Stone Money- lmj20

Money powers our world. From economics to international affairs, money can make or break a person’s quality of life. The power of money has led many, including NPR broadcaster Jacob Goldstein, to question where exactly money originated, how it evolved, and how it gained the inherent value that it seems to have today. In his studies, Goldstein cites a peculiar story of the people of Yap. In their village, there was a huge stone made of limestone, a metal considered precious to the Yaps due to its rarity. The citizen that held ownership of the stone, even if it was not in his direct possession, could make purchases with the stone. If he or she chose to make an exchange with the stone, the ownership of the stone would then change to that seller. The stone never had to move, the only thing that changed was the village’s knowledge of the owner of the stone. Even when that stone accidentally fell to the bottom of the ocean, the villagers of Yap continued to use it as a means of currency. The stone did not have to be present to have value. As long as villagers continued to exchange using the stone, it had value.

The story of the Yaps, although it seemed bizarre at first, sounds very familiar. America started its currency evolution in an almost identical way. Gold, a metal that is considered rare and beautiful, was used as a means of currency. When gold became a hassle to transport, paper money was created. Each paper dollar represented an amount of gold. So as the Yaps exchanged their stone through word of mouth, Americans exchanged their gold through paper money. The gold never moved, only the ownership changed. As time moved forward, American money was no longer backed by gold. A dollar bill was just a dollar bill. Its value was not an amount of gold, but now just valued at whatever it can be exchanged for. In present day America, even cash is starting to go out of style. Now, the average American’s finances are based on electronics. Salaries are awarded, bills are paid, and purchases are made just by numbers changing on a bank account statement. This present-day economic system can only survive on human faith. If everyone lost their faith in the banking system and attempted to withdraw all their cash, the system would collapse. This is because there is not enough money to back every number on every bank account. As long as people continue to trust the banking system and the value of their dollar, the system can continue to grow.

This idea of faith ruling a country’s economic success is shown in Brazil. When the Brazilian economy began to stumble and inflation was increasing, Brazilians began to lose faith in their currency. The citizens no longer felt as though their money was valuable, so there was a rush to spend it all quickly instead of saving it. This made inflation even worse and so the cycle continued, until Edmar Bacha created a system of “real value” currency. Units of real value meant that prices always appeared to stay steady, the only thing that fluctuated was the amount of cruzeiros that was equivalent to the real value currency. Since steady prices made the Brazilians regain their faith in their economic system, soon the economy began to level out. This fake currency even allowed Brazil to thrive economically more than it ever did.

All in all, money runs on faith. If people have faith in the value of their currency, they will feel safe saving, spending, and accepting it. If one day all American companies decided that the dollar was worthless and they would not accept it as payment, then it would be worthless because it cannot be exchanged for any goods or services. However, as long as companies continue to feel as though the dollar is something to be sought after, the dollar does have value. When it’s broken down it means that one day someone can be rich and the next day they could have nothing. Despite the system’s apparent fragility, it’s not time to lose faith now. Currency systems like ours are essential to society and as illogical as they seem, they work. By how things are going now, people are not likely to lose their idea of value in the dollar any time soon. Companies continue to seek the dollar crazily. People work tirelessly just to see the numbers in their bank account rise each week. Therefore, I believe the American currency system will not collapse any time soon because citizens continue to believe that currency is valuable and the key to a good life.

References

Goldstein, Jacob. “The Invention Of ‘The Economy'” Planet Money. NPR, 28 Feb. 2014. Web. 13 Sept. 2016.

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

“How Fake Money Saved Brazil.” Planet Money. NPR, 4 Oct. 2010. Web. 13 Sept. 2016.

“The Invention of Money.” This American Life. This American Life, 7 Jan. 2011. Web. 13  Sept. 2016.