Money: Fake or For Real

To some people, money is everything. It’s what they believe in, what they live for and/or what they arrange most of their life around. What baffles me is the incredibility of it all. It used to be that money was backed by items of real value. These green rectangles of paper used to be representative of rare metals and other valuable objects. Now, it’s an entirely faith-based system. Even though the majority of Americans know the government printed too much money for all of it to be properly supported by things of value, we still have faith in the value of our money.

Like Jansen writes in his article, “The Concept of Money And The Money Illusion,” even when entire communities were self-sufficient in making their own clothes, raising their own food and creating a home to exist in, the idea of exchanging one thing for another thing was around. It was such a natural concept that no one thought to take note of it. However, the typical monetary system has changed so drastically and become so abstract that it’s no longer a simple exchange. In order to make the economy more open and accessible, a form of common currency was established to make the system easier to track and regulate. This is also called indirect trade. Having a baseline of value created a more common idea of what something might be worth.

For example, let’s say you raise cows and are trying to sell the milk your cows produce for a profit. Your neighbor wants to buy the milk but without a common currency established, he has no cash. Instead, he wants to pay you in the soybeans he grows in his backyard. However, you have no interest in soy beans. Therefore, the currency he prefers has no value because it’s not worth anything to you. You’re left with milk you don’t need and no cash and your neighbor doesn’t get the milk he wants and now has an excess of soybeans. This creates a stagnant trade system. Thus, the concept of indirect trade was born.

The problem with indirect trade is that the common currency is entirely fake. I understand and agree that the point of the dollar bill is to be a substitute for things of value but what happens when people decide they no longer want to accept the U.S. dollar as a form of payment?

Our economy is built on a series of social contracts. We, as a country, have agreed that our government issued bills will be the intermediary in monetary transactions. Again, this makes our trade system far more accessible and easier to regulate because we have common ground on which to base the worth of certain items. Even though our economy is fragile and balances on a very fine line, it is one of the strongest ad largest economies in the world. Countries across the globe have modeled their financial systems after ours. Whether or not we will continue to stand as an example for the world, I’m truly not sure. However, I believe if recent trends continue in regards to inflation and the decline of the recession, we should be okay for at least a while longer.

Works Cited

Bellis, M. (n.d.). The History of Money. Retrieved September 25, 2016, from http://inventors.about.com/od/mstartinventions/a/money.htm

Friedman, M. (2010, December 10). The Island Of Stone Money. Retrieved September 24, 2016, from http://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money

Jansen, K. (2016). The Concept Of Money And The Money Illusion. Retrieved September 24, 2016, from https://www.bullionstar.com/blogs/koos-jansen/the-concept-of-money-and-the-money-illusion/

Joffe-Walt, C. (2010, October 4). How Fake Money Saved Brazil. Retrieved September 25, 2016, from http://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil?gt=

Zaretsky, E. (2015, April 12). The Invention of Money. Retrieved September 24, 2016, from http://www.publicseminar.org/2015/04/the-invention-of-money/