For as long as I can remember, I have always viewed money as a physical item whose digital presence only existed for as much money as there really was in the physical world. However, NPR’s broadcast on money made me realize that money is not truly physical, but more so an idea that expresses wealth. Through further research on the topic, I learned not only that money as an idea has been seen throughout history, but how it works and even helps.

Initially, I was introduced to the concept through the aforementioned NPR broadcast. The hosts of the broadcast discussed how all money cannot be truly accounted for. If someone makes a deposit of cash to a bank, then it is possible for that same cash to be loaned to a startup business. The money that the original man deposited is still his, but its physical form is no longer in his possession. (NPR) Despite not having physical money, an individual’s wealth is undisputed through digital numbers. A significant amount of purchases, withdrawals, deposits, etc. occur by simply transferring these numbers. It was bizarre to even consider at first, but I quickly realized that money is more imaginary than it is real.

Alongside the broadcast’s discussion of money as an idea, one of the hosts brings up a story that is elaborated in Milton Friedman’s The Island of Stone Money. In this essay, Friedman talks about the Island of Yap and how its residents would use giant stones to make major trades. These stones stayed in one spot even if it was traded. Natives of the island simply took a mental note of who the new owner was. (Friedman) While it may come off as a foreign concept, the idea of stone money being traded in a mental, almost imaginary space is no different from the way modern day countries have their “money” as numbers stored in a digital space.

This concept reminded me of discussions I would have with my father. He had been experimenting with bitcoin mining, and as such would frequently talk about it. However, I never could grasp the concept of people digitally mining money that had real world value until now. Bitcoin miners have machines that compute complex code in order to generate bitcoins into a virtual wallet. These bitcoins can then be used as currency while remaining anonymous. (Renaut) What had always perplexed me was how these bitcoins, which didn’t exist in the real world, could have value to them. Through my recent research, I realize that people hold value in bitcoins, because they trust it. The people of Yap learned to trust the stones. The people of America have learned to trust the number shown in their bank account page. It may seem overly simple, but it really is just that. If something can be vouched for, then people will trust it. The wealthiest family of Yap did not even have a stone on the island. People simply vouched for their ancestors that their stone was not only the grandest of all, but it had fallen into the ocean.

The idea of money not existing in a physical sense had even saved the nation of Brazil. During the 1950s, Brazil printed so much paper money that over the years they faced a massive problem of inflation. In 1992, four men countered this by coming up with the Unit of Real Value or URV. URVs was a virtual value of everything from prices to wages. The URV of any given thing never changed, but the amount of cruzeiros, Brazil’s currency, that a URV was worth did change. (Joffe-Walt) While this concept of imaginary money is a little different from the ones previously discussed, it still relies on people’s faith in a non-physical form of currency. While people are going out using cruzeiros as a means to purchase items, their paper money is only worth as much as its value in URVs. Citizens of Brazil have to put their faith in a constantly changing URV similarly to how the people of Yap put their faith in the value of stones.

After all of that extensive research, it is still a little hard to swallow that money has to be trusted and is not something that can be known for sure. What if banks mess with an account’s numbers? What if the wealthiest family on Yap lied about their giant stone at the bottom of the ocean? Despite the abundance of questions I may have, I did get an understanding of how it works and in the case of Brazil, how it can even help.

Works Cited

“The Invention of Stone Money.” 423: The Invention of Stone Money. This Is American Life, WBEZ. Chicago . 7 Jan. 2011.

Friedman, Milton. “The Island of Stone Money.” Diss. Hoover Institution, Stanford University , 1991.

Renaut, Anne . “The bubble bursts on e-currency Bitcoin.” Yahoo.com. 13 Apr. 2013. 30 Jan. 2015. <https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html&gt;.

Joffe-Walt, Chana . “How Fake Money Saved Brazil.” NPR.org. 4 Oct. 2010. 30 Jan. 2015. <http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil&gt;.