Unit of Real Value (or URV). Money, or Fei, or French gold, is worthless if its value is not respected by the people meant to utilize it. The moral of the story here is that this aspect of society is charged by the people. Like parts to a machine, the economy would fall apart without the cooperation from the very people that use it.