Is Money Really Valuable?
To illustrate how worthless a dollar truly is, first we must envision the impact the dollar has on an economy. The economy can be affected greatly by the value of the dollar, for example the Great Depression and Brazil. These two examples display that the dollar itself only holds as much value as the people within that region claims it does. During both situations the dollar lost its value and as a result the people in that culture suffered greatly because the economy plummeted. The dollar value changes constantly in actuality the dollar or paper money is not worth much the reason it holds value is because the culture states the value of the money.
Within the essay “The Island of Stone Money,” by Milton Friedman, he emphasizes a method used for transactions within his story about a cultured known as the Yaps. The Yaps transactions where similar to what the France bank and the United States bank did when the France wanted gold from the U.S. The Yaps transactions never moved however the ownership did. Their currency was in stones and the stone took the place of the limestone that was on a different island. This is relatable to what the France Bank and The United States went through because the bank of France noticed the value of the U.S. dollar was depleting. As a result of the bank of France taking note of this they asked for gold in exchange for their previous transactions with the U.S. dollar. Similar to the Yaps and their transactions the U.S. put a certain amount of gold aside for the French and labeled that the property of France. The French approved of this transaction and likewise to the Yaps transactions the stone never moved, however the owner of the stone changed.
Similarly with the French and U.S. banking situation it reveals how the value of money doesn’t remain the same. Within the Yaps society, the use stones as their currency and the value of their stones can change depending on who is involved in the transaction. The stones held this value due to their society accepting it. However not every person within the society accepted the same amount of stones or accepted what we can get with our stones. Some residents of the society accepted one stone for one cow, while if we walk to another part of the island another person may offer us 2 coconuts for our one stone. Our neighbor may offer us 4 bags of rice for 2 stones, but the person who lives across the river may accept 4 bags of rice for 4 stones. From these different transactions reveals that the value of the stone within the Yap society will vary based on our consumer.
Traditionally people advise us in order to obtain money, we must save our money. However within the article “Back in Power, Abe Aims to Spend Japan Back to Economic Vitality,” by Hiroko Tabuchi, it suggests in order to make money you are required to spend money. This supports within the article when it was stated that those who support Abe’s concept claim his policy will defeat deflation and generate growth. The Japan government has decided they will spend a large amount of money in order to generate a stable economy, while other governments go with a more traditional approach and save their money in order to obtain money. This shows how the value of money constantly changes because Japan is trying to spend more money in order to become stable, however they were put in this situation because they spent too much money in the first place.
Spending too much money doesn’t always produce the same results for each economy. In the article, “How Fake Money Saved Brazil” by Chana Joffe-Walt, she went in depth about how brazil’s economy was plagued by inflation and each time they tried to spend money the prices of merchandise would rise. Their structure became stable by using a “fake” money system. They used a different currency to take the place of the previous one, however the the new currency the price remained the same. However since no one had euros they used their old currency and used it in place of the new one. For instance, if one bag of chips was one euro last week, it would be one euro this week. Due to no one having any euros that one euro would convert into 7 pounds, however the next week it would remain one euro but it would convert into 14 pounds instead of 7 pounds. This system was able to provide Brazil with the solution to their economic struggle despite the fact it contradicts the concept of the value of money. It is doing so because inflation still was occurring within the economy the only difference was the fact that they attached a physical label to make it appear as if inflation was not occurring. Inflation continued because each week the customers still had to pay more and more, nonetheless from their perspective the price remained the same.
Work Cited
Friedman, Milton. “The Island of Stone Money.” (n.d.): n. pag. The Hoover Institution. Stanford University, 01 Feb. 1991. Web. 25 Sept. 2016.
Joffe-Walt, Chana. “How Fake Money Saved Brazil.” NPR. NPR, 04 Oct. 2010. Web. 25 Sept. 2016.
Tabuchi, Hiroko. “Back in Power, Abe Aims to Spend Japan Back to Economic Vitality.” The New York Times. The New York Times, 22 Jan. 2013. Web. 25 Sept. 2016.
Rowan Counterintuitive 