The Illusion of Money

Money. One word with countless definitions. To understand the concept of money, I searched the internet and came upon the article by Adriene Hill, “Money: The Myth We All Believe in.” In the article, psychologist Adam Waytz said, “Money is a shared illusion.” Money is not a physical paper or metal, but a pure and dedicated belief in an object with no real value other than the value of what others believe it to be. If every citizen in the United States thought buttons or sea shells had monetary value, then the use those objects would become our currency. To a seven-year-old, the colorful Monopoly game hundred dollar bill could have the same value as a real hundred dollar bill if that was what his parents made him think. In reality, that child couldn’t use the Monopoly money to buy their favorite candy from the dollar store because Monopoly currency isn’t excepted as “real” money to the cashier ringing up the treats. Literally anything can be money if everyone thinks it has monetary value.

Take for instance, the natives of the island Yap mentioned in Friedman’s essay “The Island of Stone Money.” While here in the United States we make our deals and purchases with paper money and copper pennies, the Yaps use large, carved limestone wheels called fei as their physical money. The fei is an immovable stone where its owner can change with only an agreement between two inhabitants of the island of Yap basically states, “It’s yours now” and the other responds with, “I own it.” In the essay, Friedman mentioned how a family’s wealth is “acknowledged by every one” despite the fact that no has seen the fei that makes the family as wealthy as it is. How can anyone, let alone everyone, believe that the family owns some stone only seen by the family’s ancestor and his expedition crew? It is only because they believe that the stone exists that the stone has value. The “illusion” that a carved piece of stone, seen or not seen, has value because everyone says it does is baffling, but they’re not the only ones in the world with this view on money.

Similar to the Yaps, the United States relies on the customers of banks and business to believe in what we call credit. Today, many U.S. citizens use credit to purchase items despite the only evidence of one having “money” is a plastic card, maybe containing a chip, that according to the bank has a value of so-and-so dollars.  We neither see the money that is acknowledged as ours by the bank and the establishments we use the credit to buy merchandise from nor move the money physically because we trust that the credit will move from the bank to our account to the establishment through virtual means. The only difference to the Yaps is that we have a third party involved, a.k.a. the bank, during agreements of “I own this, now you own this.”

As I mentioned previously, the value of money is due to the pure and dedicated belief that the currency used is real. My point is further proven by NPR’s article about Brazil’s currency change from cruzeiros to reals. In the beginning, Brazil suffered from inflation that made the cost of items in cruzeiros increase day after day. Brazilians lost faith in the cruzeiro’s value. The government then introduced a virtual price, URV, that had the price f items remain at a constant price unlike the ever-changing prices in cruzeiro. Overtime, the URV was trusted and believed in more than the cruzeiros, thus leading to the end of the cruzeiro and the beginning of the Brazilian real. The real was only able to be made the new currency because of the collective thought that this currency was better than the old cruzeiro currency. Money is valued only by how much everyone believes in the currency as seen by how the Brazilian cruzeiro became obsolete when a better looking, new currency was introduced.

The German government, as mentioned in “Bitcoin Recognized by Germany as ‘private money'” on CNBC, planned to have Bitcoin potentially become the new currency if the faith in the euro decreases like it did for the Brazilian cruzeiro. Bitcoin is more similar to the Yap islanders’ money exchange because of the lack of the middle man, the bank, and how the lack of physical evidence does not affect the value of the Bitcoin, since it is purely an electronic currency. This raises the questions, Is this real money? Is there any value? All I can say, is that the value of the Bitcoin will be what the people of Germany and the world will believe it to be. ((((((need to add Clinch in this paragraph))))))))

Physical money can be paper, metal, or stone, but the true value of money depends on the thoughts and beliefs of the people who use it.

Works Cited 

• Clinch, Matt. “Bitcoin Recognized by Germany as ‘private money'” CNBC. CNBC, 21 Aug. 2013. Web. 13 Sept. 2016.
• Friedman, Milton. “The Island of Stone Money.” (n.d.): n. pag. The Hoover Institution, Feb. 1991. Web. 13 Sept. 2016.
• Hill, Adriene. “Money: The Myth We All Believe in.” Money: The Myth We All Believe in. Marketplace, 12 July 2013. Web. 13 Sept. 2016.
• “How Fake Money Saved Brazil.” NPR. NPR, 4 Oct. 2010. Web. 14 Sept. 2016.